Revenue (Tables)

9 Months Ended

Jun. 30, 2019

Revenue

Schedule of Revenue Recognition Time

	Three-Months Ended June 30, 2019						Nine-Months Ended June 30, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	191,516	$	147,194	$	338,710	$	563,713	$	482,979	$	1,046,692
Over time		307,259		106,036		413,295		810,903		306,065		1,116,968
Total net sales	$	498,775	$	253,230	$	752,005	$	1,374,616	$	789,044	$	2,163,660

Schedule of Accounts Receivable

	June 30, 2019		September 30, 2018
Billed receivables
Trade accounts receivable	$	370,643	$	403,590
Other (Chinese financial institutions)		86,059		23,191
Less: Allowance for uncollectible amounts		(3,904)		(3,938)
Net billed receivables		452,798		422,843
Current unbilled receivables (contract assets), net		197,979		9,160
Total accounts receivable, net	$	650,777	$	432,003

Schedule of Contract Liability

	June 30, 2019				September 30, 2018
		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	6,806	$	234,038	$	7,087	$	235,300
Deferred revenue from advance invoicing and/or prepayments from customers		3,343		-		2,572		-
Liability related to customer supplied inventory		13,021		-		-		-
Deferred revenue from material rights related to engineering and development funding		3,137		98,889		-		-
Net contract liabilities	$	26,307	$	332,927	$	9,659	$	235,300

Schedule of Impact of the Adoption ASC 606 on Financial Statement

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Balance Sheet as of October 1, 2018, as revised for the error correction detected in the three-months ended June 30, 2019, which was not material. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606 and the adjustment for the error subsequently corrected:

	September 30, 2018 ‎as reported		Effect of ASC 606 ‎as previously reported		October 1, 2018 ‎as previously reported		Adjustments for ‎error correction		October 1, 2018 ‎as corrected
ASSETS
Current assets:
Cash and cash equivalents	$	83,594	$	-	$	83,594	$	-	$	83,594
Accounts receivable, net (1)(2)		432,003		104,907		536,910		30,761		567,671
Inventories (1)(2)		549,596		(55,002)		494,594		(18,604)		475,990
Income taxes receivable (5)		6,397		(959)		5,438		(288)		5,150
Other current assets		43,207		(154)		43,053		-		43,053
Total current assets		1,114,797		48,792		1,163,589		11,869		1,175,458
Property, plant and equipment, net		1,060,005		-		1,060,005		-		1,060,005
Goodwill		813,250		-		813,250		-		813,250
Intangible assets, net (4)		700,883		(2,519)		698,364		-		698,364
Deferred income tax assets (5)		16,570		(975)		15,595		(210)		15,385
Other assets (1)(2)(3)		85,144		85,865		171,009		-		171,009
Total assets	$	3,790,649	$	131,163	$	3,921,812	$	11,659	$	3,933,471
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	153,635	$	-	$	153,635	$	-	$	153,635
Accounts payable		226,285		-		226,285		-		226,285
Income taxes payable (5)		16,745		4,141		20,886		1,211		22,097
Accrued liabilities (2)(3)		194,513		15,672		210,185		(1,047)		209,138
Total current liabilities		591,178		19,813		610,991		164		611,155
Long-term debt, less current portion		1,092,397		-		1,092,397		-		1,092,397
Deferred income tax liabilities (5)		170,915		3,833		174,748		1,682		176,430
Other liabilities (3)		398,055		78,631		476,686		(1)		476,685
Total liabilities		2,252,545		102,277		2,354,822		1,845		2,356,667
Stockholders’ equity:
Preferred stock		-		-		-		-		-
Common stock		106		-		106		-		106
Additional paid-in capital		185,705		-		185,705		-		185,705
Accumulated other comprehensive losses		(74,942)		(41)		(74,983)		(4)		(74,987)
Deferred compensation		8,431		-		8,431		-		8,431
Retained earnings		1,966,643		28,927		1,995,570		9,818		2,005,388
		2,085,943		28,886		2,114,829		9,814		2,124,643
Treasury stock at cost		(539,408)		-		(539,408)		-		(539,408)
Treasury stock held for deferred compensation		(8,431)		-		(8,431)		-		(8,431)
Total stockholders’ equity		1,538,104		28,886		1,566,990		9,814		1,576,804
Total liabilities and stockholders’ equity	$	3,790,649	$	131,163	$	3,921,812	$	11,659	$	3,933,471

