Leases

12 Months Ended

Sep. 30, 2022

Leases [Abstract]

Leases

LEASES

Lessee Accounting

We are the lessee under various agreements for real estate, vehicles, aircraft, and other equipment that are accounted for as operating leases. Our finance leases principally relate to the right to use machinery and equipment and are not material.

Operating lease expense was $105.3, $89.5, and $80.1 for fiscal years 2022, 2021, and 2020, respectively. These amounts do not include short-term and variable lease expenses, which were not material.

Amounts associated with operating leases and their presentation on our consolidated balance sheets are as follows:

30 September	2022	2021
Operating lease right-of-use assets
Other noncurrent assets	$694.7	$566.2
Operating lease liabilities
Payables and accrued liabilities	90.0	78.6
Other noncurrent liabilities	592.1	503.4
Total operating lease liabilities	$682.1	$582.0

30 September	2022		2021
Weighted-average remaining lease term in years(A)	19.1		17.2
Weighted-average discount rate(B)	2.1	%	1.9	%

(A)Calculated on the basis of the remaining lease term and the lease liability balance for each lease as of the reporting date.

(B)Calculated on the basis of the discount rate used to calculate the lease liability for each lease and the remaining balance of the lease payments for each lease as of the reporting date.

The following maturity analysis of our operating lease liabilities as of 30 September 2022 presents the undiscounted cash flows for each of the next five years and thereafter with a reconciliation to the lease liability recognized on our balance sheet:

	Operating Leases
2023	$102.3
2024	85.0
2025	69.1
2026	52.4
2027	39.1
Thereafter	461.3
Total undiscounted lease payments	809.2
Imputed interest	(127.1)
Present value of lease liability recognized on balance sheet	$682.1

The impacts associated with our operating leases on the consolidated statements of cash flows are reflected within "Other adjustments" within operating activities. This includes non-cash operating lease expense of $105.3, $89.5, and $80.1, as well as a use of cash of $128.0, $98.8, and $90.0 for payments on amounts included in the measurement of the lease liability for fiscal years 2022, 2021, and 2020, respectively.

We recorded $252, $259, and $442 of noncash right-of-use asset additions during fiscal years 2022, 2021, and 2020, respectively.

We have additional operating leases that have not yet commenced as of 30 September 2022 having lease payments totaling approximately $120.

Lessor Accounting

Certain contracts associated with facilities that are built to provide product to a specific customer have been accounted for as leases. As we generally control the operations and maintenance of the assets that provide the supply of gas to our customers, there have been no new arrangements that qualified as a lease in fiscal year 2022.

In cases for which operating lease treatment is appropriate, there is no difference in revenue recognition over the life of the contract as compared to accounting for the contract under a sale of gas agreement. These contracts qualify for a practical expedient available to lessors to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We elected to apply this practical expedient and have accounted for the combined component as product sales under the revenue standard as we control the operations and maintenance of the assets that provide the supply of gas to our customers.

In cases for which sales-type lease treatment is appropriate, revenue and expense are recognized up front for the sale of equipment component of the contract as compared to revenue recognition over the life of the arrangement under contracts not qualifying as sales-type leases. Additionally, a portion of the revenue representing interest income from the financing component of the lease receivable is reflected as sales over the life of the contract. During fiscal years 2022, 2021, and 2020, we recognized interest income of $59.1, $67.4, and $71.2 on our lease receivables, respectively.

Our contracts generally do not have the option to extend or terminate the lease or provide the customer the right to purchase the asset at the end of the contract term. Instead, renewal of such contracts requires negotiation of mutually agreed terms by both parties. Unless the customer terminates within the required notice period, the contract will go into evergreen. Given the long-term duration of our contracts, there is no assumed residual value for the assets at the end of the lease term.

"Lease receivables, net" primarily relate to sales-type leases on certain on-site assets for which payments are collected over the contract term. As of 30 September 2022 and 2021, our lease receivables, net were $660.9 and $824.7, respectively, and are primarily included within "Noncurrent lease receivables" on our consolidated balance sheets, with the remaining balance in "Other receivables and current assets." The majority of our leases are of high credit quality and were originated prior to fiscal year 2017. As of 30 September 2022 and 2021, the credit quality of lease receivables did not require a material allowance for credit losses.

Lease payments collected in fiscal years 2022, 2021, and 2020 were $153.1, $166.2, and $162.8, respectively. These payments reduced the noncurrent lease receivable balance by $94.0, $98.8, and $91.6 in fiscal years 2022, 2021, and 2020, respectively.

As of 30 September 2022, minimum lease payments expected to be collected, which reconciles to lease receivables, net, were as follows:

2023	$126.9
2024	122.0
2025	116.9
2026	107.3
2027	94.3
Thereafter	363.6
Total	931.0
Unearned interest income	(270.1)
Lease Receivables, net	$660.9

Leases

LEASES

Lessee Accounting

We are the lessee under various agreements for real estate, vehicles, aircraft, and other equipment that are accounted for as operating leases. Our finance leases principally relate to the right to use machinery and equipment and are not material.

