Credit Facilities, Short-term Borrowings and Long-term Debt

12 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Credit Facilities, Short-term Borrowings and Long-term Debt

Note 15.  Credit facilities, short-term borrowings and long-term debt

As of September 30, 2021, Woodward’s short-term borrowings and availability under its various short-term credit facilities follows:

	Total availability		Outstanding letters of credit and guarantees			Outstanding borrowings		Remaining availability
Revolving credit facility	$	1,000,000	$	(10,961	)	$	—	$	989,039
Foreign lines of credit and overdraft facilities		7,413		—			—		7,413
Foreign performance guarantee facilities		494		(217	)		—		277
	$	1,007,907	$	(11,178	)	$	—	$	996,729

Revolving credit facility

Woodward maintains a $1,000,000 revolving credit facility established under a revolving credit agreement among Woodward, a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent (the “Revolving Credit Agreement”).  The Revolving Credit Agreement provided for the option to increase available borrowings up to $1,500,000, subject to lenders’ participation.  Borrowings under the Revolving Credit Agreement can be made by Woodward and certain of its foreign subsidiaries in U.S. dollars or in foreign currencies other than the U.S. dollar and generally bear interest at LIBOR plus 0.875% to 1.75%.  The Revolving Credit Agreement matures on June 19, 2024.  Under the Revolving Credit Agreement, there were no borrowings outstanding as of September 30, 2021 and September 30, 2020.

The Revolving Credit Agreement contains certain covenants customary with such agreements, which are generally consistent with the covenants applicable to Woodward’s long-term debt agreements, and contains customary events of default, including certain cross default provisions related to Woodward’s other outstanding debt arrangements in excess of $60,000, the occurrence of which would permit the lenders to accelerate the amounts due thereunder.  In addition, the Revolving Credit Agreement includes the following financial covenants: (i) a maximum permitted leverage ratio of consolidated net debt to consolidated earnings before interest, taxes, depreciation, stock-based compensation, and amortization, plus any usual non-cash charges to the extent deducted in computing net income and transaction costs associated with permitted acquisitions (incurred within six-months of the permitted acquisition), minus any usual non-cash gains to the extent added in computing net income (“Leverage Ratio”) for Woodward and its consolidated subsidiaries of 3.5 to 1.0, which ratio, subject to certain restrictions, may increase to 4.0 to 1.0 for each period of four consecutive quarters during which a permitted acquisition occurs, and (ii) a minimum consolidated net worth of $1,156,000 plus (a) 50% of Woodward’s positive net income for the prior fiscal year and (b) 50% of Woodward’s net cash proceeds resulting from certain issuances of stock, subject to certain adjustments.

Woodward’s obligations under the Revolving Credit Agreement are guaranteed by Woodward FST, Inc., Woodward MPC, Inc., and Woodward HRT, Inc., each of which is a wholly owned subsidiary of Woodward.

Short-term borrowings

Woodward has other foreign lines of credit and foreign overdraft facilities at various financial institutions, which are generally reviewed annually for renewal and are subject to the usual terms and conditions applied by the financial institutions.  Pursuant to the terms of the related facility agreements, Woodward’s foreign performance guarantee facilities are limited in use to providing performance guarantees to third parties.  There were no borrowings outstanding on Woodward’s foreign lines of credit and foreign overdraft facilities as of both September 30, 2021 and September 30, 2020.  

Long-term debt

	September 30, 2021			September 30, 2020
Series G notes – 3.42%, due November 15, 2020; unsecured	$	—		$	50,000
Series H notes – 4.03%, due November 15, 2023; unsecured		25,000			25,000
Series I notes – 4.18%, due November 15, 2025; unsecured		25,000			25,000
Series J notes – Floating rate (LIBOR plus 1.25%), due November 15, 2020; unsecured		—			50,000
Series K notes – 4.03%, due November 15, 2023; unsecured		50,000			50,000
Series L notes – 4.18%, due November 15, 2025; unsecured		50,000			50,000
Series M notes – 1.12% due September 23, 2026; unsecured		46,376			46,962
Series N notes – 1.31% due September 23, 2028; unsecured		89,273			90,401
Series O notes – 1.57% due September 23, 2031; unsecured		49,854			50,484
Series P notes – 4.27% due May 30, 2025; unsecured		85,000			85,000
Series Q notes – 4.35% due May 30, 2027; unsecured		85,000			85,000
Series R notes – 4.41% due May 30, 2029; unsecured		75,000			75,000
Series S notes – 4.46% due May 30, 2030; unsecured		75,000			75,000
Series T notes – 4.61% due May 30, 2033; unsecured		80,000			80,000
Finance leases (Note 5)		1,203			2,807
Unamortized debt issuance costs		(1,856	)		(2,171	)
Total long-term debt		734,850			838,483
Less: Current portion of long-term debt		728			101,634
Long-term debt, less current portion	$	734,122		$	736,849

The Notes

On October 1, 2013, Woodward entered into a note purchase agreement relating to the sale by Woodward of an aggregate principal amount of $250,000 of its senior unsecured notes in a series of private placement transactions.  Woodward issued the Series G, H and I Notes (the “First Closing Notes”) on October 1, 2013.  Woodward issued the Series J, K and L Notes (the “Second Closing Notes” and with the First Closing Notes, collectively the “USD Notes”) on November 15, 2013.  On November 15, 2020, Woodward paid the entire principal balance of $100,000 on the Series G and J Notes.

