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.

	Classification on the Condensed Consolidated Balance Sheets	March 31, 2021		September 30, 2020
Assets:
Operating lease assets	Other assets	$	21,935	$	18,918
Finance lease assets	Property, plant and equipment, net		970		1,201
Total lease assets			22,905		20,119

Current liabilities:
Operating lease liabilities	Accrued liabilities		5,280		4,925
Finance lease liabilities	Current portion of long-term debt		1,398		1,634
Noncurrent liabilities:
Operating lease liabilities	Other liabilities		17,178		14,569
Finance lease liabilities	Long-term debt, less current portion		620		1,173
Total lease liabilities		$	24,476	$	22,301

During 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, Sale of businesses, and defined therein as the “disposal group”) represented a triggering event requiring that 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 right-of-use (“ROU”) assets of the disposal group were not recoverable and a $639 non-cash impairment charge was recorded during fiscal year 2020.

	Three-Months Ended March 31,						Six-Months Ended March 31,
	2021			2020			2021			2020
Operating lease expense	$	1,615		$	1,532		$	3,168		$	3,051
Amortization of finance lease assets		94			101			220			248
Interest on finance lease liabilities		17			20			35			40
Variable lease expense		496			288			818			595
Short-term lease expense		76			162			158			337
Sublease income¹		(214	)		(200	)		(382	)		(325	)
Total lease expense	$	2,084		$	1,903		$	4,017		$	3,946

	Six-Months Ended March 31, 2021		Six-Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	2,671	$	2,701
Operating cash flows for finance leases		35		40
Financing cash flows for finance leases		835		787
Right-of-use assets obtained in exchange for recorded lease obligations:
Operating leases		5,070		5,345
Finance leases		12		1,244

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 March 31, 2021. 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 is included in “Net sales” in the Condensed Consolidated Statements of Earnings, was $1,511 for the three-months and $3,309 for the six-months ended March 31, 2021, compared to $1,561 for the three-months and $3,125 for the six-months ended March 31, 2020.

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, follows:

	March 31, 2021			September 30, 2020
Property, plant and equipment leased to others through embedded leasing arrangements	$	76,995		$	76,655
Less accumulated depreciation		(32,716	)		(29,819	)
Property, plant and equipment leased to others through embedded leasing arrangements, net	$	44,279		$	46,836