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