On September 23, 2016, Woodward and the BV Subsidiary each entered into note purchase agreements (the “2016 Note Purchase Agreements”) relating to the sale by Woodward and the BV Subsidiary of an aggregate principal amount of €160,000 of senior unsecured notes in a series of private placement transactions.  Woodward issued €40,000 Series M Notes.  The BV Subsidiary issued (a) €77,000 aggregate principal amount of the BV Subsidiary’s Series N Senior Notes (the “Series N Notes”) and (b) €43,000 aggregate principal amount of the BV Subsidiary’s Series O Senior Notes (the “Series O Notes” and together with the Series M Notes and the Series N Notes, the “2016 Notes”).

On May 31, 2018, Woodward entered into a note purchase agreement (the “2018 Note Purchase Agreement”) relating to the sale by Woodward of an aggregate principal amount of $400,000 of senior unsecured notes comprised of (a) $85,000 aggregate principal amount of its Series P Senior Notes (the “Series P Notes”), (b) $85,000 aggregate principal amount of its Series Q Senior Notes (the “Series Q Notes”), (c) $75,000 aggregate principal amount of its Series R Senior Notes (the “Series R Notes”), (d) $75,000 aggregate principal amount of its Series S Senior Notes (the “Series S Notes”), and (e) $80,000 aggregate principal amount of its Series T Senior Notes (the “Series T Notes”, and together with the Series P Notes, the Series Q Notes, the Series R Notes, and the Series S Notes, the “2018 Notes,” and, together with the USD Notes and 2016 Notes, the “Notes”), in a series of private placement transactions.

In connection with the issuance of the 2018 Notes, the Company entered into cross currency swap transactions in respect of each tranche of the 2018 Notes, which effectively reduced the interest rates on the Series P Notes to 1.82% per annum, the Series Q Notes to 2.15% per annum, the Series R Notes to 2.42% per annum, the Series S Notes to 2.55% per annum and the Series T Notes to 2.90% per annum.  Following the termination and settlement of the Floating-Rate Cross-Currency Swap and Fixed-Rate Cross-Currency Swaps entered into in 2018, the Company entered into the 2020 Floating-Rate Cross-Currency Swap and 2020 Fixed-Rate Cross-Currency Swaps, which effectively resulted in the interest rates on the Series P Notes being 3.44% per annum, the Series Q Notes to 3.44% per annum, the Series R Notes to 3.45% per annum, the Series S Notes to 3.50% per annum and the Series T Notes to 3.62% per annum (see Note 8, Derivative instruments and hedging activities).

Interest on the remaining First Closing Notes, and the Series K and L Notes is payable semi-annually on April 1 and October 1 of each year until all principal is paid.  Interest on the 2016 Notes is payable semi-annually on March 23 and September 23 of each year, until all principal is paid.  

None of the Notes were registered under the Securities Act of 1933 and they may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.  Holders of the Notes do not have any registration rights. All of the issued Notes are held by multiple institutions.

Woodward’s payment and performance obligations under the Notes, including without limitation the obligations for payment of all principal, interest and any applicable prepayment compensation amount, are guaranteed by (i) Woodward FST, Inc., Woodward MPC, Inc., and Woodward HRT, Inc., each of which is a wholly owned subsidiary of Woodward, and (ii) in the case of the BV Subsidiary’s Series N and O Notes, by Woodward. Woodward’s obligations under the Notes rank equal in right of payment with all of Woodward’s other unsecured unsubordinated debt, including its outstanding debt under its revolving credit facility.

The Notes contain restrictive covenants customary for such financings, including, among other things, covenants that place limits on Woodward’s ability to incur liens on assets, incur additional debt (including a leverage or coverage-based maintenance test), transfer or sell Woodward’s assets, merge or consolidate with other persons and enter into material transactions with affiliates. Under the financial covenants contained in the note purchase agreement governing each series of the Notes, Woodward’s priority debt may not exceed, at any time, 25% of its consolidated net worth.  Woodward’s Leverage Ratio cannot exceed 4.0 to 1.0 during any material acquisition period, or 3.5 to 1.0 at any other time on a rolling four quarter basis.  In the event that Woodward’s Leverage Ratio exceeds 3.5 to 1.0 during any material acquisition period, the interest rate on each series of Notes will increase.  The minimum consolidated net worth, prior year positive net income, and net cash proceeds resulting from certain issuances of stock for satisfaction of Woodward’s leverage ratio are consistent between the Notes and Revolving Credit Agreement.

Required future principal payments of the Notes as of September 30, 2021 are as follows:

Year Ending September 30:
2022	$	—
2023		—
2024		75,000
2025		85,000
2026		121,376
Thereafter		454,127
	$	735,503

Certain financial and other covenants under Woodward’s debt agreements contain customary restrictions on the operation of its business.  Management believes that Woodward was in compliance with the covenants under the long-term debt agreements at September 30, 2021.

Debt Issuance Costs

Amounts recognized as interest expense from the amortization of debt issuance costs were $922 in fiscal year 2021, $892 in fiscal year 2020, and $1,094 in fiscal year 2019.  Unamortized debt issuance costs associated with the Notes of $1,856 as of September 30, 2021 and $2,171 as of September 30, 2020 were recorded as a reduction in “Long-term debt, less current portion” in the Consolidated Balance Sheets.  Unamortized debt issuance costs associated with Woodward’s Revolving Credit Agreements of $1,644 as of September 30, 2021 and $2,242 as of September 30, 2020 were recorded as “Other assets” in the Consolidated Balance Sheets.  Amortization of debt issuance costs is included in operating activities in the Consolidated Statements of Cash Flows.