Leases Leases

6 Months Ended

Dec. 31, 2019

Future Operating Lease Payments [Abstract]

Leases of Lessee Disclosure [Text Block]

LEASES

At the inception of our contracts we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement. For leases that do not have a readily determinable implicit rate, we use a discount rate based on our incremental borrowing rate, which is determined considering factors such as the lease term, our credit rating and the economic environment of the location of the lease as of the commencement date.

We account for non-lease components separately from lease components. These costs often relate to the payments for a proportionate share of real estate taxes, insurance, common area maintenance and other operating costs in addition to base rent. We also do not recognize ROU assets and liabilities for leases with an initial term of 12 months or less. Lease costs associated with leases of less than 12 months were $1.9 million and $4.0 million for the three and six months ended December 31, 2019, respectively.

As a lessee, we have various operating lease agreements primarily related to real estate, vehicles and office and plant equipment. Our real estate leases, which are comprised primarily of manufacturing, warehousing, office and administration facilities, represent a majority of our lease liability. Our lease payments are largely fixed. Any variable lease payments, including utilities, common area maintenance and repairs and maintenance, are expensed during the period incurred. Variable lease costs were immaterial for the three and six months ended December 31, 2019. A majority of our real estate leases include options to extend the lease and options to early terminate the lease. Leases with an early termination option generally involve a termination payment. We review all options to extend, terminate, or purchase the ROU assets at the inception of the lease and account for these options when they are reasonably certain of being exercised. Our lease agreements generally do not contain any material residual value guarantees or materially restrictive covenants. We do not have any material leases that have been signed but not commenced, and we did not have any lease transactions with related parties.

The weighted average remaining lease term and discount rate for our operating leases were approximately 8.9 years and 3.4 percent, respectively, at December 31, 2019.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in operating expense on our consolidated statement of income. Operating lease cost was $4.2 million and $8.3 million for the three and six months ended December 31, 2019, respectively.

The following table sets forth supplemental cash flow information related to our operating leases:

(in thousands)	Six Months Ended December 31, 2019
Operating cash flows from operating leases	$	7,978
ROU assets obtained in exchange for new operating lease liabilities	$	5,572

The following table sets forth the maturities of our operating lease liabilities and reconciles the respective undiscounted payments to the operating lease liabilities in the condensed consolidated balance sheet as of December 31, 2019:

Year Ended June 30, (in thousands)	December 31, 2019
Remaining six months of 2020	$	8,206
2021	13,093
2022	8,532
2023	5,602
2024	3,884
Thereafter	19,304
Total undiscounted operating lease payments	$	58,621
Less: discount to net present value	8,213
Total operating lease liabilities	$	50,408

The following table sets forth the future minimum lease payments for non-cancelable operating leases as of the year ended June 30, 2019:

Year Ended June 30, (in thousands)	June 30, 2019
2020	$	17,074
2021	12,212
2022	6,693
2023	4,294
2024	2,636
Thereafter	17,168
Total future minimum lease payments	$	60,077