LEASES (Notes)

12 Months Ended

Sep. 30, 2020

Leases [Abstract]

LEASES

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:

	September 30, 2020
Weighted average remaining lease term for operating leases (in years)	3.8
Weighted average discount rate for operating leases	5.47	%

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:

	September 30, 2020
Finance lease right-of-use assets, net of accumulated amortization (included in PP&E) (in thousands)	$	6,329
Weighted average remaining lease term for finance leases (in years)	11.3
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 expense in the consolidated statements of operations, during the fiscal year ended September 30, 2020 were as follows:

		Year ended
Lease Expense	Classification	September 30, 2020
(in thousands)
Operating lease expense
Fixed payment operating lease expense ¹	Cost of sales	$	184
Fixed payment operating lease expense	Selling and administrative expenses	32
Variable payment operating lease expense		—
Finance lease expense
Depreciation of ROU assets	Cost of sales	534
Interest	Interest expense	347
Total lease expense		$	1,097

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 fiscal year ended September 30, 2020 were as follows:

	Year ended
Supplemental Cash Flow	September 30, 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating lease ROU assets	$	83
Interest paid on finance leases	346
Financing cash flows from finance leases	—
Lease liabilities arising from obtaining ROU assets:
Operating leases	$	53

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 September
2021	$	73
2022	73
2023	71
2024	55
2025 and thereafter	—
Total operating lease payments	272
Less: amounts representing interest	(27)
Total operating lease obligation	$	245

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

Finance Lease Payment Schedule	Contractual Lease Payments
(in thousands)
Twelve months ending September
2021	$	768
2022	781
2023	795
2024	809
2025 and thereafter	6,117
Total finance lease payments	9,270
Less: amounts representing interest	(2,218)
Total finance lease obligation	$	7,052

The Company also entered into a master lease arrangement for certain equipment and leasehold improvements to be located at the new facility in Newark, NY and received financing of $1.8 million during the fiscal year ended September 30, 2020 which is included in property, plant and equipment as construction in progress and as a long-term debt section of the consolidated balance sheet. As of September 30, 2020, the Company has an 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 facility lease is expected to commence in early fiscal 2021 when construction of the asset is complete.

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

LEASES

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:

	September 30, 2020
Weighted average remaining lease term for operating leases (in years)	3.8
Weighted average discount rate for operating leases	5.47	%

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:

	September 30, 2020
Finance lease right-of-use assets, net of accumulated amortization (included in PP&E) (in thousands)	$	6,329
Weighted average remaining lease term for finance leases (in years)	11.3
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 expense in the consolidated statements of operations, during the fiscal year ended September 30, 2020 were as follows:

		Year ended
Lease Expense	Classification	September 30, 2020
(in thousands)
Operating lease expense
Fixed payment operating lease expense ¹	Cost of sales	$	184
Fixed payment operating lease expense	Selling and administrative expenses	32
Variable payment operating lease expense		—
Finance lease expense
Depreciation of ROU assets	Cost of sales	534
Interest	Interest expense	347
Total lease expense		$	1,097

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 fiscal year ended September 30, 2020 were as follows:

	Year ended
Supplemental Cash Flow	September 30, 2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating lease ROU assets	$	83
Interest paid on finance leases	346
Financing cash flows from finance leases	—
Lease liabilities arising from obtaining ROU assets:
Operating leases	$	53

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 September
2021	$	73
2022	73
2023	71
2024	55
2025 and thereafter	—
Total operating lease payments	272
Less: amounts representing interest	(27)
Total operating lease obligation	$	245

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

Finance Lease Payment Schedule	Contractual Lease Payments
(in thousands)
Twelve months ending September
2021	$	768
2022	781
2023	795
2024	809
2025 and thereafter	6,117
Total finance lease payments	9,270
Less: amounts representing interest	(2,218)
Total finance lease obligation	$	7,052

The Company also entered into a master lease arrangement for certain equipment and leasehold improvements to be located at the new facility in Newark, NY and received financing of $1.8 million during the fiscal year ended September 30, 2020 which is included in property, plant and equipment as construction in progress and as a long-term debt section of the consolidated balance sheet. As of September 30, 2020, the Company has an 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 facility lease is expected to commence in early fiscal 2021 when construction of the asset is complete.

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