DEF: Woodward Sets 2026 Annual Meeting, Proposes Governance Changes

Woodward, Inc. announces its virtual 2026 Annual Meeting of Stockholders, featuring director elections, executive compensation approval, and proposed amendments to its Certificate of Incorporation.

Summary

• The Annual Meeting of Stockholders will be held virtually on Wednesday, January 28, 2026, at 8:00 a.m. Central Time.
• Stockholders will vote on the election of three director nominees, an advisory resolution to approve executive compensation, and the ratification of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year ending September 30, 2026.
• Proposals include amending the Certificate of Incorporation to eliminate certain supermajority voting requirements and to eliminate cumulative voting rights in director elections.
• Woodward achieved record net sales of $3.6 billion in fiscal year 2025, an increase of 7% from the prior year.
• Record diluted earnings per share reached $7.19 in fiscal year 2025, up 20% from the prior year.
• Net cash provided by operating activities was $471 million, a 7% increase from the prior year.
• The company returned $235 million to stockholders in fiscal year 2025, comprising $170 million in share repurchases and $65 million in dividends.
• Aerospace segment sales increased by 14%, while Industrial segment sales decreased by 3%.
• Fiscal year 2025 short-term incentive plan (STIP) payouts were at 127% of target.
• Fiscal year 2023-2025 Cash Long-Term Incentive (LTI) awards were earned at 200% of target, based on Return on Capital and Earnings Per Share growth relative to the S&P MidCap 400.

Sentiment

Score: 8

Explanation: The company delivered strong financial results with record sales and EPS, significant cash generation, and high incentive plan payouts, indicating robust operational execution. While there's a slight dip in free cash flow and industrial sales, the overall picture is very positive, especially with strategic governance improvements proposed.

Positives

• Record net sales of $3.6 billion in fiscal year 2025, a 7% increase versus the prior year.
• Record diluted earnings per share of $7.19 in fiscal year 2025, a 20% increase versus the prior year.
• Net cash provided by operating activities increased by 7% to $471 million in fiscal year 2025.
• Returned $235 million to stockholders, including $170 million in share repurchases and $65 million in dividends.
• Aerospace segment sales increased by 14%, supported by high aircraft utilization and robust defense activity.
• Industrial segment achieved double-digit growth across power generation and oil & gas markets.
• Fiscal year 2025 short-term incentive plan (STIP) payouts were achieved at 127% of target, indicating strong operational performance.
• Fiscal year 2023-2025 Cash LTI awards were earned at 200% of target, reflecting superior performance in Return on Capital (75.4 percentile) and Growth in Earnings Per Share (91.2 percentile) relative to the S&P MidCap 400.
• The Board proposes eliminating supermajority voting requirements, which is expected to enhance stockholder participation and accountability.

Negatives

• Industrial sales were down 3% in fiscal year 2025.
• Free cash flow decreased slightly from $343 million in fiscal year 2024 to $340 million in fiscal year 2025.
• The Board proposes eliminating cumulative voting rights in director elections, which could reduce the influence of minority stockholders.

Risks

• Future sales, earnings, cash flow, uses of cash, and other measures of financial performance, including underlying assumptions.
• Trends in business and the markets in which the company operates, including expectations for those markets, customers, and their business and products.
• Ability to manage risks from operating internationally, including the impacts of tariffs on markets and supply chain.
• Demand for products, in particular expectations with respect to natural gas trucks in China.
• Expected expenses in future periods and trends in such expenses over time.
• Expectations regarding margins and the impact of specific products, product mix, and strategic actions on margins.
• Descriptions of plans and expectations for future operations, including strategic initiatives and their impact.
• Plans and expectations relating to the performance of the joint venture with GE Aerospace.
• Expected levels of activity in particular industries or markets and the effects of changes in those levels.
• The scope, nature, or impact of acquisition activity and integration of such acquisition into the business.
• Impact of restructuring activities.
• The research, development, production, and support of new products and services.
• Plans, objectives, expectations, and intentions with respect to business opportunities that may be available.
• Liquidity, including ability to meet capital spending requirements and operations.
• Future dividends and repurchases of common stock.
• Future levels of indebtedness and capital spending.
• The stability of financial institutions, including those lending to the company.
• Pension and other postretirement plan assumptions and future contributions.
• Tax rate and other effects of the changes in U.S. federal tax law and other tax law.
• Availability of raw materials and components used in products.
• Expectations relating to environmental and emissions regulations.
• Effects of data privacy, data protection, and cybersecurity regulations.
• Ability to develop competitive technologies or products and to compete effectively in markets.
• Consolidated customer base and ability to enhance customer experience.
• Ability to manage risks related to U.S. Government contracting, including defense activity and spending patterns.
• Ability to attract, retain, and develop qualified personnel and maintain favorable labor relations.
• Ability to structure operations in light of evolving market conditions.
• Ability to mitigate the ongoing impacts of inflation and tariffs.
• The impact of legal proceedings, investigations, claims and other regulatory proceedings.
• The impact of future prices for fossil fuels and commodity prices for oil, natural gas and other minerals.
• The impact of ability to protect intellectual property and technological know-how on business, financial condition, results of operations, and cash flows.
• The impact of any potential physical or cybersecurity attacks and other information technology system or network interruptions or intrusions on operations, business, including financial condition, operating results, and reputation.

Future Outlook

The company's focus on growth, innovation, and operational excellence is expected to fuel its future and create value, positioning it to capture opportunities from the next generation of aircraft and energy systems. For fiscal year 2026, the Long-Term Incentive (LTI) Plan will be modified to include two types of Performance Share Units (PSUs): rTSR PSUs (based on Total Shareholder Return relative to the S&P MidCap 400 Index) with a mandatory one-year post-vest holding period and a maximum payout of 200%, and new ROIC PSUs (based on Return on Invested Capital goals) with a three-year performance period and a maximum payout of 200%.

