Note 14. Accrued liabilities



	June 30,		September 30,
	2017		2016
Salaries and other member benefits	$	72,709	$	87,197
Warranties		14,298		15,993
Interest payable		5,264		9,071
Current portion of acquired performance obligations and unfavorable contracts (1)		1,393		2,910
Accrued retirement benefits		2,505		2,505
Current portion of loss reserve on contractual lease commitments		1,840		1,840
Current portion of deferred income from JV formation (Note 4)		6,252		6,552
Deferred revenues		5,120		5,779
Taxes, other than income		10,100		14,580
Other		10,789		10,200
	$	130,270	$	156,627

(1)

In connection with Woodward’s acquisition of GE Aviation Systems LLC’s (the “Seller”) thrust reverser actuation systems business located in Duarte, California (the “Duarte Acquisition”) in fiscal year 2013, Woodward assumed current and long-term performance obligations for contractual commitments that are expected to result in future economic losses. In addition, Woodward assumed current and long-term performance obligations for services to be provided to the Seller and others, partially offset by current and long-term assets related to contractual payments due from the Seller. The current portion of both obligations is included in Accrued liabilities.

Warranties

Provisions of Woodward’s sales agreements include product warranties customary to these types of agreements. Accruals are established for specifically identified warranty issues that are probable to result in future costs. Warranty costs are accrued on a non-specific basis whenever past experience indicates a normal and predictable pattern exists. Changes in accrued product warranties were as follows:



	Three-Months Ended June 30,				Nine-Months Ended June 30,
		2017		2016		2017		2016
Warranties, beginning of period	$	15,041	$	15,553	$	15,993	$	13,741
Expense, net of recoveries		2,746		951		6,808		7,362
Reductions for settling warranties		(3,746)		(1,272)		(8,528)		(6,015)
Foreign currency exchange rate changes		257		(49)		25		95
Warranties, end of period	$	14,298	$	15,183	$	14,298	$	15,183

Loss reserve on contractual lease commitments

In connection with the construction of a new production facility in Niles, Illinois, Woodward vacated a leased facility in Skokie, Illinois. During the first quarter of fiscal year 2016 Woodward fully vacated the Skokie facility and therefore recorded a charge of $8,165 to recognize a loss reserve against the estimated remaining contractual lease commitments, less anticipated sublease income. During the third quarter of fiscal year 2017, Woodward entered into an additional sublease agreement with a third party related to a portion of the vacated Skokie facility. Woodward recorded a reduction in the loss reserve associated with the vacated Skokie facility of $2,322 related to the anticipated sublease income it will receive.

The summary for the activity in the loss reserve during the three and nine-months ended June 30, 2017 and June 30, 2016 is as follows:



	Three-Months Ended June 30,				Nine-Months Ended June 30,
		2017		2016		2017		2016
Loss reserve on contractual lease commitments, beginning of period	$	8,395	$	9,772	$	9,242	$	2,464
Additions		-		-		-		8,165
Payments		(382)		(168)		(1,229)		(1,025)
Non-cash adjustments		(2,322)		-		(2,322)		-
Loss reserve on contractual lease commitments, end of period	$	5,691	$	9,604	$	5,691	$	9,604

Other liabilities included $3,851 of accrued loss reserve on contractual lease commitments that are not expected to be settled or paid within twelve months as of June 30, 2017.