(1)The adoption of ASC 606 changed the revenue recognition practices for a number of revenue generating activities across Woodward’s businesses, although the most significant impacts are concentrated in product being produced for customers that have no alternative use to Woodward and Woodward has an enforceable right to payment with a profit, and MRO. The revenue related to these activities, which previously was accounted for on a point in time basis, is now required to use an over time model because the associated contracts meet one or more of the mandatory criteria established in ASC 606, as described above, and are included as current unbilled receivables in “Accounts receivable” and noncurrent unbilled receivables in “Other assets.” The change in the timing of revenue recognized in connection with over time contracts similarly changed the timing of manufacturing cost recognition and certain engineering and development costs, which are reflected as a reduction to inventory.

(2)

The value of noncash consideration in the form of exchanged products and other customer provided inventory is reflected in “Inventories,” and in contract liabilities, which are included in “Accrued liabilities.”

(3)Woodward recorded customer funding of product engineering and development identified as material rights as current and noncurrent deferred revenue contract liabilities included in “Accrued liabilities” and “Other liabilities.” The related customer funded product engineering and development costs were capitalized as costs to fulfill a contract, to the extent of the contractually committed customer funded payments, and are recorded as “Other assets.”

(4)The net book value of the backlog and customer relationships and contracts intangible assets was adjusted concurrent with the change in the timing of the associated revenue, resulting in a reduction in the net book value of these assets as of the date of adoption.

(5)The value of tax assets and tax liabilities was impacted by the change in timing of the recognition of assets and liabilities within tax jurisdictions.

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Statements of Earnings for the three and nine-months ended June 30, 2019 and the impact of the out-of-period correction discussed above on the Condensed Consolidated Statements of Earnings for the three-months ended June 30, 2019. The effect of the new standard and the error correction represent the increase (decrease) in the line item based on the adoption of ASC 606.

	Three-Months Ended June 30, 2019								Nine-Months Ended June 30, 2019
	Under previous standard		Effect of ‎ASC 606		Out-of-period correction			As reported	Under previous standard		Effect of ‎ASC 606		As reported
Net sales	$	701,426	$	36,965	$	13,614	$	752,005	$	2,057,294	$	106,366	$	2,163,660
Costs and expenses:
Cost of goods sold		520,274		36,669		5,573		562,516		1,528,328		93,203		1,621,531
Selling, general, and administrative expenses		52,897		83		-		52,980		159,902		(138)		159,764
Research and development costs		40,911		(250)		-		40,661		125,262		(1,903)		123,359
Interest expense		10,798		-		-		10,798		34,156		-		34,156
Interest income		(348)		-		-		(348)		(1,013)		-		(1,013)
Other expense (income), net		(6,916)		-		-		(6,916)		(18,134)		-		(18,134)
Total costs and expenses		617,616		36,502		5,573		659,691		1,828,501		91,162		1,919,663
Earnings before income taxes		83,810		463		8,041		92,314		228,793		15,204		243,997
Income tax expense		24,403		(200)		2,004		26,207		47,958		3,233		51,191
Net earnings	$	59,407	$	663	$	6,037	$	66,107	$	180,835	$	11,971	$	192,806
Earnings per share
Basic earnings per share	$	0.96	$	0.01		0.10	$	1.07	$	2.92	$	0.19	$	3.11
Diluted earnings per share	$	0.92	$	0.01		0.09	$	1.02	$	2.81	$	0.19	$	2.99
Weighted Average Common Shares Outstanding (Note 4):
Basic		61,941						61,941		61,977				61,977
Diluted		64,633						64,633		64,437				64,437

The adoption of ASC 606 resulted in an increase to net sales and cost of goods sold primarily due to the recognition of noncash consideration in the form of customer supplied inventory and the accelerated recognition of revenue and associated cost of goods sold for over time contracts, which would have been recognized at a point in time under the previous standard. The increases were offset by decreases in revenue and cost of goods sold related to the deferral of amounts due from customers recognized as material rights and over time contracts recognized as of the date of adoption, both of which would otherwise have been recognized as revenue during the periods under the previous standard.

