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Revenue (Tables) | 9 Months Ended
--- | ---
Jun. 30, 2019
Revenue |
Schedule of Revenue Recognition Time |
| Three-Months Ended June 30, 2019 |  | Nine-Months Ended June 30, 2019
| Aerospace |  | Industrial |  | Consolidated |  | Aerospace |  | Industrial |  | Consolidated
Point in time | $ | 191,516 |  | $ | 147,194 |  | $ | 338,710 |  | $ | 563,713 |  | $ | 482,979 |  | $ | 1,046,692
Over time |  | 307,259 |  |  | 106,036 |  |  | 413,295 |  |  | 810,903 |  |  | 306,065 |  |  | 1,116,968
Total net sales | $ | 498,775 |  | $ | 253,230 |  | $ | 752,005 |  | $ | 1,374,616 |  | $ | 789,044 |  | $ | 2,163,660
Schedule of Accounts Receivable |
|  | June 30, 2019 |  | September 30, 2018
Billed receivables |  |  |  |  |  |
Trade accounts receivable |  | $ | 370,643 |  | $ | 403,590
Other (Chinese financial institutions) |  |  | 86,059 |  |  | 23,191
Less: Allowance for uncollectible amounts |  |  | (3,904) |  |  | (3,938)
Net billed receivables |  |  | 452,798 |  |  | 422,843
Current unbilled receivables (contract assets), net |  |  | 197,979 |  |  | 9,160
Total accounts receivable, net |  | $ | 650,777 |  | $ | 432,003
Schedule of Contract Liability |
|  | June 30, 2019 |  | September 30, 2018
|  |  | Current |  |  | Noncurrent |  |  | Current |  |  | Noncurrent
Deferred revenue from material rights from GE joint venture formation |  | $ | 6,806 |  | $ | 234,038 |  | $ | 7,087 |  | $ | 235,300
Deferred revenue from advance invoicing and/or prepayments from customers |  |  | 3,343 |  |  | - |  |  | 2,572 |  |  | -
Liability related to customer supplied inventory |  |  | 13,021 |  |  | - |  |  | - |  |  | -
Deferred revenue from material rights related to engineering and development funding |  |  | 3,137 |  |  | 98,889 |  |  | - |  |  | -
Net contract liabilities |  | $ | 26,307 |  | $ | 332,927 |  | $ | 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, as revised for the error correction detected in the three-months ended June 30, 2019, which was not material. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606 and the adjustment for the error subsequently corrected:
|  | September 30, 2018 ‎as reported |  | Effect of ASC 606 ‎as previously reported |  | October 1, 2018 ‎as previously reported |  |  | Adjustments for ‎error correction |  | October 1, 2018 ‎as corrected
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 83,594 |  | $ | - |  | $ | 83,594 |  |  | $ | - |  | $ | 83,594
Accounts receivable, net (1)(2) |  |  | 432,003 |  |  | 104,907 |  |  | 536,910 |  |  |  | 30,761 |  |  | 567,671
Inventories (1)(2) |  |  | 549,596 |  |  | (55,002) |  |  | 494,594 |  |  |  | (18,604) |  |  | 475,990
Income taxes receivable (5) |  |  | 6,397 |  |  | (959) |  |  | 5,438 |  |  |  | (288) |  |  | 5,150
Other current assets |  |  | 43,207 |  |  | (154) |  |  | 43,053 |  |  |  | - |  |  | 43,053
Total current assets |  |  | 1,114,797 |  |  | 48,792 |  |  | 1,163,589 |  |  |  | 11,869 |  |  | 1,175,458
Property, plant and equipment, net |  |  | 1,060,005 |  |  | - |  |  | 1,060,005 |  |  |  | - |  |  | 1,060,005
