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Leases

12 Months Ended

Sep. 30, 2023

11. Leases

We record our leases in accordance with ASC 842, Leases. We determine at lease inception whether an arrangement that provides control over the use of an asset is a lease. We recognize 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 (including anticipated renewals). We have elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Certain of our leases include options to extend the term of the lease for up to 20 years. When it is reasonably certain that we 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 our lease agreements do not explicitly state the discount rate implicit in the lease, Management uses our incremental borrowing rate on the commencement date to calculate the present value of future payments based on the tenor of each arrangement.

Our leases for real estate commonly include escalating payments. We include these variable lease payments in the calculation of our 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.

Our leases are for office space, manufacturing facilities, and machinery and equipment.

The components of lease costs are shown below:


	Year Ended		Year Ended
	September 30,		September 30,
(Dollars in thousands)	2023		2022
Finance lease cost:
Amortization	$	1,572		1,572
Interest on lease liabilities		925		973
Operating lease cost		7,224		6,347
Total lease cost	$	9,721		8,892

Additional information related to leases is shown below:


	Year Ended			Year Ended
	September 30,			September 30,
(Dollars in thousands)	2023			2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,964			6,101
Operating cash flows from finance leases		925			973
Financing cash flows from finance leases		1,331			1,224

Right-of-use assets obtained in exchange for operating lease liabilities	$	16,243			4,160

Weighted-average remaining lease term:
Operating leases		11.1	yrs		9.3	yrs
Finance leases		11.1	yrs		12.0	yrs
Weighted-average discount rate:
Operating leases		4.5	%		3.2	%
Finance leases		4.6	%		4.6	%

The table below 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 September 30, 2023:


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2024	$	6,826		2,315
2025		5,645		2,370
2026		4,436		2,434
2027		4,229		2,494
2028 and thereafter		32,806		16,503
Total minimum lease payments		53,942		26,116
Less: amounts representing interest		12,262		6,265
Present value of net minimum lease payments	$	41,680		19,851
Less: current portion of lease obligations		5,126		1,444
Non-current portion of lease obligations		36,554		18,407

ROU assets	$	39,839		15,771


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2023	$	5,953	2,256
2024		5,132	2,315
2025		3,790	2,370
2026		2,881	2,434
2027 and thereafter		17,029	18,997
Total minimum lease payments		34,785	28,372
Less: amounts representing interest		4,760	7,189
Present value of net minimum lease payments	$	30,025	21,183
Less: current portion of lease obligations		5,172	1,331
Non-current portion of lease obligations		24,853	19,852

ROU assets	$	29,150	17,343

We include operating and finance lease liabilities in the Consolidated Balance Sheet in accrued other expenses (current portion) and other liabilities (long-term portion). We include operating lease ROU assets as a caption on the Consolidated Balance Sheet and include finance lease ROU assets in Property, plant and equipment on the Consolidated Balance Sheet.