Revenue

3 Months Ended

Dec. 31, 2019

Note 3. Revenue

Sales of Products

Revenue from manufactured products and from maintenance, repair and overhaul (“MRO”) represented 87% and 12%, respectively, of Woodward’s net sales for the three-months ended December 31, 2019, and 87% and 11%, respectively, of Woodward’s net sales for the three-months ended December 31, 2018.

The amount of revenue recognized as point in time or over time follows:



	Three-Months Ended December 31, 2019						Three-Months Ended December 31, 2018
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	187,515	$	167,942	$	355,457	$	164,014	$	172,162	$	336,176
Over time		286,410		78,488		364,898		228,873		87,762		316,635
Total net sales	$	473,925	$	246,430	$	720,355	$	392,887	$	259,924	$	652,811

Contract assets

Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in “Accounts receivable” in Woodward’s Condensed Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms, which are generally tied to shipment of the products to the customer, or as work progresses in accordance with contractual terms. Billed accounts receivable are typically due within 60 days.

Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require revenue to be recognized over time rather than at a point in time. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract.

Woodward’s contracts with customers generally have no financing components.

Accounts receivable consisted of the following:


	December 31, 2019		September 30, 2019
Billed receivables
Trade accounts receivable	$	354,152	$	381,942
Other (Chinese financial institutions)		16,635		42,171
Less: Allowance for uncollectible amounts		(3,813)		(7,908)
Net billed receivables		366,974		416,205
Current unbilled receivables (contract assets), net		205,469		175,324
Total accounts receivable, net	$	572,443	$	591,529

In addition, as of December 31, 2019 “Other assets” on the Condensed Consolidated Balance Sheets includes $1,562 of unbilled receivables not expected to be invoiced and collected within a period of twelve months, compared to $1,573 as of September 30, 2019.

Contract liabilities

Contract liabilities consisted of the following:


	December 31, 2019				September 30, 2019
		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	8,186	$	229,011	$	8,317	$	230,588
Deferred revenue from advance invoicing and/or prepayments from customers		4,200		139		4,554		141
Liability related to customer supplied inventory		10,298		-		13,396		-
Deferred revenue from material rights related to engineering and development funding		2,277		111,858		1,624		106,436
Net contract liabilities	$	24,961	$	341,008	$	27,891	$	337,165

Woodward recognized revenue of $3,970 in the three-months ended December 31, 2019 from contract liabilities balances recorded as of October 1, 2019, compared to $9,760 in the three-months ended December 31, 2018 from contract liabilities balances recorded as of October 1, 2018.

Remaining performance obligations

Remaining performance obligations related to the aggregate amount of the total contract transaction price of firm orders for which the performance obligation has not yet been recognized in revenue as of December 31, 2019 was $1,562,813, compared to $1,527,437 as of September 30, 2019 the majority of which relate to Woodward’s Aerospace segment. Woodward expects to recognize almost all of these remaining performance obligations within two years after December 31, 2019.

Remaining performance obligations related to material rights that have not yet been recognized in revenue as of December 31, 2019 was $434,437, of which $9,781 is expected to be recognized in the remainder of fiscal year 2020, $11,204 is expected to be recognized in fiscal year 2021, and the balance is expected to be recognized thereafter. Woodward expects to recognize revenue from performance obligations related to material rights over the life of the underlying programs, which may be as long as forty years.

Disaggregation of Revenue

Woodward designs, produces and services reliable, efficient, low-emission, and high-performance energy control products for diverse applications in markets throughout the world. Woodward reports financial results for each of its Aerospace and Industrial reportable segments. Woodward further disaggregates its revenue from contracts with customers by primary market and by geographical area as Woodward believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

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


	Three-Months Ended December 31,
	2019		2018
Commercial OEM	$	158,666	$	140,508
Commercial aftermarket		125,928		111,348
Defense OEM		140,926		101,836
Defense aftermarket		48,405		39,195
Total Aerospace segment net sales	$	473,925	$	392,887

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


	Three-Months Ended December 31,
	2019		2018
Reciprocating engines	$	174,653	$	196,130
Industrial turbines		51,500		49,512
Renewables		20,277		14,282
Total Industrial segment net sales	$	246,430	$	259,924

The customers who account for approximately 10% or more of net sales to each of Woodward’s reportable segments for the three-months ended December 31, 2019 are as follows:


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

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



	Three-Months Ended December 31, 2019						Three-Months Ended December 31, 2018
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	363,912	$	51,092	$	415,004	$	286,745	$	49,892	$	336,637
Germany		17,278		51,438		68,716		12,749		63,364		76,113
Europe, excluding Germany		38,987		50,501		89,488		39,612		59,348		98,960
China		10,212		53,876		64,088		15,638		50,251		65,889
Asia, excluding China		6,981		31,912		38,893		8,368		29,167		37,535
Other countries		36,555		7,611		44,166		29,775		7,902		37,677
Total net sales	$	473,925	$	246,430	$	720,355	$	392,887	$	259,924	$	652,811