Leases

12 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Leases

The adoption of Topic 842 requires lessees to recognize a ROU asset and a lease liability on the consolidated balance sheet, with the exception of short-term leases. The Company primarily leases its manufacturing buildings, specifically at its Orange location, machinery and office equipment. The Company determines if a contract contains a lease based on whether the contract conveys the right to control the use of identified assets for a period in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a ROU asset and a lease liability. Operating leases are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-term debt on the consolidated balance sheets.

The Company has remaining lease terms ranging from one to 16 years, some of which include options to renew the lease. The total lease term is determined by considering the initial lease term per the lease agreement, which is adjusted to include any renewal options that the Company is reasonably certain to exercise as well as any period that the Company has control before the stated initial term of the agreement. If the Company determines there exists a reasonable certainty of exercising termination or early buyout options, then the lease terms are adjusted to account for these facts. A portion of our real estate leases include rents that are generally subject to annual changes in the Consumer Price Index ("CPI"). Such changes to the CPI are treated as variable lease payments.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classification.

The Company has made an accounting policy election to not separate non-lease components from lease components when allocating consideration for the buildings and machinery and equipment ROU asset classes. The election was made to reduce the administrative burden that would be imposed on the Company.

ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date and duration of the lease term in determining the present value of the future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition.

A lease asset and lease liability are not recorded for leases with an initial term of 12 months or less and the lease expense related to these leases is recognized as incurred over the lease term.

The components of lease expense were as follows:

	Year Ended September 30, 2020
Lease expense
Finance lease expense:
Amortization of right-of use assets on finance leases	$	55
Interest on lease liabilities	5
Operating lease expense:	2,173
Variable lease cost:	157
Total lease expense	$	2,390

The following table presents the impact of leasing on the consolidated balance sheet at September 30:

	Classification to the consolidated balance sheets	2020
Assets:
Finance lease assets	Property, plant and equipment, net	$	89
Operating lease assets	Operating lease right-of-use assets, net	17,021
Total lease assets		$	17,110
Current liabilities:
Finance lease liabilities	Current maturities of long-term debt	$	58
Operating lease liabilities	Short-term operating lease liabilities	991
Non-current liabilities:
Finance lease liabilities	Long-term debt, net of current maturities	22
Operating lease liabilities	Long-term operating lease liabilities, net of short-term	16,188
Total lease liabilities		$	17,259

Supplemental cash flow and other information related to leases were as follows:

	September 30, 2020
Other Information
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	2,173
Operating cash flows from finance leases	5
Financing cash flows from finance leases	57
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	278

	September 30, 2020
Weighted-average remaining lease term (years):
Finance leases	1.64
Operating leases	15.15
Weighted-average discount rate:
Finance leases	4.84	%
Operating leases	5.89	%

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

Year ending September 30,	Finance Leases		Operating Leases
2021	$	55	$	1,939
2022	21		1,687
2023	6		1,624
2024	—		1,639
2025	—		1,635
Thereafter	—		17,515
Total lease payments	$	82	$	26,039
Less: Imputed interest	(2)		(8,860)
Present value of lease liabilities	$	80	$	17,179

As previously disclosed in the Company's 2019 Annual Report on Form 10-K, the Company recorded rent expense of $2,391 in fiscal 2019 and under the previous lease accounting standard, future minimum lease payments under initial or remaining non-cancellable lease terms in excess of one year would have been as follows:

Year ending September 30,	Finance Leases		Operating Leases
2020	$	61	$	2,172
2021	61		1,865
2022	21		1,583
2023	6		1,502
2024	—		1,498
Thereafter	—		16,711
Total lease payments	$	149	$	25,331
Less: Interest	(11)
Present value of lease liabilities	$	138

Leases

Leases

The adoption of Topic 842 requires lessees to recognize a ROU asset and a lease liability on the consolidated balance sheet, with the exception of short-term leases. The Company primarily leases its manufacturing buildings, specifically at its Orange location, machinery and office equipment. The Company determines if a contract contains a lease based on whether the contract conveys the right to control the use of identified assets for a period in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a ROU asset and a lease liability. Operating leases are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-term debt on the consolidated balance sheets.

The Company has remaining lease terms ranging from one to 16 years, some of which include options to renew the lease. The total lease term is determined by considering the initial lease term per the lease agreement, which is adjusted to include any renewal options that the Company is reasonably certain to exercise as well as any period that the Company has control before the stated initial term of the agreement. If the Company determines there exists a reasonable certainty of exercising termination or early buyout options, then the lease terms are adjusted to account for these facts. A portion of our real estate leases include rents that are generally subject to annual changes in the Consumer Price Index ("CPI"). Such changes to the CPI are treated as variable lease payments.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classification.

The Company has made an accounting policy election to not separate non-lease components from lease components when allocating consideration for the buildings and machinery and equipment ROU asset classes. The election was made to reduce the administrative burden that would be imposed on the Company.

ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date and duration of the lease term in determining the present value of the future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition.

A lease asset and lease liability are not recorded for leases with an initial term of 12 months or less and the lease expense related to these leases is recognized as incurred over the lease term.

The components of lease expense were as follows:

	Year Ended September 30, 2020
Lease expense
Finance lease expense:
Amortization of right-of use assets on finance leases	$	55
Interest on lease liabilities	5
Operating lease expense:	2,173
Variable lease cost:	157
Total lease expense	$	2,390

The following table presents the impact of leasing on the consolidated balance sheet at September 30:

	Classification to the consolidated balance sheets	2020
Assets:
Finance lease assets	Property, plant and equipment, net	$	89
Operating lease assets	Operating lease right-of-use assets, net	17,021
Total lease assets		$	17,110
Current liabilities:
Finance lease liabilities	Current maturities of long-term debt	$	58
Operating lease liabilities	Short-term operating lease liabilities	991
Non-current liabilities:
Finance lease liabilities	Long-term debt, net of current maturities	22
Operating lease liabilities	Long-term operating lease liabilities, net of short-term	16,188
Total lease liabilities		$	17,259

Supplemental cash flow and other information related to leases were as follows:

	September 30, 2020
Other Information
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	2,173
Operating cash flows from finance leases	5
Financing cash flows from finance leases	57
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	278

	September 30, 2020
Weighted-average remaining lease term (years):
Finance leases	1.64
Operating leases	15.15
Weighted-average discount rate:
Finance leases	4.84	%
Operating leases	5.89	%

Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows:

Year ending September 30,	Finance Leases		Operating Leases
2021	$	55	$	1,939
2022	21		1,687
2023	6		1,624
2024	—		1,639
2025	—		1,635
Thereafter	—		17,515
Total lease payments	$	82	$	26,039
Less: Imputed interest	(2)		(8,860)
Present value of lease liabilities	$	80	$	17,179

As previously disclosed in the Company's 2019 Annual Report on Form 10-K, the Company recorded rent expense of $2,391 in fiscal 2019 and under the previous lease accounting standard, future minimum lease payments under initial or remaining non-cancellable lease terms in excess of one year would have been as follows:

Year ending September 30,	Finance Leases		Operating Leases
2020	$	61	$	2,172
2021	61		1,865
2022	21		1,583
2023	6		1,502
2024	—		1,498
Thereafter	—		16,711
Total lease payments	$	149	$	25,331
Less: Interest	(11)
Present value of lease liabilities	$	138