Leases

12 Months Ended

Sep. 30, 2022

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.

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


	Balance Sheet Location	September 30, 2022		September 30, 2021
Assets
Operating leases	Operating lease right-of-use assets	$	15,299	$	15,684
Total lease assets		$	15,299	$	15,684

Liabilities

Operating leases	Current portion of operating lease liabilities	$	3,196	$	2,633

Operating leases	Operating lease liabilities	16,978		18,368
Total lease liabilities		$	20,174	$	21,001

The following were the components of our lease cost which is recorded in both cost of goods sold and selling, general and administrative expense (in thousands):


	Statement of Operations Location	Year ended September 30, 2022		Year ended September 30, 2021
Operating lease cost	Cost of goods sold and SG&A	$	3,783	$	3,504
Variable lease cost	Cost of goods sold and SG&A	1,094		1,094
Short-term lease cost	Cost of goods sold and SG&A	109		127
Total lease cost		$	4,986	$	4,725

9. LEASES (CONTINUED)

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


	Year ended September 30, 2022		Year ended September 30, 2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,998	$	2,707
Right-of-use assets obtained in exchange for new operating lease liabilities	2,615		3,785
Non-cash tenant improvement allowance	$	—	$	1,000


	September 30, 2022
Weighted average remaining lease term - operating leases	7.2 years
Weighted average discount rate - operating leases	2.86	%

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, 2022 (in thousands):


Fiscal year	Amount

2023	$	3,835
2024	3,449
2025	3,041
2026	2,817
2027	1,990
Thereafter	7,224
Total future undiscounted lease payments	22,356
Less imputed interest	(2,182)
Total reported lease liability	$	20,174