Leases

9 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Leases

General Lease Description

We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from 1 year to 8 years.

We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 3 years to 4 years.

Significant Assumptions and Judgments

Contract Contains a Lease

In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:

• Whether explicitly or implicitly identified assets have been deployed in the contract; and

• Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Allocation of Consideration

In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.

Options to Extend or Terminate Leases

We have leases which contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.

Discount Rate

The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We used a discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our internal borrowing rate, treasury security rates, collateral and credit risk specific to us, and our lease portfolio characteristics.

As of March 31, 2020, the weighted-average discount rate of our operating and finance leases was 3.0% and 4.1%, respectively.

Practical Expedients and Accounting Policy Elections

We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.

Amounts Recognized in the Financial Statements

The components of lease expense were as follows:

	Three Months Ended  March 31, 2020		Nine Months Ended  March 31, 2020
Operating lease cost in Cost of Sales and Selling, General and Administrative Expenses	$	2,379	$	6,520
Finance lease cost:
Amortization of assets in Cost of Sales	$	83	$	251
Interest on lease liabilities in Other, Net	18		57
Total finance lease cost	$	101	$	308
Short-term lease cost in Cost of Sales and Selling, General and Administrative Expenses	361		1,785
Total net lease cost	$	2,841	$	8,613

Supplemental balance sheet information related to leases is as follows:

	March 31, 2020
Operating Leases
Operating Lease Right-Of-Use Assets	$	24,469
Current operating lease liabilities in Accrued Liabilities	$	6,903
Noncurrent Operating Lease Liabilities	19,292
Total operating lease liabilities	$	26,195
Finance Leases
Finance lease right-of-use assets in Property, Plant and Equipment-Net	$	1,799
Current finance lease liabilities in Accrued Liabilities	$	446
Noncurrent finance lease liabilities in Other Noncurrent Liabilities	1,183
Total finance lease liabilities	$	1,629

Supplemental cash flow information related to leases is as follows:

	Nine Months Ended  March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,675
Operating cash flows from finance leases	$	57
Financing cash flows from finance leases	$	322
Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets	$	4,867
Supplemental noncash information on lease liabilities removed due to purchase of leased asset	$	5,765

As of March 31, 2020, the maturities of lease liabilities were as follows:

	Operating Leases			Finance Leases
Three months ending June 30, 2020	$	2,220		$	126
2021	6,961			505
2022	5,917			505
2023	4,631			493
2024	3,768			121
Thereafter	4,694			—
Total minimum payments	$	28,191		$	1,750
Less amount representing interest	(1,996		)	(121		)
Present value of lease obligations	$	26,195		$	1,629

As of March 31, 2020, the weighted-average remaining term of our operating and finance leases was 4.8 years and 3.5 years, respectively.

As previously disclosed in our 2019 Annual Report on Form 10-K and under the previous lease accounting standard (Topic 840), as of June 30, 2019, future minimum lease payments under noncancelable leases with initial lease terms in excess of one year were as follows:

	Operating Leases		Capital Leases
2020	$	8,261	$	505
2021	7,136		505
2022	6,345		505
2023	4,992		493
2024	4,619		121
Thereafter	6,901		—
Total minimum payments	$	38,254	$	2,129
Less amount representing interest			(178		)
Present value of capital lease obligations			$	1,951