Revenue (Tables)

6 Months Ended

Mar. 31, 2019



	Three-Months Ended March 31, 2019						Six-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
Point in time	$	208,183	$	163,623	$	371,806	$	372,197	$	335,785	$	707,982
Over time		274,771		112,267		387,038		503,644		200,029		703,673
Total net sales	$	482,954	$	275,890	$	758,844	$	875,841	$	535,814	$	1,411,655

Schedule of Contract Asset and Liability


	March 31, 2019		September 30, 2018
Billed receivables
Trade accounts receivable	$	399,150	$	403,590
Other (Chinese financial institutions)		60,537		23,191
Less: Allowance for uncollectible amounts		(4,033)		(3,938)
Net billed receivables		455,654		422,843
Current unbilled receivables (contract assets), net		136,682		9,160
Total accounts receivable, net	$	592,336	$	432,003


	March 31, 2019				September 30, 2018
		Current		Noncurrent		Current		Noncurrent
Deferred revenue from material rights from GE joint venture formation	$	6,897	$	235,961	$	7,087	$	235,300
Deferred revenue from advance invoicing and/or prepayments from customers		4,766		-		2,572		-
Liability related to customer supplied inventory		17,258		-		-		-
Deferred revenue from material rights related to engineering and development funding		1,610		95,303		-		-
Net contract liabilities	$	30,531	$	331,264	$	9,659	$	235,300

Schedule of Impact of the Adoption ASC 606 on Financial Statement

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Balance Sheet as of October 1, 2018. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606:


	September 30, 2018 as reported		Effect of ASC 606		October 1, 2018 as adjusted
ASSETS
Current assets:
Cash and cash equivalents	$	83,594	$	-	$	83,594
Accounts receivable, net (1)(2)		432,003		104,907		536,910
Inventories (1)(2)		549,596		(55,002)		494,594
Income taxes receivable (5)		6,397		(959)		5,438
Other current assets		43,207		(154)		43,053
Total current assets		1,114,797		48,792		1,163,589
Property, plant and equipment, net		1,060,005		-		1,060,005
Goodwill		813,250		-		813,250
Intangible assets, net (4)		700,883		(2,519)		698,364
Deferred income tax assets (5)		16,570		(975)		15,595
Other assets (1)(2)(3)		85,144		85,865		171,009
Total assets	$	3,790,649	$	131,163	$	3,921,812

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	153,635	$	-	$	153,635
Accounts payable		226,285		-		226,285
Income taxes payable (5)		16,745		4,141		20,886
Accrued liabilities (2)(3)		194,513		15,672		210,185
Total current liabilities		591,178		19,813		610,991
Long-term debt, less current portion		1,092,397		-		1,092,397
Deferred income tax liabilities (5)		170,915		3,833		174,748
Other liabilities (3)		398,055		78,631		476,686
Total liabilities		2,252,545		102,277		2,354,822
Stockholders’ equity:
Preferred stock		-		-		-
Common stock		106		-		106
Additional paid-in capital		185,705		-		185,705
Accumulated other comprehensive losses		(74,942)		(41)		(74,983)
Deferred compensation		8,431		-		8,431
Retained earnings		1,966,643		28,927		1,995,570
		2,085,943		28,886		2,114,829
Treasury stock at cost		(539,408)		-		(539,408)
Treasury stock held for deferred compensation		(8,431)		-		(8,431)
Total stockholders’ equity		1,538,104		28,886		1,566,990
Total liabilities and stockholders’ equity	$	3,790,649	$	131,163	$	3,921,812

(1)

The adoption of ASC 606 changed the revenue recognition practices for a number of revenue generating activities across Woodward’s businesses, although the most significant impacts are concentrated in product being produced for customers that have no alternative use to Woodward and Woodward has an enforceable right to payment with a profit, and MRO. The revenue related to these activities, which previously was accounted for on a point in time basis, is now required to use an over time model because the associated contracts meet one or more of the mandatory criteria established in ASC 606, as described above, and are included as current unbilled receivables in “Accounts receivable” and noncurrent unbilled receivables in “Other assets.” The change in the timing of revenue recognized in connection with over time contracts similarly changed the timing of manufacturing cost recognition and certain engineering and development costs, which are reflected as a reduction to inventory.

(2)

The value of noncash consideration in the form of exchanged products and other customer provided inventory is reflected in unbilled receivables included in “Accounts receivable,” “Other assets,” and “Inventories,” and in contract liabilities, which are included in “Accrued liabilities.”

(3)

Woodward recorded customer funding of product engineering and development identified as material rights as current and noncurrent deferred revenue contract liabilities included in “Accrued liabilities” and “Other liabilities.” The related customer funded product engineering and development costs were capitalized as costs to fulfill a contract, to the extent of the contractually committed customer funded payments, and are recorded as “Other assets.”

(4)

The net book value of the backlog and customer relationships and contracts intangible assets was adjusted concurrent with the change in the timing of the associated revenue, resulting in a reduction in the net book value of these assets as of the date of adoption.

(5)

The value of tax assets and tax liabilities was impacted by the change in timing of the recognition of assets and liabilities within tax jurisdictions.

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Statements of Earnings for the three and six-months ended March 31, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.



