Leases

3 Months Ended

Dec. 31, 2024

Note 5. Leases

Lessee arrangements

Woodward has entered into operating leases for certain facilities and equipment with terms in excess of one year under agreements that expire at various dates. Some leases require the payment of property taxes, insurance, maintenance costs, or other similar costs in addition to rental payments. Woodward has also entered into finance leases for equipment with terms in excess of one year under agreements that expire at various dates.

Lease-related assets and liabilities were as follows:


	Classification on the Condensed Consolidated Balance Sheets	December 31, 2024		September 30, 2024
Assets:
Operating lease	Other assets	$	23,218	$	27,135
Finance lease	Property, plant, and equipment, net		3,341		2,516
Total lease assets			26,559		29,651

Current liabilities:
Operating lease	Accrued liabilities		4,564		5,029
Finance lease	Current portion of long-term debt		975		719
Noncurrent liabilities:
Operating lease	Other liabilities		19,129		22,670
Finance lease	Long-term debt, less current portion		2,592		2,017
Total lease liabilities		$	27,260	$	30,435

Lease-related expenses were as follows:


	Three Months Ended December 31,
	2024		2023
Operating lease expense	$	1,796	$	1,632
Amortization of finance lease assets		241		248
Interest on finance lease liabilities		44		41
Variable lease expense		193		228
Short-term lease expense		53		38
Total lease expense	$	2,327	$	2,187

Lease-related supplemental cash flow information was as follows:


	Three Months Ended December 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,534	$	1,316
Operating cash flows for finance leases		44		41
Financing cash flows for finance leases		235		249
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		476		477
Finance leases		1,069		—

Lessor arrangements

Woodward has assessed its manufacturing contracts and concluded that certain of the contracts for the manufacture of customer products met the criteria to be considered a leasing arrangement (“embedded leases”) with Woodward as the lessor. The specific manufacturing contracts that met the criteria were those that utilized Woodward property, plant, and equipment and which are substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with three of its customers representing embedded leases, all of which qualified as operating leases with undefined quantities of future customer purchase commitments.

Although Woodward expects to allocate some portion of future net sales to these customers to embedded lessor arrangements, it cannot provide expected future undiscounted lease payments from property, plant, and equipment leased to customers as of December 31, 2024. If, in the future, customers reduce purchases of related products from Woodward, the Company believes it will derive additional value from the underlying equipment by repurposing its use to support other customer arrangements.

Revenue from contracts with customers that included embedded operating leases, which is included in “Net sales” in the Condensed Consolidated Statements of Earnings, was $1,034 for the three months ended December 31, 2024, compared to $1,364 for the three months ended December 31, 2023.

The carrying amount of property, plant, and equipment leased to others through embedded leasing arrangements, included in “Property, plant, and equipment, net” on the Condensed Consolidated Balance Sheets, follows:


	December 31, 2024			September 30, 2024
Property, plant, and equipment	$	31,721		$	48,495
Less accumulated depreciation		(19,493	)		(32,994	)
Property, plant, and equipment, net	$	12,228		$	15,501