Leases

12 Months Ended

Sep. 30, 2020

All of our leases are operating leases and primarily consist of leases for office space. For any lease with an initial term in excess of twelve months, the related lease assets and lease liabilities are recognized on our Consolidated Balance Sheets as either operating or financing leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components. We have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of twelve months or less are not recorded on our Consolidated Balance Sheets. Instead we recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments. These assets and liabilities are recognized based on the present value of future payments over the lease term at the commencement date. We generally use a collateralized incremental borrowing rate based on information available at the commencement date, including the lease term, in determining the present value of future payments. When determining our right-of-use asset, we generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Our leases typically require payment of real estate taxes and common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

10. LEASES (CONTINUED)

The following table shows the supplemental balance sheet information related to our leases (in thousands):


	Balance Sheet Location	September 30, 2020
Assets
Operating leases	Other non-current assets	$	14,334
Total lease assets		$	14,334

Liabilities

Operating leases	Other current liabilities	$	2,527

Operating leases	Other non-current liabilities	16,193
Total lease liabilities		$	18,720

The following were the components of our lease cost (in thousands):


	Statement of Operations Location	Fiscal year ended September 30, 2020
Operating lease cost	Cost of goods sold and SG&A	$	3,341
Variable lease cost	Cost of goods sold and SG&A	744
Short-term lease cost	Cost of goods sold and SG&A	175
Total lease cost		$	4,260

The following table presents supplemental information related to operating leases (in thousands):


	Fiscal year ended September 30, 2020
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,893
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,073


	September 30, 2020
Weighted average remaining lease term - operating leases	5.6 years
Weighted average discount rate - operating leases	4.80	%

The table below reconciles the undiscounted cash flows for each of the first five years as well as all the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of September 30, 2020 (in thousands):


Fiscal year	Amount

2021	$	3,335
2022	2,932
2023	2,669
2024	2,452
2025	2,348
Thereafter	9,219
Total future undiscounted lease payments	22,955
Less imputed interest	(4,235)
Total reported lease liability	$	18,720

In July 2020, we signed a lease agreement for ten years in Sandy, Utah. We have $4.8 million of future minimum lease obligations under this new lease for 35,466 square feet of office space. Included in this agreement is $1.0 million of tenant improvement allowance. This agreement is not included on our Consolidated Balance Sheet nor in the above table as the lessor has not made the underlying asset available for use.

10. LEASES (CONTINUED)

As follows, aggregate annual future minimum rental commitments under operating leases with noncancelable terms of more than one year at September 30, 2019 were reported under previous lease accounting standards (in thousands):


Fiscal year	Amount
2020	$	2,596
2021	2,575
2022	2,314
2023	2,056
2024	2,095
Thereafter	11,361
Total minimum payments required	$	22,997