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Leases | 12 Months Ended
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Sep. 30, 2022
Leases [Abstract] |
Leases | Note 5. Leases Woodward is primarily a lessee in lease arrangements but has some embedded lessor arrangements. 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. None of Woodward’s lease agreements contain significant residual value guarantees, restrictions, or covenants. As of September 30, 2022, Woodward has not entered into any lease arrangements that have not yet commenced but would create significant rights and obligations. Woodward does not have any lease transactions between related parties. Lease-related assets and liabilities follows:
|  | Classification on the Consolidated Balance Sheets |  | September 30, 2022 |  |  | September 30, 2021 |
Assets: |  |  |  |  |  |  |  |  |  |
Operating lease assets |  | Other assets |  | $ | 25,144 |  |  | $ | 19,370 |
Finance lease assets |  | Property, plant and equipment, net |  |  | 5,474 |  |  |  | 781 |
Total lease assets |  |  |  |  | 30,618 |  |  |  | 20,151 |
Current liabilities: |  |  |  |  |  |  |  |  |  |
Operating lease liabilities |  | Accrued liabilities |  |  | 4,587 |  |  |  | 5,260 |
Finance lease liabilities |  | Current portion of long-term debt |  |  | 856 |  |  |  | 728 |
Noncurrent liabilities: |  |  |  |  |  |  |  |  |  |
Operating lease liabilities |  | Other liabilities |  |  | 21,443 |  |  |  | 14,770 |
Finance lease liabilities |  | Long-term debt, less current portion |  |  | 4,405 |  |  |  | 475 |
Total lease liabilities |  |  |  | $ | 31,291 |  |  | $ | 21,233 |
In the first quarter of fiscal year 2020, Woodward determined that the approved plan to divest of the renewable power systems business and other related businesses (as described more fully in Note 10, Acquisitions and Divestitures, and defined therein as the “disposal group”) represented a triggering event requiring the long-lived assets attributable to the disposal group be assessed for impairment. Given the facts and circumstances at that time, Woodward determined that the remaining value of the ROU assets of the disposal group were not recoverable, and a $639 non-cash impairment charge was recorded during the fiscal year ended September 30, 2020. Supplemental lease-related information follows:
|  | September 30, 2022 |  |  | September 30, 2021 |
Weighted average remaining lease term |  |  |  |  |  |  |  |
Operating leases |  | 8.3 years |  |  | 4.3 years |
Finance leases |  | 9.7 years |  |  | 1.7 years |
Weighted average discount rate |  |  |  |  |  |  |  |
Operating leases |  |  | 3.6 | % |  |  | 3.2 | %
Finance leases |  |  | 3.4 | % |  |  | 2.8 | %
Lease-related expenses were as follows:
|  | Year Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Operating lease expense |  | $ | 6,335 |  |  | $ | 6,559 |  |  | $ | 6,164 |
Amortization of financing lease assets |  |  | 454 |  |  |  | 425 |  |  |  | 476 |
Interest on financing lease liabilities |  |  | 51 |  |  |  | 58 |  |  |  | 87 |
Variable lease expense |  |  | 929 |  |  |  | 1,495 |  |  |  | 1,101 |
Short-term lease expense |  |  | 190 |  |  |  | 283 |  |  |  | 466 |
Sublease income1 |  |  | (192 | ) |  |  | (680 | ) |  |  | (697 | )
Total lease expense |  | $ | 7,767 |  |  | $ | 8,140 |  |  | $ | 7,597 |
| (1) | Relates to two separate subleases Woodward has entered into for a leased manufacturing building in Niles, Illinois. During fiscal year 2022, these subleases were terminated.
Lease-related supplemental cash flow information was as follows:
|  | Year Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Operating cash flows for operating leases |  | $ | 5,303 |  |  | $ | 5,707 |  |  | $ | 5,622 |
Operating cash flows for finance leases |  |  | 51 |  |  |  | 58 |  |  |  | 87 |
Financing cash flows for finance leases |  |  | 796 |  |  |  | 1,639 |  |  |  | 1,590 |
Right-of-use assets obtained in exchange for recorded lease obligations: |  |  |  |  |  |  |  |  |  |  |  |
Operating leases |  |  | 14,678 |  |  |  | 6,871 |  |  |  | 6,501 |
Finance leases |  |  | 4,046 |  |  |  | 35 |  |  |  | 1,244 |
Maturities of lease liabilities were as follows:
Year Ending September 30: |  | Operating Leases |  |  | Finance Leases |
2023 |  | $ | 5,383 |  |  | $ | 1,032 |
2024 |  |  | 4,695 |  |  |  | 1,002 |
2025 |  |  | 3,768 |  |  |  | 870 |
2026 |  |  | 3,156 |  |  |  | 870 |
2027 |  |  | 2,592 |  |  |  | 868 |
Thereafter |  |  | 10,959 |  |  |  | 1,919 |
Total lease payments |  |  | 30,553 |  |  |  | 6,561 |
Less: imputed interest |  |  | (4,523 | ) |  |  | (1,300 | )
Total lease obligations |  | $ | 26,030 |  |  | $ | 5,261 |
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 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 September 30, 2022. 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. Woodward recognizes revenue from the embedded lessor arrangements based on the value of the underlying dedicated property, plant, and equipment. There are no fixed payments that the customers under the embedded lessor arrangements are obligated to pay. Therefore, all the customer payments under the embedded lessor arrangements are considered variable with the associated leasing revenue recognized when the revenue from underlying product sale related to variable lease payment is recognized. Revenue from contracts with customers that included embedded operating leases, which is included in “Net sales” at the Consolidated Statements of Earnings, was $5,528 for the fiscal year ended September 30, 2022, compared to $6,305 for the fiscal year ended September 30, 2021. The carrying amount of property, plant and equipment leased to others through embedded leasing arrangements, included in “Property, plant and equipment, net” at the Consolidated Balance Sheets, follows:
|  | September 30, 2022 |  |  | September 30, 2021 |
Property, plant and equipment leased to others through embedded leasing arrangements |  | $ | 44,912 |  |  | $ | 93,732 |
Less accumulated depreciation |  |  | (25,508 | ) |  |  | (35,733 | )
Property, plant and equipment leased to others through embedded leasing arrangements, net |  | $ | 19,404 |  |  | $ | 57,999 |

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