LEASES

9 Months Ended

Jun. 30, 2023

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. 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)	2023		2022
Finance lease cost
Amortization of right-of-use assets	$	393	$	393
Interest on lease liabilities		230		242
Operating lease cost		1,858		1,577
Total lease costs	$	2,481	$	2,212

	Nine Months		Nine Months
	Ended		Ended
	June 30,		June 30,
(Dollars in thousands)	2023		2022
Finance lease cost
Amortization of right-of-use assets	$	1,179	$	1,219
Interest on lease liabilities		698		753
Operating lease cost		5,356		4,731
Total lease costs	$	7,233	$	6,703

Additional information related to leases are shown below:

	Three Months Ended		Three Months Ended
	June 30,		June 30,
(Dollars in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,792	$	1,485
Operating cash flows from finance leases		230		242
Financing cash flows from finance leases		334		307
Right-of-use assets obtained in exchange for operating lease liabilities		402		566

	Nine Months Ended			Nine Months Ended
	June 30,			June 30,
(Dollars in thousands)	2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,172		$	4,521
Operating cash flows from finance leases		698			753
Financing cash flows from finance leases		991			971
Right-of-use assets obtained in exchange for operating lease liabilities		14,984			1,813
		June 30, 2023			June 30, 2022
Weighted-average remaining lease term
Operating leases		11.4	years		9.7	years
Finance leases		11.3	years		12.0	years
Weighted-average discount rate
Operating leases		4.42	%		3.12	%
Finance leases		4.62	%		4.59	%

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, 2023:

(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2023 (excluding the nine months ended June 30, 2023)	$	1,796	566
2024		6,458	2,315
2025		5,168	2,370
2026		4,300	2,434
2027 and thereafter		36,913	18,997
Total minimum lease payments		54,635	26,682
Less: amounts representing interest		12,570	6,491
Present value of net minimum lease payments	$	42,065	20,191
Less: current portion of lease obligations		5,250	1,415
Non-current portion of lease obligations		36,815	18,776
ROU assets	$	40,314	16,164

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.