LEASES

9 Months Ended

Jun. 30, 2022

LEASES

LEASES

13.  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 Ended		Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2022		2021
Finance lease cost
Amortization of right-of-use assets	$	393	$	492
Interest on lease liabilities		242		306
Operating lease cost		2,104		1,471
Total lease costs	$	2,739	$	2,269

	Nine Months		Nine Months
	Ended		Ended
	June 30,		June 30,
(Dollars in thousands)	2022		2021
Finance lease cost
Amortization of right-of-use assets	$	1,179	$	1,477
Interest on lease liabilities		734		929
Operating lease cost		4,709		4,347
Total lease costs	$	6,622	$	6,753

Additional information related to leases are shown below:

	Three Months Ended		Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,989	$	1,320
Operating cash flows from finance leases		242		306
Financing cash flows from finance leases		307		428
Right-of-use assets obtained in exchange for operating lease liabilities		760		12,780

	Nine Months Ended		Nine Months Ended
	June 30,		June 30,
(Dollars in thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,502	$	4,102
Operating cash flows from finance leases		734		915
Financing cash flows from finance leases		911		1,261
Right-of-use assets obtained in exchange for operating lease liabilities		1,813		12,780

	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	9.8	years	10.3	years
Finance leases	12.3	years	11.9	years
Weighted-average discount rate
Operating leases	3.11	%	3.12	%
Finance leases	4.59	%	4.31	%

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 June 30, 2022:

(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2022 (excluding the nine months ended June 30, 2022)	$	1,316	552
2023		5,126	2,256
2024		4,330	2,315
2025		3,751	2,370
2026 and thereafter		20,251	21,431
Total minimum lease payments		34,774	28,924
Less: amounts representing interest		4,999	7,429
Present value of net minimum lease payments	$	29,775	21,495
Less: current portion of lease obligations		4,566	1,304
Non-current portion of lease obligations		25,209	20,191
ROU assets	$	28,922	17,736

Operating lease liabilities are included in the Consolidated Balance Sheet in accrued other expenses (current portion) and as a caption on the Consolidated Balance Sheet (long-term portion). Finance lease liabilities are included on the Consolidated Balance Sheet in accrued other expenses (current portion) and other liabilities (long-term portion). 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.