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Balance Sheet as of June 30, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.

	June 30, 2019 ‎under previous standard		Effect of ‎ASC 606		June 30, 2019 ‎as reported
ASSETS
Current assets:
Cash and cash equivalents	$	63,302	$	-	$	63,302
Accounts receivable, net		456,282		194,495		650,777
Inventories		641,521		(110,358)		531,163
Income taxes receivable		17,903		(9,833)		8,070
Other current assets		44,866		(69)		44,797
Total current assets		1,223,874		74,235		1,298,109
Property, plant and equipment, net		1,063,084		-		1,063,084
Goodwill		807,868		-		807,868
Intangible assets, net		641,541		(60)		641,481
Deferred income tax assets		16,543		(1,207)		15,336
Other assets		90,604		99,121		189,725
Total assets	$	3,843,514	$	172,089	$	4,015,603
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	180,000	$	-	$	180,000
Accounts payable		243,071		-		243,071
Income taxes payable		12,816		-		12,816
Accrued liabilities		188,942		17,843		206,785
Total current liabilities		624,829		17,843		642,672
Long-term debt, less current portion		1,011,147		-		1,011,147
Deferred income tax liabilities		167,918		5,371		173,289
Other liabilities		385,994		98,190		484,184
Total liabilities		2,189,888		121,404		2,311,292
Stockholders' equity:
Preferred stock		-		-		-
Common stock		106		-		106
Additional paid-in capital		205,704		-		205,704
Accumulated other comprehensive losses		(64,149)		(31)		(64,180)
Deferred compensation		9,118		-		9,118
Retained earnings		2,117,488		50,716		2,168,204
		2,268,267		50,685		2,318,952
Treasury stock at cost		(605,523)		-		(605,523)
Treasury stock held for deferred compensation		(9,118)		-		(9,118)
Total stockholders' equity		1,653,626		50,685		1,704,311
Total liabilities and stockholders' equity	$	3,843,514	$	172,089	$	4,015,603

Schedule of Disaggregation of Revenue

	Three-Months Ended		Nine-Months Ended
	June 30, 2019		June 30, 2019
Commercial OEM	$	174,077	$	488,928
Commercial aftermarket		124,863		375,919
Defense OEM		147,696		372,538
Defense aftermarket		52,139		137,231
Total Aerospace segment net sales	$	498,775	$	1,374,616

Revenue by primary market for the Industrial reportable segment was as follows:

	Three-Months Ended		Nine-Months Ended
	June 30, 2019		June 30, 2019
Reciprocating engines	$	185,523	$	590,910
Industrial turbines		53,740		155,439
Renewables		13,967		42,695
Total Industrial segment net sales	$	253,230	$	789,044

The customers who account for approximately 10% or more of net sales to each of Woodward’s reportable segments for both the three and nine-months ended June 30, 2019 follow:

	Customer
Aerospace	The Boeing Company, General Electric Company, United Technologies
Industrial	Rolls-Royce PLC, Weichai Westport, General Electric Company

Net sales by geographic area, as determined based on the location of the customer, were as follows:

	Three-Months Ended June 30, 2019						Nine-Months Ended June 30, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	386,136	$	53,380	$	439,516	$	1,024,644	$	156,836	$	1,181,480
Germany		18,319		50,943		69,262		56,136		178,032		234,168
Europe, excluding Germany		42,849		66,936		109,785		131,243		191,415		322,658
Asia		18,908		73,856		92,764		66,206		238,737		304,943
Other countries		32,563		8,115		40,678		96,387		24,024		120,411
Total net sales	$	498,775	$	253,230	$	752,005	$	1,374,616	$	789,044	$	2,163,660