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.

	Classification on the Condensed Consolidated Balance Sheets	December 31, 2021		September 30, 2021
Assets:
Operating lease assets	Other assets	$	20,871	$	19,370
Finance lease assets	Property, plant and equipment, net		690		781
Total lease assets			21,561		20,151

Current liabilities:
Operating lease liabilities	Accrued liabilities		5,270		5,260
Finance lease liabilities	Current portion of long-term debt		424		728
Noncurrent liabilities:
Operating lease liabilities	Other liabilities		16,294		14,770
Finance lease liabilities	Long-term debt, less current portion		388		475
Total lease liabilities		$	22,376	$	21,233

	Three-Months Ended December 31,
	2021			2020
Operating lease expense	$	1,607		$	1,553
Amortization of finance lease assets		79			126
Interest on finance lease liabilities		8			18
Variable lease expense		403			322
Short-term lease expense		40			82
Sublease income¹		(192	)		(168	)
Total lease expense	$	1,945		$	1,933

	Three-Months Ended December 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,343	$	1,151
Operating cash flows for finance leases		8		18
Financing cash flows for finance leases		382		396
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		3,082		1,130
Finance leases		—		12

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 is substantially (more than 90%) dedicated to the manufacturing of the product(s) for a single customer. Woodward has dedicated manufacturing lines with four 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, 2021. 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 $1,343 for the three-months ended December 31, 2021, compared to $1,798 for the three-months ended December 31, 2020.

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, 2021			September 30, 2021
Property, plant and equipment leased to others through embedded leasing arrangements	$	71,958		$	93,732
Less accumulated depreciation		(27,070	)		(35,733	)
Property, plant and equipment leased to others through embedded leasing arrangements, net	$	44,888		$	57,999