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.

Lease-related assets and liabilities were as follows:


	Classification on the Condensed Consolidated Balance Sheets	June 30, 2026		September 30, 2025
Assets:
Operating lease	Other assets	$	22,794	$	25,274
Finance lease	Property, plant, and equipment, net		2,114		2,896
Total lease assets			24,908		28,170

Current liabilities:
Operating lease	Accrued liabilities		5,428		5,465
Finance lease	Current portion of long-term debt		1,075		1,032
Noncurrent liabilities:
Operating lease	Other liabilities		18,115		20,199
Finance lease	Long-term debt, less current portion		1,122		1,902
Total lease liabilities		$	25,740	$	28,598

Lease-related expenses were as follows:


	Three Months Ended June 30,				Nine Months Ended June 30,
	2026		2025		2026		2025
Operating lease expense	$	1,937	$	1,913	$	5,990	$	5,608
Amortization of finance lease assets		242		242		727		725
Interest on finance lease liabilities		27		39		91		125
Variable lease expense		373		219		1,275		787
Short-term lease expense		139		51		343		159
Total lease expense	$	2,718	$	2,464	$	8,426	$	7,404

Lease-related supplemental cash flow information was as follows:


	Nine Months Ended June 30,
	2026		2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	4,812	$	4,456
Operating cash flows for finance leases		91		125
Financing cash flows for finance leases		772		720
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		2,608		4,902
Finance leases		43		1,171

Woodward has assessed its manufacturing contracts and concluded that certain 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 are 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 June 30, 2026. 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 are included in “Net sales” in the Condensed Consolidated Statements of Earnings, was $1,018 for the three months and $3,060 for the nine months ended June 30, 2026, compared to $989 for the three months and $2,926 for the nine months ended June 30, 2025.

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, was as follows:


	June 30, 2026			September 30, 2025
Property, plant, and equipment	$	41,368		$	41,593
Less accumulated depreciation		(31,961	)		(29,110	)
Property, plant, and equipment, net	$	9,407		$	12,483