Leases

6 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

LeasesThe Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. At contract inception, a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, and a corresponding right-of-use asset. As a majority of the Company’s leases do not provide an implicit interest rate within the lease, an incremental borrowing rate is used to determine the ROU asset and lease liability which is based on information available at the commencement date. Options to purchase, extend or terminate a lease are included in the ROU asset and lease liability when it is reasonably certain an option will be exercised. Renewal options are most prevalent in the Company’s real estate leases. In general, the Company has not included renewal options for leases in the ROU asset and lease liability because

Note 8.   Leases (continued)

the likelihood of renewal was not determined to be reasonably certain. In addition, leases may include variable lease payments, for items such as maintenance and utilities, which are expensed as incurred as variable lease expense.

There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. Leases not meeting the finance lease criteria are classified as operating leases. Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet. ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other liabilities on the Consolidated Balance Sheet. For finance leases, short-term lease liabilities are classified in long-term debt, current maturities, and long-term lease liabilities are classified in long-term debt on the Consolidated Balance Sheet. Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet. Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

The following table presents the balance sheet and lease classification for the Company's lease portfolio:

Balance Sheet Classification	Lease Classification	March 31, 2020
Non-current assets:
Property, plant and equipment, net	Finance	$	3,194
Other assets	Operating	79,563
Total lease assets		$	82,757
Current liabilities:
Long-term debt, current maturities	Finance	$	1,077
Other current liabilities	Operating	26,098
Non-current liabilities:
Long-term debt	Finance	4,171
Other liabilities	Operating	54,295
Total lease liabilities		$	85,641

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

The following table presents the components of lease cost:

		Three months ended March 31, 2020		Six months ended March 31, 2020
Finance lease cost:
	Amortization of ROU assets	$	222	$	351
	Interest on lease liabilities	43		77
Operating lease cost		6,835		13,098
Variable lease cost		1,457		2,882
Sublease income		(212)		(399)
Total lease cost		$	8,345	$	16,009

Note 8.   Leases (continued)

Supplemental information regarding the Company's leases follows:

		Six months ended March 31, 2020
Cash paid for finance and operating lease liabilities:
	Operating cash flows from finance leases	$	77
	Operating cash flows from operating leases	$	15,589
	Financing cash flows from finance leases	$	331
ROU assets obtained in exchange for new finance lease liabilities		$	2,011
ROU assets obtained in exchange for new operating lease liabilities		$	9,284
		March 31, 2020
Weighted-average remaining lease term - finance leases (years)		5.67
Weighted-average remaining lease term - operating leases (years)		3.84
Weighted-discount rate - finance leases		3.32		%
Weighted-discount rate - operating leases		3.04		%

The Company elected the practical expedient to not separate lease components from non-lease components for all asset classes. In addition, the Company elected the practical expedient to utilize a portfolio approach for certain equipment asset classes, primarily information technology, as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

Maturities of lease obligations by fiscal year were as follows as of March 31, 2020:

	Operating Leases		Finance Leases
2020 (remainder)	$	14,881	$	647
2021	25,080		1,122
2022	17,199		1,008
2023	11,063		800
2024	7,650		386
Thereafter	9,555		2,100
Total future minimum lease payments	85,428		6,063
Less: Interest	5,035		815
Present value of lease liabilities:	$	80,393	$	5,248

Leases

LeasesThe Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. At contract inception, a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, and a corresponding right-of-use asset. As a majority of the Company’s leases do not provide an implicit interest rate within the lease, an incremental borrowing rate is used to determine the ROU asset and lease liability which is based on information available at the commencement date. Options to purchase, extend or terminate a lease are included in the ROU asset and lease liability when it is reasonably certain an option will be exercised. Renewal options are most prevalent in the Company’s real estate leases. In general, the Company has not included renewal options for leases in the ROU asset and lease liability because

Note 8.   Leases (continued)

the likelihood of renewal was not determined to be reasonably certain. In addition, leases may include variable lease payments, for items such as maintenance and utilities, which are expensed as incurred as variable lease expense.

There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. Leases not meeting the finance lease criteria are classified as operating leases. Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet. ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other liabilities on the Consolidated Balance Sheet. For finance leases, short-term lease liabilities are classified in long-term debt, current maturities, and long-term lease liabilities are classified in long-term debt on the Consolidated Balance Sheet. Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet. Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

The following table presents the balance sheet and lease classification for the Company's lease portfolio:

Balance Sheet Classification	Lease Classification	March 31, 2020
Non-current assets:
Property, plant and equipment, net	Finance	$	3,194
Other assets	Operating	79,563
Total lease assets		$	82,757
Current liabilities:
Long-term debt, current maturities	Finance	$	1,077
Other current liabilities	Operating	26,098
Non-current liabilities:
Long-term debt	Finance	4,171
Other liabilities	Operating	54,295
Total lease liabilities		$	85,641

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

The following table presents the components of lease cost:

		Three months ended March 31, 2020		Six months ended March 31, 2020
Finance lease cost:
	Amortization of ROU assets	$	222	$	351
	Interest on lease liabilities	43		77
Operating lease cost		6,835		13,098
Variable lease cost		1,457		2,882
Sublease income		(212)		(399)
Total lease cost		$	8,345	$	16,009

Note 8.   Leases (continued)

Supplemental information regarding the Company's leases follows:

		Six months ended March 31, 2020
Cash paid for finance and operating lease liabilities:
	Operating cash flows from finance leases	$	77
	Operating cash flows from operating leases	$	15,589
	Financing cash flows from finance leases	$	331
ROU assets obtained in exchange for new finance lease liabilities		$	2,011
ROU assets obtained in exchange for new operating lease liabilities		$	9,284
		March 31, 2020
Weighted-average remaining lease term - finance leases (years)		5.67
Weighted-average remaining lease term - operating leases (years)		3.84
Weighted-discount rate - finance leases		3.32		%
Weighted-discount rate - operating leases		3.04		%

The Company elected the practical expedient to not separate lease components from non-lease components for all asset classes. In addition, the Company elected the practical expedient to utilize a portfolio approach for certain equipment asset classes, primarily information technology, as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

Maturities of lease obligations by fiscal year were as follows as of March 31, 2020:

	Operating Leases		Finance Leases
2020 (remainder)	$	14,881	$	647
2021	25,080		1,122
2022	17,199		1,008
2023	11,063		800
2024	7,650		386
Thereafter	9,555		2,100
Total future minimum lease payments	85,428		6,063
Less: Interest	5,035		815
Present value of lease liabilities:	$	80,393	$	5,248