LEASES

6 Months Ended

Mar. 31, 2020

LEASES

LEASES

16.  LEASES

As described in Note 3, effective October 1, 2019, the Company adopted ASC 842, Leases. The Company determines at lease inception whether an arrangement that provides control over the use of an asset is a lease. The Company recognizes at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. The Company has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Certain of the Company’s leases include options to extend the term of the lease for up to 20 years. When it is reasonably certain that the Company will exercise the option, Management includes the impact of the option in the lease term for purposes of determining total future lease payments. As most of the Company’s lease agreements do not explicitly state the discount rate implicit in the lease, Management uses the Company’s incremental borrowing rate on the commencement date to calculate the present value of future payments based on the tenor of each arrangement.

The Company’s leases for real estate commonly include escalating payments. These variable lease payments are included in the calculation of the ROU asset and lease liability. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. Non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.

The Company’s leases are for office space, manufacturing facilities, and machinery and equipment.

The components of lease costs are shown below:

	Three Months		Six Months
	Ended		Ended
	March 31,		March 31,
(Dollars in thousands)	2020		2020
Finance lease cost
Amortization of right-of-use assets	$	622	$	1,245
Interest on lease liabilities		323		651
Operating lease cost		1,402		2,750
Total lease costs	$	2,347	$	4,646

Additional information related to leases are shown below:

	Three Months		Six Months
	Ended		Ended
	March 31,		September 30,
(Dollars in thousands)	2020		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,380	$	2,717
Operating cash flows from finance leases		198		335
Financing cash flows from finance leases		376		727
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	1,566	$	22,268
Weighted-average remaining lease term
Operating leases				6.37	years
Finance leases				12.97	years
Weighted-average discount rate
Operating leases				3.14	%
Finance leases				4.29	%

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on our Consolidated Balance Sheet on March 31, 2020:

(Dollars in thousands)		Operating	Finance
Years Ending September 30:	Leases		Leases
2020 (excluding the six months ended March 31, 2020)	$	2,667		1,455
2021		4,696		2,930
2022		4,036		3,011
2023		3,090		3,094
2024 and thereafter		6,931		31,481
Total minimum lease payments		21,420		41,971
Less: amounts representing interest		2,202		10,821
Present value of net minimum lease payments	$	19,218		31,150
Less: current portion of lease obligations		4,208		1,902
Non-current portion of lease obligations		15,010		29,248
ROU assets	$	18,901		28,072

Operating lease liabilities are included in the Consolidated Balance Sheet in accrued other expenses and operating lease liabilities. Finance lease liabilities are included in accrued other expenses and other liabilities. Operating lease ROU assets are included as a caption on the Consolidated Balance Sheet and finance lease ROU assets are included in Property, plant and equipment on the Consolidated Balance sheets.

As the Company has not restated prior-year information for the adoption of ASC 842, the following presents the Company’s future minimum lease payments for operating and capital leases under ASC 840 for continuing operations as of September 30, 2019:

(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2020	$	5,574		2,518
2021		4,558		2,930
2022		3,950		3,012
2023		3,270		3,094
2024 and thereafter		8,443		31,499
Total minimum lease payments	$	25,795		43,053
Less: amounts representing interest		*		11,241
Present value of net minimum lease payments		*		31,812
Less: Current portion of lease obligations		*		1,832
Non-current portion of lease obligations		*		29,980

*    Not applicable for operating leases