Goodwill |  |  | 813,250 |  |  | - |  |  | 813,250 |  |  |  | - |  |  | 813,250
Intangible assets, net (4) |  |  | 700,883 |  |  | (2,519) |  |  | 698,364 |  |  |  | - |  |  | 698,364
Deferred income tax assets (5) |  |  | 16,570 |  |  | (975) |  |  | 15,595 |  |  |  | (210) |  |  | 15,385
Other assets (1)(2)(3) |  |  | 85,144 |  |  | 85,865 |  |  | 171,009 |  |  |  | - |  |  | 171,009
Total assets |  | $ | 3,790,649 |  | $ | 131,163 |  | $ | 3,921,812 |  |  | $ | 11,659 |  | $ | 3,933,471
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term borrowings |  | $ | 153,635 |  | $ | - |  | $ | 153,635 |  |  | $ | - |  | $ | 153,635
Accounts payable |  |  | 226,285 |  |  | - |  |  | 226,285 |  |  |  | - |  |  | 226,285
Income taxes payable (5) |  |  | 16,745 |  |  | 4,141 |  |  | 20,886 |  |  |  | 1,211 |  |  | 22,097
Accrued liabilities (2)(3) |  |  | 194,513 |  |  | 15,672 |  |  | 210,185 |  |  |  | (1,047) |  |  | 209,138
Total current liabilities |  |  | 591,178 |  |  | 19,813 |  |  | 610,991 |  |  |  | 164 |  |  | 611,155
Long-term debt, less current portion |  |  | 1,092,397 |  |  | - |  |  | 1,092,397 |  |  |  | - |  |  | 1,092,397
Deferred income tax liabilities (5) |  |  | 170,915 |  |  | 3,833 |  |  | 174,748 |  |  |  | 1,682 |  |  | 176,430
Other liabilities (3) |  |  | 398,055 |  |  | 78,631 |  |  | 476,686 |  |  |  | (1) |  |  | 476,685
Total liabilities |  |  | 2,252,545 |  |  | 102,277 |  |  | 2,354,822 |  |  |  | 1,845 |  |  | 2,356,667
Stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock |  |  | - |  |  | - |  |  | - |  |  |  | - |  |  | -
Common stock |  |  | 106 |  |  | - |  |  | 106 |  |  |  | - |  |  | 106
Additional paid-in capital |  |  | 185,705 |  |  | - |  |  | 185,705 |  |  |  | - |  |  | 185,705
Accumulated other comprehensive losses |  |  | (74,942) |  |  | (41) |  |  | (74,983) |  |  |  | (4) |  |  | (74,987)
Deferred compensation |  |  | 8,431 |  |  | - |  |  | 8,431 |  |  |  | - |  |  | 8,431
Retained earnings |  |  | 1,966,643 |  |  | 28,927 |  |  | 1,995,570 |  |  |  | 9,818 |  |  | 2,005,388
|  |  | 2,085,943 |  |  | 28,886 |  |  | 2,114,829 |  |  |  | 9,814 |  |  | 2,124,643
Treasury stock at cost |  |  | (539,408) |  |  | - |  |  | (539,408) |  |  |  | - |  |  | (539,408)
Treasury stock held for deferred compensation |  |  | (8,431) |  |  | - |  |  | (8,431) |  |  |  | - |  |  | (8,431)
Total stockholders’ equity |  |  | 1,538,104 |  |  | 28,886 |  |  | 1,566,990 |  |  |  | 9,814 |  |  | 1,576,804
Total liabilities and stockholders’ equity |  | $ | 3,790,649 |  | $ | 131,163 |  | $ | 3,921,812 |  |  | $ | 11,659 |  | $ | 3,933,471
(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 “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 nine-months ended June 30, 2019 and the impact of the out-of-period correction discussed above on the Condensed Consolidated Statements of Earnings for the three-months ended June 30, 2019. The effect of the new standard and the error correction represent the increase (decrease) in the line item based on the adoption of ASC 606.
