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Leases

12 Months Ended

Sep. 30, 2020

Leases

Lessee Accounting

As discussed in Note 2, “Summary of Significant Accounting Policies” the Company adopted ASU 2016-02 on October 1, 2019. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for all leases, with the result being the recognition of a right-of-use (“ROU”) asset and a corresponding lease liability. The lease liability is equal to the present value of the minimum lease payments for the term of the lease using the discount rate determined at lease commencement and including any optional renewal periods that were determined to be reasonably certain to be exercised. The ROU asset is equal to the initial measurement of the lease liability plus any lease payments made to the lessor at or before the commencement date and any unamortized initial indirect costs incurred by the lessee, less any unamortized lease incentives received. ROU assets are periodically reviewed for impairment whenever events or changes in circumstances arise. During the year ended September 30, 2020, the Company incurred no impairment charges on ROU assets.

The discount rate utilized in calculating the lease liability is the rate implicit in the lease, if known, otherwise, the incremental borrowing rate (“IBR”) for the expected lease term is used. Generally, the Company cannot determine the

interest rate implicit in the lease. The Company’s IBR approximates the rate the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The Company occupies certain facilities and operates certain equipment and vehicles under non‑cancelable lease arrangements. Lease agreements may contain lease escalation clauses and purchase and renewal options. At the inception of a contract, the Company determines whether the arrangement is or contains a lease. A lease is determined to exist if there is an identified asset, the Company has the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the asset. Once a lease is determined to exist, the Company determines the lease classification at lease commencement. Leases are classified as operating or finance leases based on specific criteria. Operating lease expense is recognized on a straight-line basis on the Consolidated Statements of Operations. Finance lease expense have front-loaded expense recognition that is recognized as depreciation expense and interest expense on the Consolidated Statements of Operations. On the Consolidated Statements of Changes in Cash Flows, payments for operating leases are included in operating activities and payments for finance leases are included in financing activity, with the interest component included in operating activities.

The Company’s real estate leases often include options to extend the lease term; however, the Company has not included the renewal options in the ROU asset and lease liability because the likelihood of renewal was not reasonably certain. In addition, the Company has leases that include variable lease payments, for items such as maintenance or other operating expenses, which are expensed as incurred as variable lease expense.

Adoption of ASU 2016-02, Leases (Topic 842)

The Company applied Topic 842 to all existing leases at October 1, 2019 using the modified retrospective approach. As a result, prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historical accounting under Topic 840. The Company has elected the following package of practical expedients which exempts the Company from having to reassess: (i) whether expired or existing contracts contain a lease, (ii) the lease classification for expired or existing leases, and (iii) initial direct costs for existing leases. In addition, the Company elected to separate lease and non-lease components for all asset classes, did not elect to use hindsight to determine the lease term and made an accounting policy election for short-term leases which does not require the capitalization of leases with terms of 12 months or less.

As a result of adoption of Topic 842 on October 1, 2019, the Company recognized $42,073 of ROU assets related to operating leases in Operating lease right-of-use assets, net and $42,904 of corresponding lease liabilities, of which $13,596 is included in Accrued expenses and other liabilities and $29,308 is included in Obligation under operating leases on the Consolidated Balance Sheets. The difference is attributable to deferred rent balance as of September 30, 2019 that reduced the ROU asset balance on October 1, 2019, of which $73 was removed from Prepaid and other current assets and the remainder was recognized in Retained deficit on the Consolidated Balance Sheets. In addition, the Company recorded an ROU asset related to finance leases in Property, plant, and equipment, net of $2,812 and $3,245 in corresponding lease liabilities included in Other non‑current liabilities on the Consolidated Balance Sheets, with the difference recognized in Retained deficit. See Note 2, “Summary of Significant Accounting Policies” for further information on the impact of adoption.

The following represents the components of lease cost for the year ended September 30, 2020 and other information for both operating and finance leases for the year ended September 30, 2020:



	Year Ended September 30, 2020
Lease cost
Finance lease cost:
Amortization of ROU assets	$	13,738
Interest on lease liabilities	1,981
Operating lease cost	16,052
Short-term lease cost	4,970
Variable lease cost	—
Sublease income	(56		)
Total lease cost	$	36,685

Total lease cost for operating leases was $20,088 and $18,864 for the years ended September 30, 2019 and 2018, respectively.



Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	1,968
Operating cash flows from operating leases	$	16,034
Financing cash flows from finance leases	$	13,459
ROU assets obtained in exchange for new finance lease liabilities	$	14,934
ROU assets obtained in exchange for new operating lease liabilities	$	8,456
ROU asset remeasurement	$	(960	)
Weighted average remaining lease term - finance leases	3.9 years
Weighted average remaining lease term - operating leases	5.2 years
Weighted average discount rate - finance leases	4.6		%
Weighted average discount rate - operating leases	4.2		%

The following table reconciles future minimum undiscounted rental commitments for operating leases to operating lease liabilities record on the Consolidated Balance Sheet as of September 30, 2020:



Fiscal Year
2021	$	14,624
2022	11,914
2023	9,622
2024	7,259
2025	5,616
Thereafter	7,704
Total undiscounted lease payments	$	56,739
Present value adjustment	(6,176		)
Operating lease liabilities	$	50,563
Less current installments of obligations under operating leases	12,767
Obligations under operating leases, excluding current installments	$	37,796

The gross and net carrying values of the equipment under finance leases as of September 30, 2020 and September 30, 2019 was as follows:



	September 30, 2020		September 30, 2019
Gross carrying amount	$	89,254	$	69,760
Net carrying amount	$	36,577	$	36,337

The following table reconciles future minimum undiscounted rental commitments for finance leases to the finance lease liabilities recorded on the Consolidated Balance Sheet as of September 30, 2020:



Fiscal Year
2021	$	12,944
2022	10,603
2023	8,003
2024	5,601
2025	3,060
Thereafter	1,115
Total undiscounted lease payments	$	41,326
Present value adjustment	(3,694		)
Finance lease liabilities	$	37,632
Less current installments of obligations under finance leases	11,362
Obligations under finance leases, excluding current installments	$	26,270

The current installments of obligations under finance leases are included in Accrued expenses and other liabilities. Obligations under finance leases, excluding current installments, are included in Other non-current liabilities.

Lessor Accounting

The Company is a lessor to multiple parties. In certain instances, the Company enters into a contract with a customer but must construct the underlying asset prior to its lease. At the time of contract inception, the Company determines if an arrangement is or contains a lease. These contracts generally contain both lease and non-lease components, including installation, maintenance and monitoring services of the Company owned equipment, in addition to sale of certain constructed assets. In situations where arrangements contain multiple elements, contract consideration is allocated based on relative standalone selling price. Lease components associated with underlying assets that have an alternative use are classified as operating leases with revenue recognized over time throughout the lease term, within Revenue from services on the Consolidated Statements of Operations. Lease components associated with underlying assets that have no alternative use are classified as sales-type leases, with point in time revenue recognition at the on-set of the lease. or classified as financing transactions, with over time revenue recognition at the on-set of the construction of the underlying assets. In order for a component to be separate, the customer would be able to benefit from the right of use of the component separately or with other resources readily available to the customer and the right of the use is not highly dependent or highly interrelated with the other rights to use the other underlying assets or components.

As of September 30, 2020, future minimum lease payments receivable under operating leases are as follows:



Fiscal year
2021	$	109,312
2022	62,618
2023	44,686
2024	30,827
2025	25,097
Thereafter	155,564
Future minimum lease payments	$	428,104

Lessor, Operating Leases [Text Block]