Revenue (Tables)

12 Months Ended

Sep. 30, 2019

Revenue

Schedule of Revenue Recognition Time

	Year Ended September 30, 2019
	Aerospace		Industrial		Consolidated
Point in time	$	762,042	$	634,219	$	1,396,261
Over time		1,118,478		385,458		1,503,936
Total net sales	$	1,880,520	$	1,019,677	$	2,900,197

Schedule of Accounts Receivable

	September 30, 2019		September 30, 2018
Billed receivables
Trade accounts receivable	$	381,942	$	403,590
Other (Chinese financial institutions)		42,171		23,191
Less: Allowance for uncollectible amounts		(7,908)		(3,938)
Net billed accounts receivable		416,205		422,843
Current unbilled receivables (contract assets), net		175,324		9,160
Total accounts receivable, net	$	591,529	$	432,003

Schedule of Contract Liability

	September 30, 2019				September 30, 2018
		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	8,317	$	230,588	$	7,087	$	235,300
Deferred revenue from advance invoicing and/or prepayments from customers		4,554		141		2,572		-
Liability related to customer supplied inventory		13,396		-		-		-
Deferred revenue from material rights related to engineering and development funding		1,624		106,436		-		-
Net contract liabilities	$	27,891	$	337,165	$	9,659	$	235,300

Schedule of Impact of the Adoption ASC 606 on Consolidated Financial Statement

The following schedule quantifies the impact of adopting ASC 606 on the Consolidated Balance Sheet as of October 1, 2018. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606:

	September 30, 2018 ‎as reported		Effect of ‎ ASC 606		October 1, 2018 ‎as adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	83,594	$	-	$	83,594
Accounts receivable, net (1)(2)		432,003		135,668		567,671
Inventories (1)(2)		549,596		(73,606)		475,990
Income taxes receivable (5)		6,397		(1,247)		5,150
Other current assets		43,207		(154)		43,053
Total current assets		1,114,797		60,661		1,175,458
Property, plant and equipment, net		1,060,005		-		1,060,005
Goodwill		813,250		-		813,250
Intangible assets, net (4)		700,883		(2,519)		698,364
Deferred income tax assets (5)		16,570		(1,185)		15,385
Other assets (1)(2)(3)		85,144		85,865		171,009
Total assets	$	3,790,649	$	142,822	$	3,933,471
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	153,635	$	-	$	153,635
Accounts payable		226,285		-		226,285
Income taxes payable (5)		16,745		5,352		22,097
Accrued liabilities (2)(3)		194,513		14,625		209,138
Total current liabilities		591,178		19,977		611,155
Long-term debt, less current portion		1,092,397		-		1,092,397
Deferred income tax liabilities (5)		170,915		5,515		176,430
Other liabilities (3)		398,055		78,630		476,685
Total liabilities		2,252,545		104,122		2,356,667
Stockholders' equity:
Preferred stock		-		-		-
Common stock		106		-		106
Additional paid-in capital		185,705		-		185,705
Accumulated other comprehensive losses		(74,942)		(45)		(74,987)
Deferred compensation		8,431		-		8,431
Retained earnings		1,966,643		38,745		2,005,388
		2,085,943		38,700		2,124,643
Treasury stock at cost		(539,408)		-		(539,408)
Treasury stock held for deferred compensation		(8,431)		-		(8,431)
Total stockholders' equity		1,538,104		38,700		1,576,804
Total liabilities and stockholders' equity	$	3,790,649	$	142,822	$	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 Consolidated Statements of Earnings for the fiscal year ended September 30, 2019. The effect of the new standard represent the increase (decrease) in the line item based on the adoption of ASC 606.

	Year Ended September 30, 2019
	Under previous standard		Effect of ‎ASC 606		As reported
Net sales	$	2,790,557	$	109,640	$	2,900,197
Costs and expenses:
Cost of goods sold		2,088,087		104,567		2,192,654
Selling, general, and administrative expenses		211,307		(102)		211,205
Research and development costs		160,402		(1,295)		159,107
Interest expense		44,001		-		44,001
Interest income		(1,413)		-		(1,413)
Other expense (income), net		(25,969)		-		(25,969)
Total costs and expenses		2,476,415		103,170		2,579,585
Earnings before income taxes		314,142		6,470		320,612
Income tax expense		60,175		835		61,010
Net earnings	$	253,967	$	5,635	$	259,602
Earnings per share
Basic earnings per share	$	4.10	$	0.09	$	4.19
Diluted earnings per share	$	3.94	$	0.08	$	4.02
Weighted Average Common Shares Outstanding (Note 4):
Basic		61,950				61,950
Diluted		64,498				64,498

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 Consolidated Balance Sheet as of September 30, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.