|  | Three-Months Ended June 30, 2019 |  | Nine-Months Ended June 30, 2019
|  | Under previous standard |  | Effect of ‎ASC 606 |  | Out-of-period correction |  |  |  | As reported |  | Under previous standard |  | Effect of ‎ASC 606 |  | As reported
Net sales |  | $ | 701,426 |  | $ | 36,965 |  | $ | 13,614 |  |  | $ | 752,005 |  | $ | 2,057,294 |  | $ | 106,366 |  | $ | 2,163,660
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 520,274 |  |  | 36,669 |  |  | 5,573 |  |  |  | 562,516 |  |  | 1,528,328 |  |  | 93,203 |  |  | 1,621,531
Selling, general, and administrative expenses |  |  | 52,897 |  |  | 83 |  |  | - |  |  |  | 52,980 |  |  | 159,902 |  |  | (138) |  |  | 159,764
Research and development costs |  |  | 40,911 |  |  | (250) |  |  | - |  |  |  | 40,661 |  |  | 125,262 |  |  | (1,903) |  |  | 123,359
Interest expense |  |  | 10,798 |  |  | - |  |  | - |  |  |  | 10,798 |  |  | 34,156 |  |  | - |  |  | 34,156
Interest income |  |  | (348) |  |  | - |  |  | - |  |  |  | (348) |  |  | (1,013) |  |  | - |  |  | (1,013)
Other expense (income), net |  |  | (6,916) |  |  | - |  |  | - |  |  |  | (6,916) |  |  | (18,134) |  |  | - |  |  | (18,134)
Total costs and expenses |  |  | 617,616 |  |  | 36,502 |  |  | 5,573 |  |  |  | 659,691 |  |  | 1,828,501 |  |  | 91,162 |  |  | 1,919,663
Earnings before income taxes |  |  | 83,810 |  |  | 463 |  |  | 8,041 |  |  |  | 92,314 |  |  | 228,793 |  |  | 15,204 |  |  | 243,997
Income tax expense |  |  | 24,403 |  |  | (200) |  |  | 2,004 |  |  |  | 26,207 |  |  | 47,958 |  |  | 3,233 |  |  | 51,191
Net earnings |  | $ | 59,407 |  | $ | 663 |  | $ | 6,037 |  |  | $ | 66,107 |  | $ | 180,835 |  | $ | 11,971 |  | $ | 192,806
Earnings per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings per share |  | $ | 0.96 |  | $ | 0.01 |  |  | 0.10 |  |  | $ | 1.07 |  | $ | 2.92 |  | $ | 0.19 |  | $ | 3.11
Diluted earnings per share |  | $ | 0.92 |  | $ | 0.01 |  |  | 0.09 |  |  | $ | 1.02 |  | $ | 2.81 |  | $ | 0.19 |  | $ | 2.99
Weighted Average Common Shares Outstanding (Note 4): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 61,941 |  |  |  |  |  |  |  |  |  | 61,941 |  |  | 61,977 |  |  |  |  |  | 61,977
Diluted |  |  | 64,633 |  |  |  |  |  |  |  |  |  | 64,633 |  |  | 64,437 |  |  |  |  |  | 64,437
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 June 30, 2019. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of ASC 606.
|  | June 30, 2019 ‎under previous standard |  | Effect of ‎ASC 606 |  | June 30, 2019 ‎as reported
ASSETS |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 63,302 |  | $ | - |  | $ | 63,302
Accounts receivable, net |  |  | 456,282 |  |  | 194,495 |  |  | 650,777
Inventories |  |  | 641,521 |  |  | (110,358) |  |  | 531,163
Income taxes receivable |  |  | 17,903 |  |  | (9,833) |  |  | 8,070
Other current assets |  |  | 44,866 |  |  | (69) |  |  | 44,797
Total current assets |  |  | 1,223,874 |  |  | 74,235 |  |  | 1,298,109
Property, plant and equipment, net |  |  | 1,063,084 |  |  | - |  |  | 1,063,084
Goodwill |  |  | 807,868 |  |  | - |  |  | 807,868
Intangible assets, net |  |  | 641,541 |  |  | (60) |  |  | 641,481
Deferred income tax assets |  |  | 16,543 |  |  | (1,207) |  |  | 15,336
Other assets |  |  | 90,604 |  |  | 99,121 |  |  | 189,725
