Leases

6 Months Ended

Mar. 31, 2025

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	March 31, 2025		September 30, 2024
Assets:
Operating lease	Other assets	$	25,471	$	27,135
Finance lease	Property, plant, and equipment, net		3,101		2,516
Total lease assets			28,572		29,651

Current liabilities:
Operating lease	Accrued liabilities		5,783		5,029
Finance lease	Current portion of long-term debt		989		719
Noncurrent liabilities:
Operating lease	Other liabilities		20,229		22,670
Finance lease	Long-term debt, less current portion		2,341		2,017
Total lease liabilities		$	29,342	$	30,435

Lease-related expenses were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024		2025		2024
Operating lease expense	$	1,899	$	1,656	$	3,695	$	3,288
Amortization of finance lease assets		242		222		483		470
Interest on finance lease liabilities		42		32		86		73
Variable lease expense		375		301		568		529
Short-term lease expense		55		45		108		83
Total lease expense	$	2,613	$	2,256	$	4,940	$	4,443

Lease-related supplemental cash flow information was as follows:


	Six Months Ended March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	2,982	$	2,660
Operating cash flows for finance leases		86		73
Financing cash flows for finance leases		474		472
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		3,852		966
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 March 31, 2025. 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 $903 for the three months and $1,937 for the six months ended March 31, 2025, compared to $1,365 for the three months and $2,729 for the six months ended March 31, 2024.

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:


	March 31, 2025			September 30, 2024
Property, plant, and equipment	$	36,818		$	48,495
Less accumulated depreciation		(24,699	)		(32,994	)
Property, plant, and equipment, net	$	12,119		$	15,501