Business Acquisitions

9 Months Ended

Jun. 30, 2011

Business Combinations

Business Acquisitions

Note 4. Business acquisitions

IDS Acquisition

During the third quarter of fiscal year 2011, Woodward acquired of 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' business in China (together the "IDS Acquisition") for an aggregate purchase price of approximately $48,412. The purchase price remains subject to certain customary post-closing adjustments. The estimated purchase price is included in "Cash flows from investing activities" in the Condensed Consolidated Statement of Cash Flows.

IDS is a developer and manufacturer of innovative power electronic systems predominantly in utility scale wind turbines and photovoltaic power plants. Additionally, IDS offers key products in 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 is being integrated into Woodward's Electrical Power Systems business 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 and 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 Electrical Power Systems business segment.

Woodward is in the process of finalizing valuations of current assets, property, plant and equipment (including estimated useful lives), intangible assets (including estimated useful lives), other current liabilities, postretirement benefits obligations, deferred tax liabilities, and other noncurrent liabilities.

The preliminary purchase price of the IDS Acquisition is as follows:

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

As of June 30, 2011, $8,478 paid in connection with the IDS purchase was deposited into escrow accounts as surety against standard representations and warranties made by the seller. Funds held in escrow will be released upon the payment of certain tax and as otherwise specified in the related purchase agreements.

The preliminary allocation of the purchase price for the IDS Acquisition was accounted for under the purchase method of accounting in accordance with ASC Topic 805, Business Combinations. 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. As Woodward is still in the process of finalizing valuations, as mentioned above, the final purchase accounting has not yet been completed.

The following table summarizes the preliminary 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 three-months ending June 30, 2011. The fair value of warranty liabilities assumed represents the estimated costs to provide service for contractual warranty obligations on products sold by IDS prior to April 15, 2011. 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.

Also, in connection with the IDS Acquisition, Woodward assumed the net postretirement benefit obligations of several 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:

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

The operating results of the IDS Acquisition are included in Woodward's Consolidated Statements of Earnings and Comprehensive Earnings as of April 15, 2011. Pro forma financial disclosures have not been presented as the IDS Acquisition was not material to Woodward's results of operations or financial position. The Company incurred transaction costs of $219 and $1,964 for the three and nine-months ending June 30, 2011, which are included in "Selling, general and administrative expenses" in the Condensed Consolidated Statements of Earnings.