Management Comments

• Our purpose is to design and deliver energy control solutions our partners count on to power a clean future.
• Our focus on growth, innovation and operational excellence continues to fuel our future and create value for our members, customers, communities, and stockholders.
• The dedication of Woodward employees to serving our customers and meeting our commitments to stakeholders drove strong performance in fiscal year 2025.
• We remain focused on growth, operational excellence, and innovation to drive sustained performance and long-term stockholder value.

Industry Context

Woodward operates as a global leader in energy conversion and control solutions for the aerospace and industrial equipment markets. The company's strong fiscal year 2025 performance, particularly the 14% growth in Aerospace sales, is supported by high aircraft utilization and robust defense activity, aligning with positive trends in the aerospace sector. Double-digit growth in power generation and oil & gas markets within the Industrial segment also reflects favorable conditions in these sectors. The company's strategic focus on 'powering a clean future' and capturing opportunities from next-generation aircraft and energy systems positions it within broader industry trends towards sustainability and advanced technology.

Comparison to Industry Standards

• The executive compensation program is benchmarked against a compensation peer group that includes industrial companies in sub-industries such as Industrial Machinery, Aerospace & Defense, Electrical Components & Equipment, and Electronic Equipment & Instruments, with global operations and similar size to Woodward (revenues between 0.33x to 3x Woodward's, market capitalization between 0.25x and 4x Woodward's).
• Woodward's revenues were positioned around the 44th percentile and market capitalization at the 53rd percentile of its fiscal year 2025 compensation peer group, which includes companies like Barnes Group Inc., Hexcel Corporation, Crane Co., Howmet Aerospace, Inc., Moog Inc., Curtiss-Wright Corporation, Hubbell Inc., Nordson Corporation, Donaldson Company, Inc., IDEX Corporation, ITT Inc., Sensata Technologies Holding plc, Flowserve Corp., and The Timken Company.
• Long-term incentive (LTI) plan performance for Performance Share Units (PSUs) is measured based on Total Shareholder Return (TSR) relative to the S&P MidCap 400 Index.
• The fiscal year 2023-2025 Cash LTI awards achieved a 75.4 percentile for Return on Capital and a 91.2 percentile for Growth in Earnings Per Share relative to the S&P MidCap 400 Index, indicating superior performance against this broad market benchmark.

Management Changes

Corporate Governance

Related Party Transactions

• Shawn McLevige, Executive Vice President and President, Aerospace (effective October 1, 2025), has two brothers employed in the company's Aerospace segment.
• Leonard McLevige, a technical fellow in the engineering group, earned $224,197 in total compensation in fiscal year 2025.
• Steve McLevige, a senior staff engineer, earned $199,637 in total compensation in fiscal year 2025.
• Both brothers participate in Woodward's health, welfare, and retirement benefit plans on the same basis as all U.S. employees, and their compensation was established in accordance with company practices for equivalent qualifications, experience, and responsibilities, without direct Board or executive officer involvement in setting their individual compensation.

Stakeholder Impact

• Shareholders: Directly impacted by proposed corporate governance changes (elimination of supermajority voting and cumulative voting), strong financial performance (record sales, EPS, dividends, share repurchases), and executive compensation aligned with performance.
• Employees: Benefit from a focus on 'People & Culture' strategic metrics, safety initiatives (Human and Organizational Performance program, Fatality and Serious Injury prevention efforts), competitive compensation, and comprehensive health, welfare, and retirement benefits.
• Customers: Benefit from the company's dedication to serving customers, deep customer partnerships, and focus on designing and delivering innovative energy control solutions for a clean future.
• Communities: Positively impacted by the company's commitment to sustainability and efforts to make a positive impact on the world through energy control solutions that enhance system performance and reduce carbon emissions.
• Management: Executive compensation is tied to financial and strategic performance, with new LTI plan designs for fiscal year 2026 aimed at further aligning incentives with long-term value creation.

Next Steps

• Stockholders will attend the virtual Annual Meeting on January 28, 2026, to vote on the presented proposals.
• Three director nominees will be elected to serve for a term of three years.
• An advisory resolution to approve the compensation of named executive officers will be voted upon.
• The appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending September 30, 2026, will be ratified.
• Stockholders will vote on an amendment to the Certificate of Incorporation to eliminate certain supermajority voting requirements.
• Stockholders will vote on an amendment to the Certificate of Incorporation to eliminate cumulative voting rights in the election of directors.
• If approved, the amended and restated Certificate of Incorporation will be filed with the Secretary of State of the State of Delaware shortly after the Annual Meeting.
• The Human Capital & Compensation Committee will implement changes to the LTI Plan for fiscal year 2026, introducing ROIC PSUs and revising rTSR PSUs.

Key Dates

Recommendation

The company delivered record net sales and diluted EPS, demonstrating strong operational execution and financial health. The significant return of capital to stockholders through repurchases and dividends, coupled with robust performance in the Aerospace segment and double-digit growth in key Industrial markets, indicates a well-managed and growing business. The high achievement of incentive plan targets further reinforces management's effective performance. While there are minor concerns like a slight dip in free cash flow and industrial sales, the overall trajectory and strategic positioning for future growth in next-generation aircraft and energy systems are compelling. The proposed governance changes, particularly eliminating supermajority voting, could also be viewed positively by institutional investors seeking greater board accountability.

Keywords

Woodward, SEC Filing, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Director Elections, Financial Performance, Aerospace, Industrial Equipment, Energy Control, Shareholder Return, Supermajority Voting, Cumulative Voting, Deloitte & Touche, NASDAQ:WWD