	Three-Months Ended March 31, 2019						Six-Months Ended March 31, 2019
	Under previous standard		Effect of ASC 606		As reported		Under previous standard		Effect of ASC 606		As reported
Net sales	$	723,227	$	35,617	$	758,844	$	1,355,868	$	55,787	$	1,411,655
Costs and expenses:
Cost of goods sold		539,364		27,477		566,841		1,008,054		50,961		1,059,015
Selling, general, and administrative expenses		54,979		(122)		54,857		107,005		(221)		106,784
Research and development costs		45,637		(1,806)		43,831		84,351		(1,653)		82,698
Interest expense		11,480		-		11,480		23,358		-		23,358
Interest income		(294)		-		(294)		(665)		-		(665)
Other expense (income), net		(8,039)		-		(8,039)		(11,218)		-		(11,218)
Total costs and expenses		643,127		25,549		668,676		1,210,885		49,087		1,259,972
Earnings before income taxes		80,100		10,068		90,168		144,983		6,700		151,683
Income tax expense		10,472		2,117		12,589		23,555		1,429		24,984
Net earnings	$	69,628	$	7,951	$	77,579	$	121,428	$	5,271	$	126,699

Earnings per share
Basic earnings per share	$	1.12	$	0.13	$	1.25	$	1.96	$	0.08	$	2.04
Diluted earnings per share	$	1.08	$	0.12	$	1.20	$	1.89	$	0.08	$	1.97

Weighted Average Common Shares Outstanding (Note 4):
Basic		62,175				62,175		61,995				61,995
Diluted		64,564				64,564		64,307				64,307

The adoption of ASC 606 resulted in an increase to net sales and cost of goods sold primarily due to the recognition of noncash consideration in the form of customer supplied inventory and the accelerated recognition of revenue and associated cost of goods sold for over time contracts, which would have been recognized at a point in time under the previous standard. The increases were offset by decreases in revenue and cost of goods sold related to the deferral of amounts due from customers recognized as material rights and over time contracts recognized as of the date of adoption, both of which would otherwise have been recognized as revenue during the periods under the previous standard.

The following schedule quantifies the impact of adopting ASC 606 on the Condensed Consolidated Balance Sheet as of March 31, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.


	March 31, 2019 under previous standard		Effect of ASC 606		March 31, 2019 as reported
ASSETS
Current assets:
Cash and cash equivalents	$	65,303	$	-	$	65,303
Accounts receivable, net		460,216		132,120		592,336
Inventories		604,418		(70,098)		534,320
Income taxes receivable		20,497		(6,529)		13,968
Other current assets		38,143		22		38,165
Total current assets		1,188,577		55,515		1,244,092
Property, plant and equipment, net		1,064,388		-		1,064,388
Goodwill		804,461		-		804,461
Intangible assets, net		648,413		(2,319)		646,094
Deferred income tax assets		16,187		(993)		15,194
Other assets		91,197		100,523		191,720
Total assets	$	3,813,223	$	152,726	$	3,965,949

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	160,000	$	-	$	160,000
Accounts payable		259,665		-		259,665
Income taxes payable		18,361		-		18,361
Accrued liabilities		184,260		20,326		204,586
Total current liabilities		622,286		20,326		642,612
Long-term debt, less current portion		1,000,468		-		1,000,468
Deferred income tax liabilities		159,155		3,676		162,831
Other liabilities		372,591		94,596		467,187
Total liabilities		2,154,500		118,598		2,273,098
Stockholders' equity:
Preferred stock		-		-		-
Common stock		106		-		106
Additional paid-in capital		204,892		-		204,892
Accumulated other comprehensive losses		(64,741)		(70)		(64,811)
Deferred compensation		8,876		-		8,876
Retained earnings		2,068,152		34,198		2,102,350
		2,217,285		34,128		2,251,413
Treasury stock at cost		(549,686)		-		(549,686)
Treasury stock held for deferred compensation		(8,876)		-		(8,876)
Total stockholders' equity		1,658,723		34,128		1,692,851
Total liabilities and stockholders' equity	$	3,813,223	$	152,726	$	3,965,949

Schedule of Disaggregation of Revenue

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


	Three-Months Ended		Six-Months Ended
	March 31, 2019		March 31, 2019
Commercial OEM	$	174,343	$	314,851
Commercial aftermarket		139,708		251,056
Defense OEM		123,006		224,842
Defense aftermarket		45,897		85,092
Total Aerospace segment net sales	$	482,954	$	875,841

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


	Three-Months Ended		Six-Months Ended
	March 31, 2019		March 31, 2019
Reciprocating engines	$	209,257	$	405,387
Industrial turbines		52,187		101,699
Renewables		14,446		28,728
Total Industrial segment net sales	$	275,890	$	535,814

The customers who account for approximately 10% or more of net sales to each of Woodward’s reportable segments for the three and six-months ended March 31, 2019 follow:


	Customer
Aerospace	The Boeing Company, General Electric Company, United Technologies
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, 2019						Six-Months Ended March 31, 2019
	Aerospace		Industrial		Consolidated		Aerospace		Industrial		Consolidated
United States	$	351,763	$	53,564	$	405,327	$	638,508	$	103,456	$	741,964
Germany		25,068		63,725		88,793		37,817		127,089		164,906
Europe, excluding Germany		48,782		65,131		113,913		88,394		124,479		212,873
Asia		23,292		85,463		108,755		47,298		164,881		212,179
Other countries		34,049		8,007		42,056		63,824		15,909		79,733
Total net sales	$	482,954	$	275,890	$	758,844	$	875,841	$	535,814	$	1,411,655