Revenue

6 Months Ended

Mar. 31, 2020

Note 3. Revenue

Sales of Products

Revenue from manufactured products and from maintenance, repair and overhaul (“MRO”) represented 86% and 13%, respectively, of Woodward’s net sales for the three-months ended March 31, 2020, and 86% and 12%, respectively, of Woodward’s net sales for the six-months ended March 31, 2020. Revenue from manufactured products and from MRO represented 87% and 12%, respectively, of Woodward’s net sales for both the three and six-months ended March 31, 2019.

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



	Three-Months Ended March 31, 2020						Three-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	178,325	$	157,052	$	335,377	$	208,183	$	163,623	$	371,806
Over time		295,911		88,932		384,843		274,771		112,267		387,038
Total net sales	$	474,236	$	245,984	$	720,220	$	482,954	$	275,890	$	758,844


	Six-Months Ended March 31, 2020						Six-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	365,840	$	324,994	$	690,834	$	372,197	$	335,785	$	707,982
Over time		582,321		167,420		749,741		503,644		200,029		703,673
Total net sales	$	948,161	$	492,414	$	1,440,575	$	875,841	$	535,814	$	1,411,655

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:


	March 31, 2020		September 30, 2019
Billed receivables
Trade accounts receivable	$	363,661	$	381,942
Other (Chinese financial institutions)		40,030		42,171
Less: Allowance for uncollectible amounts		(4,053)		(7,908)
Net billed receivables		399,638		416,205
Current unbilled receivables (contract assets), net		201,586		175,324
Total accounts receivable, net	$	601,224	$	591,529

As of March 31, 2020, “Other assets” on the Condensed Consolidated Balance Sheets includes $22,111 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. Unbilled receivables not expected to be invoiced and collected within a period of twelve months are primarily attributable to customer delays for deliveries on firm orders in the Aerospace segment due to the impacts of the COVID-19 pandemic.

In coordination with its customers and when terms are considered favorable, Woodward transfers ownership to collect amounts due for outstanding accounts receivable to third parties in exchange for cash. When the transfer of accounts receivable meets the criteria of FASB ASC Topic 860-10, “Transfers and Servicing”, and are without recourse, the transaction is recognized as a sale and the accounts receivable is derecognized.

Contract liabilities

Contract liabilities consisted of the following:


	March 31, 2020				September 30, 2019
		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	4,712	$	235,558	$	8,317	$	230,588
Deferred revenue from advanced invoicing and/or prepayments from customers		4,572		129		4,554		141
Liability related to customer supplied inventory		13,884		-		13,396		-
Deferred revenue from material rights related to engineering and development funding		2,433		116,753		1,624		106,436
Net contract liabilities	$	25,601	$	352,440	$	27,891	$	337,165

Woodward recognized revenue of $15,962 in the three-months and $19,932 in the six-months ended March 31, 2020 from contract liabilities balances recorded as of October 1, 2019, compared to $10,552 in the three-months and $20,312 in the six-months ended March 31, 2019 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 March 31, 2020 was $1,728,437, compared to $1,527,437 as of September 30, 2019, the majority of which in both periods relate to Woodward’s Aerospace segment. Woodward expects to recognize almost all of these remaining performance obligations within two years after March 31, 2020.

Remaining performance obligations related to material rights that have not yet been recognized in revenue as of March 31, 2020 was $454,471, of which $4,666 is expected to be recognized in the remainder of fiscal year 2020, $7,595 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 March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019
Commercial OEM	$	144,610	$	174,343	$	303,276	$	314,851
Commercial aftermarket		134,042		139,708		259,970		251,056
Defense OEM		139,901		123,006		280,827		224,842
Defense aftermarket		55,683		45,897		104,088		85,092
Total Aerospace segment net sales	$	474,236	$	482,954	$	948,161	$	875,841

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


	Three-Months Ended March 31,				Six-Months Ended March 31,
	2020		2019		2020		2019
Reciprocating engines	$	163,555	$	209,257	$	338,208	$	405,387
Industrial turbines		59,678		52,187		111,177		101,699
Renewables¹		22,751		14,446		43,029		28,728
Total Industrial segment net sales	$	245,984	$	275,890	$	492,414	$	535,814

1)Sales in the renewables market will be discontinued as of May 1, 2020 following the closing of the divestiture of the disposal groups (see Note 10, Impairment of assets held for sale).

The customers who account for approximately 10% or more of net sales of each of Woodward’s reportable segments for the three and six-months ended March 31, 2020 are as follow:


	Customer
Aerospace	The Boeing Company, General Electric Company, United Technologies Corporation
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 March 31, 2020						Three-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	356,109	$	52,907	$	409,016	$	351,763	$	53,564	$	405,327
Germany		21,111		52,941		74,052		25,068		63,725		88,793
Europe, excluding Germany		40,600		65,402		106,002		48,782		65,131		113,913
China		11,487		37,548		49,035		9,502		53,897		63,399
Asia, excluding China		10,582		29,668		40,250		13,790		31,566		45,356
Other countries		34,347		7,518		41,865		34,049		8,007		42,056
Total net sales	$	474,236	$	245,984	$	720,220	$	482,954	$	275,890	$	758,844


	Six-Months Ended March 31, 2020						Six-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	720,021	$	104,000	$	824,021	$	638,508	$	103,456	$	741,964
Germany		38,389		104,379		142,768		37,817		127,089		164,906
Europe, excluding Germany		79,587		115,903		195,490		88,394		124,479		212,873
China		21,698		91,424		113,122		25,140		104,147		129,287
Asia, excluding China		17,563		61,580		79,143		22,158		60,734		82,892
Other countries		70,903		15,128		86,031		63,824		15,909		79,733
Total net sales	$	948,161	$	492,414	$	1,440,575	$	875,841	$	535,814	$	1,411,655