	September 30, 2019 ‎under previous standard		Effect of ‎ASC 606		September 30, 2019 ‎as reported
ASSETS
Current assets:
Cash and cash equivalents	$	99,073	$	-	$	99,073
Accounts receivable, net		419,471		172,058		591,529
Inventories		614,941		(98,105)		516,836
Income taxes receivable		19,100		(11,001)		8,099
Other current assets		54,665		1,026		55,691
Total current assets		1,207,250		63,978		1,271,228
Property, plant and equipment, net		1,058,775		-		1,058,775
Goodwill		797,853		-		797,853
Intangible assets, net		611,992		-		611,992
Deferred income tax assets		19,449		(1,288)		18,161
Other assets		91,482		107,035		198,517
Total assets	$	3,786,801	$	169,725	$	3,956,526
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	220,000	$	-	$	220,000
Accounts payable		240,460		-		240,460
Income taxes payable		15,011		3,838		18,849
Accrued liabilities		209,907		18,220		228,127
Total current liabilities		685,378		22,058		707,436
Long-term debt, less current portion		864,899		-		864,899
Deferred income tax liabilities		153,521		(2,159)		151,362
Other liabilities		400,197		105,891		506,088
Total liabilities		2,103,995		125,790		2,229,785
Stockholders' equity:
Preferred stock		-		-		-
Common stock		106		-		106
Additional paid-in capital		207,120		-		207,120
Accumulated other comprehensive losses		(102,863)		(443)		(103,306)
Deferred compensation		9,382		-		9,382
Retained earnings		2,180,541		44,378		2,224,919
		2,294,286		43,935		2,338,221
Treasury stock at cost		(602,098)		-		(602,098)
Treasury stock held for deferred compensation		(9,382)		-		(9,382)
Total stockholders' equity		1,682,806		43,935		1,726,741
Total liabilities and stockholders' equity	$	3,786,801	$	169,725	$	3,956,526

The underlying causes of the impacts of the adoption of ASC 606 on the Consolidated Balance Sheet as of September 30, 2019 are consistent with those as of the date of adoption, October 1, 2018, as discussed above.

The following schedule quantifies the impact of adopting ASC 606 on the Consolidated Statement of Cash Flows as of September 30, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.

		September 30, 2019 ‎under previous standard		Effect of ‎ASC 606		September 30, 2019 ‎as reported
Cash flows from operating activities:
Net earnings	$	253,967	$	5,635	$	259,602
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		144,432		(2,428)		142,004
Net loss on sales of assets		1,925		-		1,925
Stock-based compensation		18,146		-		18,146
Deferred income taxes		(2,439)		(7,626)		(10,065)
Changes in operating assets and liabilities:
Trade accounts receivable		6,692		(5,851)		841
Unbilled receivables (contract assets)		-		(31,353)		(31,353)
Costs to fulfill a contract		-		(20,656)		(20,656)
Inventories		(73,250)		24,065		(49,185)
Accounts payable and accrued liabilities		50,038		(2,034)		48,004
Contract liabilities		(4,024)		33,106		29,082
Income taxes		(6,155)		8,238		2,083
Retirement benefit obligations		(3,705)		-		(3,705)
Other		4,981		(1,096)		3,885
Net cash provided by operating activities	$	390,608	$	-	$	390,608
Cash flows from investing activities:
Payments for purchase of property, plant, and equipment		(99,066)		-		(99,066)
Proceeds from sale of assets		1,010		-		1,010
Proceeds from sales of short-term investments		22,252		-		22,252
Payments for purchases of short-term investments		(26,723)		-		(26,723)
Net cash used in investing activities	$	(102,527)	$	-	$	(102,527)
Cash flows from financing activities:
Cash dividends paid		(39,066)		-		(39,066)
Proceeds from sales of treasury stock		36,044		-		36,044
Payments for repurchases of common stock		(110,311)		-		(110,311)
Borrowings on revolving lines of credit and short-term borrowings		1,683,542		-		1,683,542
Payments on revolving lines of credit and short-term borrowings		(1,690,035)		-		(1,690,035)
Payments of long-term debt and capital lease obligations		(143,535)		-		(143,535)
Payments of debt financing costs		(2,238)		-		(2,238)
Net cash used in financing activities		(265,599)		-		(265,599)
Effect of exchange rate changes on cash and cash equivalents		(7,003)		-		(7,003)
Net change in cash and cash equivalents		15,479		-		15,479
Cash and cash equivalents, including restricted cash, at beginning of year		83,594		-		83,594
Cash and cash equivalents, including restricted cash, at end of year	$	99,073	$	-	$	99,073

Schedule of Disaggregation of Revenue

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

	Year Ended
	September 30, 2019
Commercial OEM	$	659,336
Commercial aftermarket		497,795
Defense OEM		529,940
Defense aftermarket		193,449
Total Aerospace segment net sales	$	1,880,520

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

	Year Ended
	September 30, 2019
Reciprocating engines	$	751,136
Industrial turbines		210,064
Renewables		58,477
Total Industrial segment net sales	$	1,019,677

The customers who account for approximately 10% or more of net sales to each of Woodward’s reportable segments for the fiscal year ended September 30, 2019 follow:

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

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

	Year Ended September 30, 2019
	Aerospace		Industrial		Consolidated
United States	$	1,415,880	$	212,184	$	1,628,064
Germany		72,907		229,177		302,084
Europe, excluding Germany		178,905		252,511		431,416
Asia		85,483		293,834		379,317
Other countries		127,345		31,971		159,316
Total net sales	$	1,880,520	$	1,019,677	$	2,900,197