Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
 9 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases LeasesThe Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. At contract inception, a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, and a corresponding right-of-use asset. As a majority of the Company’s leases do not provide an implicit interest rate within the
Note 8.   Leases (continued)

lease, an incremental borrowing rate is used to determine the ROU asset and lease liability which is based on information available at the commencement date. Options to purchase, extend or terminate a lease are included in the ROU asset and lease liability when it is reasonably certain an option will be exercised. Renewal options are most prevalent in the Company’s real estate leases. In general, the Company has not included renewal options for leases in the ROU asset and lease liability because the likelihood of renewal was not determined to be reasonably certain. In addition, leases may include variable lease payments, for items such as maintenance and utilities, which are expensed as incurred as variable lease expense.

There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. Leases not meeting the finance lease criteria are classified as operating leases. Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet. ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other liabilities on the Consolidated Balance Sheet. For finance leases, short-term lease liabilities are classified in long-term debt, current maturities, and long-term lease liabilities are classified in long-term debt on the Consolidated Balance Sheet. Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet. Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

The following table presents the balance sheet and lease classification for the Company's lease portfolio:
Balance Sheet Classification Lease Classification June 30, 2020
Non-current assets:
Property, plant and equipment, net Finance $ 8,338   
Other assets Operating 73,650   
Total lease assets $ 81,988   
Current liabilities:
Long-term debt, current maturities Finance $ 3,414   
Other current liabilities Operating 23,591   
Non-current liabilities:
Long-term debt Finance 6,821   
Other liabilities Operating 51,039   
Total lease liabilities $ 84,865   

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

The following table presents the components of lease cost:
Three months ended June 30, 2020 Nine months ended June 30, 2020
Finance lease cost:
Amortization of ROU assets $ 895    $ 1,246   
Interest on lease liabilities 72    149   
Operating lease cost 5,430    18,527   
Variable lease cost 1,225    4,106   
Sublease income (250)   (649)  
Total lease cost $ 7,372    $ 23,379   
Note 8.   Leases (continued)

Supplemental information regarding the Company's leases follows:
Nine months ended June 30, 2020
Cash paid for finance and operating lease liabilities:
Operating cash flows from finance leases $ 149   
Operating cash flows from operating leases $ 22,519   
Financing cash flows from finance leases $ 1,196   
ROU assets obtained in exchange for new finance lease liabilities $ 2,165   
ROU assets obtained in exchange for new operating lease liabilities $ 11,297   
June 30, 2020
Weighted-average remaining lease term - finance leases (years) 4.68
Weighted-average remaining lease term - operating leases (years) 4.33
Weighted-discount rate - finance leases 2.81  %
Weighted-discount rate - operating leases 2.82  %

The Company elected the practical expedient to not separate lease components from non-lease components for all asset classes. In addition, the Company elected the practical expedient to utilize a portfolio approach for certain equipment asset classes, primarily information technology, as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

Maturities of lease obligations by fiscal year were as follows as of June 30, 2020:
Operating Leases Finance Leases
2020 (remainder) $ 6,738    $ 957   
2021 24,211    3,721   
2022 17,818    2,808   
2023 11,952    1,119   
2024 8,113    408   
Thereafter 10,148    2,100   
Total future minimum lease payments 78,980    11,113   
Less: Interest 4,350    878   
Present value of lease liabilities: $ 74,630    $ 10,235   
Leases LeasesThe Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. At contract inception, a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, and a corresponding right-of-use asset. As a majority of the Company’s leases do not provide an implicit interest rate within the
Note 8.   Leases (continued)

lease, an incremental borrowing rate is used to determine the ROU asset and lease liability which is based on information available at the commencement date. Options to purchase, extend or terminate a lease are included in the ROU asset and lease liability when it is reasonably certain an option will be exercised. Renewal options are most prevalent in the Company’s real estate leases. In general, the Company has not included renewal options for leases in the ROU asset and lease liability because the likelihood of renewal was not determined to be reasonably certain. In addition, leases may include variable lease payments, for items such as maintenance and utilities, which are expensed as incurred as variable lease expense.

There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. Leases not meeting the finance lease criteria are classified as operating leases. Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet. ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other liabilities on the Consolidated Balance Sheet. For finance leases, short-term lease liabilities are classified in long-term debt, current maturities, and long-term lease liabilities are classified in long-term debt on the Consolidated Balance Sheet. Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet. Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

The following table presents the balance sheet and lease classification for the Company's lease portfolio:
Balance Sheet Classification Lease Classification June 30, 2020
Non-current assets:
Property, plant and equipment, net Finance $ 8,338   
Other assets Operating 73,650   
Total lease assets $ 81,988   
Current liabilities:
Long-term debt, current maturities Finance $ 3,414   
Other current liabilities Operating 23,591   
Non-current liabilities:
Long-term debt Finance 6,821   
Other liabilities Operating 51,039   
Total lease liabilities $ 84,865   

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

The following table presents the components of lease cost:
Three months ended June 30, 2020 Nine months ended June 30, 2020
Finance lease cost:
Amortization of ROU assets $ 895    $ 1,246   
Interest on lease liabilities 72    149   
Operating lease cost 5,430    18,527   
Variable lease cost 1,225    4,106   
Sublease income (250)   (649)  
Total lease cost $ 7,372    $ 23,379   
Note 8.   Leases (continued)

Supplemental information regarding the Company's leases follows:
Nine months ended June 30, 2020
Cash paid for finance and operating lease liabilities:
Operating cash flows from finance leases $ 149   
Operating cash flows from operating leases $ 22,519   
Financing cash flows from finance leases $ 1,196   
ROU assets obtained in exchange for new finance lease liabilities $ 2,165   
ROU assets obtained in exchange for new operating lease liabilities $ 11,297   
June 30, 2020
Weighted-average remaining lease term - finance leases (years) 4.68
Weighted-average remaining lease term - operating leases (years) 4.33
Weighted-discount rate - finance leases 2.81  %
Weighted-discount rate - operating leases 2.82  %

The Company elected the practical expedient to not separate lease components from non-lease components for all asset classes. In addition, the Company elected the practical expedient to utilize a portfolio approach for certain equipment asset classes, primarily information technology, as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

Maturities of lease obligations by fiscal year were as follows as of June 30, 2020:
Operating Leases Finance Leases
2020 (remainder) $ 6,738    $ 957   
2021 24,211    3,721   
2022 17,818    2,808   
2023 11,952    1,119   
2024 8,113    408   
Thereafter 10,148    2,100   
Total future minimum lease payments 78,980    11,113   
Less: Interest 4,350    878   
Present value of lease liabilities: $ 74,630    $ 10,235