Total assets |  | $ | 3,843,514 |  | $ | 172,089 |  | $ | 4,015,603
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |
Short-term borrowings |  | $ | 180,000 |  | $ | - |  | $ | 180,000
Accounts payable |  |  | 243,071 |  |  | - |  |  | 243,071
Income taxes payable |  |  | 12,816 |  |  | - |  |  | 12,816
Accrued liabilities |  |  | 188,942 |  |  | 17,843 |  |  | 206,785
Total current liabilities |  |  | 624,829 |  |  | 17,843 |  |  | 642,672
Long-term debt, less current portion |  |  | 1,011,147 |  |  | - |  |  | 1,011,147
Deferred income tax liabilities |  |  | 167,918 |  |  | 5,371 |  |  | 173,289
Other liabilities |  |  | 385,994 |  |  | 98,190 |  |  | 484,184
Total liabilities |  |  | 2,189,888 |  |  | 121,404 |  |  | 2,311,292
Stockholders' equity: |  |  |  |  |  |  |  |  |
Preferred stock |  |  | - |  |  | - |  |  | -
Common stock |  |  | 106 |  |  | - |  |  | 106
Additional paid-in capital |  |  | 205,704 |  |  | - |  |  | 205,704
Accumulated other comprehensive losses |  |  | (64,149) |  |  | (31) |  |  | (64,180)
Deferred compensation |  |  | 9,118 |  |  | - |  |  | 9,118
Retained earnings |  |  | 2,117,488 |  |  | 50,716 |  |  | 2,168,204
|  |  | 2,268,267 |  |  | 50,685 |  |  | 2,318,952
Treasury stock at cost |  |  | (605,523) |  |  | - |  |  | (605,523)
Treasury stock held for deferred compensation |  |  | (9,118) |  |  | - |  |  | (9,118)
Total stockholders' equity |  |  | 1,653,626 |  |  | 50,685 |  |  | 1,704,311
Total liabilities and stockholders' equity |  | $ | 3,843,514 |  | $ | 172,089 |  | $ | 4,015,603
Schedule of Disaggregation of Revenue |
| Three-Months Ended |  | Nine-Months Ended
| June 30, 2019 |  | June 30, 2019
Commercial OEM | $ | 174,077 |  | $ | 488,928
Commercial aftermarket |  | 124,863 |  |  | 375,919
Defense OEM |  | 147,696 |  |  | 372,538
Defense aftermarket |  | 52,139 |  |  | 137,231
Total Aerospace segment net sales | $ | 498,775 |  | $ | 1,374,616
Revenue by primary market for the Industrial reportable segment was as follows:
| Three-Months Ended |  | Nine-Months Ended
| June 30, 2019 |  | June 30, 2019
Reciprocating engines | $ | 185,523 |  | $ | 590,910
Industrial turbines |  | 53,740 |  |  | 155,439
Renewables |  | 13,967 |  |  | 42,695
Total Industrial segment net sales | $ | 253,230 |  | $ | 789,044
The customers who account for approximately 10% or more of net sales to each of Woodward’s reportable segments for both the three and nine-months ended June 30, 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 June 30, 2019 |  | Nine-Months Ended June 30, 2019
| Aerospace |  | Industrial |  | Consolidated |  | Aerospace |  | Industrial |  | Consolidated
United States | $ | 386,136 |  | $ | 53,380 |  | $ | 439,516 |  | $ | 1,024,644 |  | $ | 156,836 |  | $ | 1,181,480
Germany |  | 18,319 |  |  | 50,943 |  |  | 69,262 |  |  | 56,136 |  |  | 178,032 |  |  | 234,168
Europe, excluding Germany |  | 42,849 |  |  | 66,936 |  |  | 109,785 |  |  | 131,243 |  |  | 191,415 |  |  | 322,658
Asia |  | 18,908 |  |  | 73,856 |  |  | 92,764 |  |  | 66,206 |  |  | 238,737 |  |  | 304,943
Other countries |  | 32,563 |  |  | 8,115 |  |  | 40,678 |  |  | 96,387 |  |  | 24,024 |  |  | 120,411
Total net sales | $ | 498,775 |  | $ | 253,230 |  | $ | 752,005 |  | $ | 1,374,616 |  | $ | 789,044 |  | $ | 2,163,660

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