LEASES

3 Months Ended

Dec. 27, 2019

NOTE 12—LEASES

Operating Leases

IEC has a lease portfolio that consists of operating leases for equipment, and has remaining terms from less than one year to up to approximately five years, with contractual terms expiring from 2020 to 2024. None of these leases contain residual value guarantees, substantial restrictions, or covenants.

Supplemental balance sheet information related to the Company’s operating leases were as follows:



	December 27, 2019

Weighted average remaining lease term for operating leases (in years)	4.4
Weighted average discount rate for operating leases	5.48	%

Finance Leases

IEC's lease portfolio also consists of finance leases for equipment and real estate, and has remaining terms of five years up to approximately thirteen years, with contractual terms expiring in 2024 through 2033.

Supplemental balance sheet information related to the Company’s finance leases were as follows:



	December 27, 2019

Finance lease right-of-use assets, net of accumulated amortization (included in PP&E) (in thousands)	$	6,761
Weighted average remaining lease term for finance leases (in years)	11.9
Weighted average discount rate for finance leases	4.83		%

Lease Expense

The components of lease expense, recorded in cost of sales, selling and administrative expenses and interest and financing expense in the condensed consolidated statements of operation, during the three months ended December 27, 2019 were as follows:



		Three Months Ended
Lease Expense	Classification	December 27, 2019
(in thousands)
Operating lease expense
Fixed payment operating lease expense ⁽¹⁾	Cost of sales	$	26
Fixed payment operating lease expense	Selling and administrative expenses	15
Variable payment operating lease expense		—
Finance lease expense
Depreciation of ROU assets	Cost of sales	129
Interest	Interest and financing expense	85
Total lease expense		$	255

⁽¹⁾ Includes short-term leases which are not material.

Supplemental Cash Flow Information

Supplemental cash flow information related to the Company's leases during the three months ended December 27, 2019 were as follows:



	Three Months Ended
Supplemental Cash Flow	December 27, 2019
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating lease ROU assets	$	32
Interest paid on finance leases	85
Financing cash flows from finance leases	—

Lease liabilities arising from obtaining ROU assets:
Operating leases	19

Contractual Lease Payments

A summary of operating lease payments for the next five years follows:



Operating Lease Payment Schedule	Contractual Lease Payments
(in thousands)
Twelve months ending December
2020	$	77
2021	73
2022	72
2023	72
2024 and thereafter	37
Total operating lease payments	331
Less: amounts representing interest	(38		)
Total operating lease obligation	$	293

A summary of finance lease payments for the next five years follows:



Finance Lease Payment Schedule	Contractual Lease Payments
(in thousands)
Twelve months ending December
2020	$	757
2021	770
2022	785
2023	798
2024 and thereafter	6,683
Total capital lease payments	9,793
Less: amounts representing interest	(2,436		)
Total finance lease obligation	$	7,357

Disclosures Related to Periods Prior to Adoption of the New Lease Standard

As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and under the previous lease accounting standard, the maturities of lease liabilities at September 30, 2019 were as follows:



Capital Lease Payment Schedule	Contractual Payments
(in thousands)
Twelve months ending September 30,
2020	$	673
2021	686
2022	700
2023	714
2024 and thereafter	6,720
Total capital lease payments	9,493
Less: amounts representing interest	(2,470		)
Present value of minimum lease payment	$	7,023

As of December 27, 2019, the Company has one outstanding lease agreement that has not yet commenced for certain property located in Newark, New York that will include a new manufacturing facility and administrative offices. The lease is expected to commence in late 2020 when construction of the asset is complete.

LEASES