Leases

3 Months Ended

Sep. 30, 2022

10. Leases (as restated)

Leases Under ASC 842

We have lease agreements for certain winery facilities, vineyards, corporate and administrative offices, tasting rooms, and equipment under long-term non-cancelable leases. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Beginning July 1, 2022, operating leases are included in operating lease right-of-use assets, current operating lease liabilities and long-term operating lease liabilities in our condensed consolidated balance sheet. Operating lease right-of-use assets and corresponding operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable.

Finance leases are included in finance lease right-of-use assets, current finance lease liabilities and long-term finance lease liabilities in our condensed consolidated balance sheet.

Our lease agreements include leases that contain lease components and non-lease components. For all asset classes, we have elected to account for both of these provisions as a single lease component.

We also have elected to apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of 12 months or less. In addition, we elected the package of transition practical expedients permitted under the transition guidance, which allows the Company to carry forward our leases without reassessing, whether any contracts are leases or contain leases, lease classification and initial direct costs.

Our leases have remaining lease terms from less than one year to 10 years. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is significant economic incentive to exercise that option.

Beginning fiscal 2022, we no longer had related party lease agreements.

The following table summarizes the components of lease expense:


	Three Months Ended
(in thousands)	September 30, 2022
Operating lease expense	$	1,808

Finance lease expense
Amortization of right-of-use assets		70
Interest on lease liabilities		9
Total finance lease expense		79
Variable lease expense		157
Short-term lease expense		35
Total lease expense	$	2,079

The following table summarizes supplemental balance sheet related to leases:


(in thousands)	September 30, 2022
Operating Leases
Operating lease right-of-use assets	$	35,509

Current portion of operating lease liabilities		5,197
Long-term operating lease liabilities		31,637
Total operating lease liabilities		36,834

Finance Leases
Finance lease right-of-use assets		689

Current portion of finance lease liabilities		263
Long-term finance lease liabilities		429
Total finance lease liabilities	$	692

The following table summarizes the weighted-average remaining lease term and discount rate:


Weighted-average remaining lease term (in years)
Operating leases	6.7
Finance leases	2.8

Weighted-average discount rate
Operating leases	5.0	%
Finance leases	5.0	%

The minimum annual payments under our lease agreements as of September 30, 2022 are as follows:


(in thousands)	Operating Leases			Finance Leases
Remaining fiscal 2023	$	4,795		$	219
2024		6,849			285
2025		6,529			157
2026		6,521			79
2027		6,195			-
2028 and thereafter		12,479			-
Total lease payments		43,368			740
Less imputed interest		(6,534	)		(48	)
Present value of lease liabilities		36,834			692
Current portion of lease liabilities		(5,197	)		(263	)
Total long term lease liabilities	$	31,637		$	429

* Table excludes obligations for leases with original terms of 12 months or less which have not been recognized as ROU assets or liabilities in our condensed consolidated balance sheets.