Operating lease expense was $105.3, $89.5, and $80.1 for fiscal years 2022, 2021, and 2020, respectively. These amounts do not include short-term and variable lease expenses, which were not material.

Amounts associated with operating leases and their presentation on our consolidated balance sheets are as follows:

30 September	2022	2021
Operating lease right-of-use assets
Other noncurrent assets	$694.7	$566.2
Operating lease liabilities
Payables and accrued liabilities	90.0	78.6
Other noncurrent liabilities	592.1	503.4
Total operating lease liabilities	$682.1	$582.0

30 September	2022		2021
Weighted-average remaining lease term in years(A)	19.1		17.2
Weighted-average discount rate(B)	2.1	%	1.9	%

(A)Calculated on the basis of the remaining lease term and the lease liability balance for each lease as of the reporting date.

(B)Calculated on the basis of the discount rate used to calculate the lease liability for each lease and the remaining balance of the lease payments for each lease as of the reporting date.

The following maturity analysis of our operating lease liabilities as of 30 September 2022 presents the undiscounted cash flows for each of the next five years and thereafter with a reconciliation to the lease liability recognized on our balance sheet:

	Operating Leases
2023	$102.3
2024	85.0
2025	69.1
2026	52.4
2027	39.1
Thereafter	461.3
Total undiscounted lease payments	809.2
Imputed interest	(127.1)
Present value of lease liability recognized on balance sheet	$682.1

The impacts associated with our operating leases on the consolidated statements of cash flows are reflected within "Other adjustments" within operating activities. This includes non-cash operating lease expense of $105.3, $89.5, and $80.1, as well as a use of cash of $128.0, $98.8, and $90.0 for payments on amounts included in the measurement of the lease liability for fiscal years 2022, 2021, and 2020, respectively.

We recorded $252, $259, and $442 of noncash right-of-use asset additions during fiscal years 2022, 2021, and 2020, respectively.

We have additional operating leases that have not yet commenced as of 30 September 2022 having lease payments totaling approximately $120.

Lessor Accounting

Certain contracts associated with facilities that are built to provide product to a specific customer have been accounted for as leases. As we generally control the operations and maintenance of the assets that provide the supply of gas to our customers, there have been no new arrangements that qualified as a lease in fiscal year 2022.

In cases for which operating lease treatment is appropriate, there is no difference in revenue recognition over the life of the contract as compared to accounting for the contract under a sale of gas agreement. These contracts qualify for a practical expedient available to lessors to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We elected to apply this practical expedient and have accounted for the combined component as product sales under the revenue standard as we control the operations and maintenance of the assets that provide the supply of gas to our customers.

In cases for which sales-type lease treatment is appropriate, revenue and expense are recognized up front for the sale of equipment component of the contract as compared to revenue recognition over the life of the arrangement under contracts not qualifying as sales-type leases. Additionally, a portion of the revenue representing interest income from the financing component of the lease receivable is reflected as sales over the life of the contract. During fiscal years 2022, 2021, and 2020, we recognized interest income of $59.1, $67.4, and $71.2 on our lease receivables, respectively.

Our contracts generally do not have the option to extend or terminate the lease or provide the customer the right to purchase the asset at the end of the contract term. Instead, renewal of such contracts requires negotiation of mutually agreed terms by both parties. Unless the customer terminates within the required notice period, the contract will go into evergreen. Given the long-term duration of our contracts, there is no assumed residual value for the assets at the end of the lease term.

"Lease receivables, net" primarily relate to sales-type leases on certain on-site assets for which payments are collected over the contract term. As of 30 September 2022 and 2021, our lease receivables, net were $660.9 and $824.7, respectively, and are primarily included within "Noncurrent lease receivables" on our consolidated balance sheets, with the remaining balance in "Other receivables and current assets." The majority of our leases are of high credit quality and were originated prior to fiscal year 2017. As of 30 September 2022 and 2021, the credit quality of lease receivables did not require a material allowance for credit losses.

Lease payments collected in fiscal years 2022, 2021, and 2020 were $153.1, $166.2, and $162.8, respectively. These payments reduced the noncurrent lease receivable balance by $94.0, $98.8, and $91.6 in fiscal years 2022, 2021, and 2020, respectively.

As of 30 September 2022, minimum lease payments expected to be collected, which reconciles to lease receivables, net, were as follows:

2023	$126.9
2024	122.0
2025	116.9
2026	107.3
2027	94.3
Thereafter	363.6
Total	931.0
Unearned interest income	(270.1)
Lease Receivables, net	$660.9