Leases

12 Months Ended

Sep. 30, 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.

None of Woodward’s lease agreements contain significant residual value guarantees, restrictions, or covenants. As of September 30, 2025, 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, 2025		September 30, 2024
Assets:
Operating lease assets	Other assets	$	25,274	$	27,135
Finance lease assets	Property, plant, and equipment, net		2,896		2,516
Total lease assets			28,170		29,651

Current liabilities:
Operating lease liabilities	Accrued liabilities		5,465		5,029
Finance lease liabilities	Current portion of long-term debt		1,032		719
Noncurrent liabilities:
Operating lease liabilities	Other liabilities		20,199		22,670
Finance lease liabilities	Long-term debt, less current portion		1,902		2,017
Total lease liabilities		$	28,598	$	30,435

Supplemental lease-related information was as follows:


	September 30, 2025			September 30, 2024
Weighted average remaining lease term
Operating leases	7.3 years			8.1 years
Finance leases	3.0 years			3.8 years
Weighted average discount rate
Operating leases		4.5	%		4.4	%
Finance leases		5.0	%		4.6	%

Lease-related expenses were as follows:


	Year Ended September 30,
	2025		2024		2023
Operating lease expense	$	7,568	$	6,804	$	6,213
Amortization of financing lease assets		967		820		914
Interest on financing lease liabilities		162		138		157
Variable lease expense		1,200		1,299		917
Short-term lease expense		205		164		196
Total lease expense	$	10,102	$	9,225	$	8,397

Lease-related supplemental cash flow information was as follows:


	Year Ended September 30,
	2025		2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	6,044	$	5,375	$	5,151
Operating cash flows for finance leases		162		138		157
Financing cash flows for finance leases		971		818		779
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		6,016		6,117		2,230
Finance leases		1,171		—		48

Maturities of lease liabilities were as follows:


Year Ending September 30:	Operating Leases			Finance Leases
2026	$	6,561		$	1,146
2027		5,435			1,143
2028		4,554			555
2029		3,406			204
2030		2,638			89
Thereafter		7,612			—
Total lease payments		30,206			3,137
Less: imputed interest		(4,542	)		(203	)
Total lease obligations	$	25,664		$	2,934

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 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 September 30, 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.

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 $3,947 for the fiscal year ended September 30, 2025, compared to $5,486 for the fiscal year ended September 30, 2024 and $5,030 for the fiscal year ended September 30, 2023.

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, was as follows:


	September 30, 2025			September 30, 2024
Property, plant, and equipment	$	41,593		$	48,495
Less accumulated depreciation		(29,110	)		(32,994	)
Property, plant, and equipment, net	$	12,483		$	15,501