Business Acquisitions

9 Months Ended

Jun. 30, 2012

Business Combinations

Business Acquisitions

Note 4. Business acquisitions

IDS Acquisition

During the third quarter of fiscal year 2011, Woodward acquired all of the outstanding stock of Integral Drive Systems AG and its European companies, including their respective holding companies ("IDS"), and the assets of IDS's business in China (collectively, the "IDS Acquisition") for an aggregate cash purchase price of $48,412 paid to the sellers.

IDS is a developer and manufacturer of innovative power electronic systems predominantly in utility scale wind turbines and photovoltaic power plants.  IDS also offers key products for power distribution and marine propulsion systems. In addition to wind turbines and photovoltaic plants, its products are used in offshore oil and gas platforms, energy storage and distribution systems, and a variety of industrial applications. IDS has been integrated into Woodward's Energy segment.

The Company believes the IDS Acquisition expands its presence in wind converter offerings and reduces its time to market with expansion of solar energy, energy storage, and marine drives. Goodwill recorded in connection with the IDS Acquisition, which is not deductible for income tax purposes, represents the estimated value of such future opportunities, the value of potential expansion with new customers, the opportunity to further develop sales opportunities with new and acquired IDS customers, and anticipated synergies expected to be achieved through the integration of IDS into Woodward's Energy segment.

As of June 30, 2012, an amount of $7,659 paid in connection with the IDS Acquisition was deposited into escrow accounts to secure Woodward's ability to recover any amounts owed to Woodward by the sellers as a result of customary indemnities related to representations and warranties made by the sellers. Funds held in escrow will only be released to the sellers as specified in the related purchase agreements.

The purchase price of the IDS Acquisition is as follows:

Cash paid to sellers	$	48,412
Less cash acquired		(1,251	)
Total purchase price		47,161
Less marketable securities acquired		(8,463	)
Price paid for business assets	$	38,698

The allocation of the purchase price to the assets acquired and liabilities assumed was finalized as of March 31, 2012. Assets acquired and liabilities assumed in the transaction were recorded at their acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred. The Company's allocation was based on an evaluation of the appropriate fair values and represents management's best estimate based on available data.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the IDS Acquisition:

Current assets	$	14,627
Investments in marketable securities		8,463
Property, plant, and equipment		1,954
Goodwill		24,188
Intangible assets		11,882
Total assets acquired		61,114
Other current liabilities		5,505
Warranty accrual		2,250
Postretirement benefits		434
Deferred tax liabilities		2,472
Other tax—noncurrent		3,292
Total liabilities assumed		13,953
Net assets acquired	$	47,161

There were no changes to the values of assets acquired and liabilities assumed during the nine-months ending June 30, 2012. The fair value of warranty liabilities assumed represents the estimated costs to provide service for contractual warranty obligations on products sold by IDS and IDS's business in China prior to the IDS Acquisition. The fair value of "Other tax – noncurrent" represents the estimated value of gross unrecognized tax benefits assumed.

In connection with the IDS Acquisition, Woodward acquired various marketable securities, which are not classified as cash equivalents under U.S. GAAP. These marketable securities were sold during the fiscal quarter ended June 30, 2011 and reinvested into cash and cash equivalents consistent with Woodward's internal investment and risk management policies. Losses on the sale of marketable securities were included in "Other (income) expense, net" in the Condensed Consolidated Statements of Earnings for the fiscal quarter ended June 30, 2011.

Also, in connection with the IDS Acquisition, Woodward assumed the net postretirement benefit obligations of five Swiss statutory retirement plans which are considered to be defined benefit plans under U.S. GAAP.

A summary of the intangible assets acquired, weighted-average useful lives, and amortization methods follows:

	Amount		Weighted- Average Useful Life		Amortization Method
Customer relationships	$	3,452		9 years		Straight-line
Process technology		7,752		8.5 years		Straight-line
Other		678		2.5 years		Straight-line
Total	$	11,882		8 years

The operating results of the IDS Acquisition are included in Woodward's Consolidated Statements of Earnings and Comprehensive Earnings beginning April 15, 2011. Pro forma financial disclosures have not been presented, as the IDS Acquisition was not significant to Woodward's financial position or results of operations. The Company incurred IDS Acquisition related transaction costs of $2,396 during the year ending September 30, 2011, which were included in "Selling, general and administrative expenses" in the Condensed Consolidated Statements of Earnings. No additional IDS Acquisition related transaction costs were incurred in the nine-months ending June 30, 2012.