Note 18. Stockholders’ equity

Stock repurchase program

In the first quarter of fiscal year 2017, Woodward’s Board of Directors terminated the Company’s prior stock repurchase program and replaced it with a new program for the repurchase of up to $500,000 of Woodward’s outstanding shares of common stock on the open market or in privately negotiated transactions over a three-year period that will end in 2019 (the “2016 Authorization”). Under the 2016 Authorization, in the first quarter of fiscal year 2017, Woodward purchased 350 shares of its common stock for $24,004 pursuant to a 10b5-1 plan.

In the first quarter of fiscal year 2016, Woodward executed a 10b5-1 plan to repurchase up to $125,000 of its common stock for a period that ended on April 20, 2016. During the first quarter of fiscal year 2016, Woodward purchased 624 shares of its common stock for $30,712 pursuant to the 10b5-1 plan under the prior stock repurchase program, which was terminated in November 2016.

Stock-based compensation

Provisions governing outstanding stock option awards are included in the 2006 Omnibus Incentive Plan (the “2006 Plan”) and the 2002 Stock Option Plan (the “2002 Plan”). The 2002 Plan provided that no further grants would be made after December 31, 2006. The 2006 Plan, which was approved by Woodward’s stockholders and became effective January 25, 2006, expired in fiscal year 2016. No further grants will be made under either the 2002 Plan or the 2006 Plan.

Woodward’s stockholders approved a successor plan to the 2006 Plan (the “2017 Plan”) at the January 25, 2017 Annual Stockholder Meeting. As of September 14, 2016, the effective date of the 2017 Plan, Board of Directors delegated authority to administer the 2017 Plan to the compensation committee of the board (the “Committee”), including, but not limited to, the power to determine the recipients of awards and the terms of those awards. The Committee approved issuance of options under the 2017 Plan, with an award date of October 3, 2016 conditional and subject to approval of the 2017 Plan by the stockholders. The stock options conditionally awarded under the 2017 Plan were not granted or outstanding for accounting purposes prior to stockholder approval of the 2017 Plan, and as such no stock based compensation expense was recognized on these stock options during the three months ended December 31, 2016. As of December 31, 2016, 773 stock options awards were approved but not granted.

Stock options

Woodward granted no stock options in the first quarter of fiscal year 2017. Previous stock options granted under the 2006 Plan were granted with an exercise price equal to the market price of Woodward’s stock at the date of grant, a ten-year term, and generally a four-year vesting schedule at a rate of 25% per year.

The following is a summary of the activity for stock option awards during the three-months ended December 31, 2016:



	Three-Months Ended
	December 31, 2016
	Number of options		Weighted-Average Exercise Price per Share
Options, beginning balance		4,944	$	35.35
Options granted		-		n/a
Options exercised		(139)		34.83
Options forfeited		(13)		42.19
Options, ending balance		4,792		35.35

Changes in non-vested stock options during the three-months ended December 31, 2016 were as follows:



	Three-Months Ended
	December 31, 2016
	Number of options		Weighted-Average Grant Date Fair Value Per Share
Options outstanding, beginning balance		2,075	$	14.90
Options granted		-		n/a
Options vested		(758)		15.24
Options forfeited		(13)		14.47
Options outstanding, ending balance		1,304		14.70

Information about stock options that have vested, or are expected to vest, and are exercisable at December 31, 2016 was as follows:



	Number		Weighted- Average Exercise Price		Weighted- Average Remaining Life in Years		Aggregate Intrinsic Value
Options outstanding		4,792	$	35.35		5.9	$	161,511
Options vested and exercisable		3,488		32.83		5.0		126,348
Options vested and expected to vest		4,719		35.25		5.8		159,525

Restricted Stock

In the first quarter of fiscal year 2014, Woodward granted an award of 24 shares of restricted stock to its Chief Executive Officer and President, Thomas A. Gendron. Subject to Mr. Gendron’s continued employment by the Company, 100% of these shares of restricted stock will vest following the end of the Company’s fiscal year 2017 if a specified cumulative earnings per share (“EPS”) target is met or exceeded for fiscal years 2014 through 2017. If this EPS target is not met, all shares of restricted stock will be forfeited by Mr. Gendron. The shares of restricted stock were awarded to Mr. Gendron pursuant to a form restricted stock agreement approved by Woodward’s Compensation Committee of the Board of Directors.

A summary of the activity for restricted stock awards in the three-months ended December 31, 2016 follows:



	Three-Months Ended
	December 31, 2016
		Number		Fair Value per Share
Beginning balance		24	$	39.43
Shares granted		-		n/a
Shares vested		-		n/a
Shares forfeited		-		n/a
Ending balance		24		39.43

Stock-based compensation cost

Woodward recognizes stock compensation expense on a straight-line basis over the requisite service period. Pursuant to form stock option agreements used by the Company, the requisite service period can be less than the four-year vesting period based on grantee’s retirement eligibility. As such, the recognition of stock-based compensation expense associated with some stock option grants can be accelerated to a period of less than four years, including immediate recognition of stock-based compensation on the date of grant.

At December 31, 2016, there was approximately $6,820 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, both stock options and restricted stock awards, granted under the 2002 Plan and the 2006 Plan (for which no further grants will be made under either plan). The pre-vesting forfeiture rates for purposes of determining stock-based compensation cost recognized were estimated to be 0% for members of Woodward’s board of directors and 9% for all others. The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 2.1 years.