LEASES

6 Months Ended

Mar. 31, 2024

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
	March 31,		March 31,
(Dollars in thousands)	2024		2023
Finance lease cost
Amortization of right-of-use assets	$	372	$	393
Interest on lease liabilities		216		233
Operating lease cost		1,874		1,853
Total lease costs	$	2,462	$	2,479

	Six Months Ended		Six Months Ended
	March 31,			March 31,
(Dollars in thousands)	2024			2023
Finance lease cost
Amortization of right-of-use assets	$	765	$	786
Interest on lease liabilities		439		469
Operating lease cost		3,738		3,498
Total lease costs	$	4,942	$	4,753

Additional information related to leases are shown below:

	Three Months Ended		Three Months Ended
	March 31,		March 31,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,824	$	1,779
Operating cash flows from finance leases		216		233
Financing cash flows from finance leases		328		330
Right-of-use assets obtained in exchange for operating lease liabilities		1,679		618

	Six Months Ended		Six Months Ended
	March 31,		March 31,
(Dollars in thousands)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,643	$	3,380
Operating cash flows from finance leases		439		469
Financing cash flows from finance leases		683		658
Right-of-use assets obtained in exchange for operating lease liabilities		1,679		14,582

	March 31, 2024		March 31, 2023
Weighted-average remaining lease term
Operating leases	10.8	years	11.5	years
Finance leases	11.1	years	11.5	years
Weighted-average discount rate
Operating leases	4.55	%	4.40	%
Finance leases	4.68	%	4.61	%

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, 2024:

(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2024 (excluding the six months ended March 31, 2024)	$	3,389	1,090
2025		6,014	2,233
2026		4,729	2,297
2027		4,479	2,357
2028 and thereafter		33,206	16,470
Total minimum lease payments		51,817	24,447
Less: amounts representing interest		11,540	5,795
Present value of net minimum lease payments	$	40,277	18,652
Less: current portion of lease obligations		4,833	1,375
Non-current portion of lease obligations		35,444	17,277
ROU assets	$	38,322	14,427

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 sheet.