Leases

9 Months Ended

Jun. 29, 2024

Leases [Abstract]

Lessee, Operating Leases

Leases

We lease certain manufacturing facilities, office space and machinery and equipment globally. At inception, we evaluate whether a contractual arrangement contains a lease. Specifically, we consider whether we control the underlying asset and have the right to obtain substantially all the economic benefits or outputs from the asset. If the contractual arrangement contains a lease, we then determine the classification of the lease, operating or finance, using the classification criteria described in ASC 842. We then determine the term of the lease based on terms and conditions of the contractual arrangement, including whether the options to extend or terminate the lease are reasonably certain to be exercised. We have elected to not separate lease components from non-lease components, such as common area maintenance charges and instead, account for the lease and non-lease components as a single component.

Our lease right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and our lease liabilities represent our obligation to make lease payments. Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Condensed Balance Sheets. Finance lease ROU assets are included in Property, plant and equipment and finance lease liabilities are included in Accrued liabilities and other, and Other long-term liabilities on the Consolidated Condensed Balance Sheets. Operating lease cost is included in Cost of sales and Selling, general and administrative on the Consolidated Condensed Statements of Earnings. Finance lease cost is included in Cost of sales, Selling, general and administrative and Interest on the Consolidated Condensed Statements of Earnings.

The ROU assets and lease liabilities for both operating and finance leases are recognized as of the commencement date at the net present value of the fixed minimum lease payments over the term of the lease, using the discount rate described below. Variable lease payments are recorded in the period in which the obligation for the payment is incurred. Variable lease payments based on an index or rate are initially measured using the index or rate as of the commencement date of the lease and included in the fixed minimum lease payments. For short-term leases that have a term of 12 months or less as of the commencement date, we do not recognize a ROU asset or lease liability on our balance sheet; we recognize expense as the lease payments are made over the lease term.

The discount rate used to calculate the present value of our leases is the rate implicit in the lease. If the information necessary to determine the rate implicit in the lease is not available, we use our incremental borrowing rate for collateralized debt, which is determined using our credit rating and other information available as of the lease commencement date.

The components of lease expense were as follows:

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Operating lease cost	$	7,897	$	7,386	$	23,112	$	22,341
Finance lease cost:
Amortization of right-of-use assets	$	2,365	$	1,471	$	6,263	$	3,589
Interest on lease liabilities	1,421		959		3,988		1,750
Total finance lease cost	$	3,786	$	2,430	$	10,251	$	5,339

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
	June 29, 2024		July 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow for operating leases	$	23,631	$	22,523
Operating cash flow for finance leases	3,988		1,750
Financing cash flow for finance leases	4,468		3,449
Assets obtained in exchange for lease obligations:
Operating leases	$	10,125	$	4,857
Finance leases	16,909		51,826

Supplemental balance sheet information related to leases was as follows:

	June 29, 2024			September 30, 2023
Operating Leases:
Operating lease right-of-use assets	$	57,669		$	56,067
Accrued liabilities and other	$	11,807		$	11,283
Other long-term liabilities	56,741			56,398
Total operating lease liabilities	$	68,548		$	67,681
Finance Leases:
Property, plant, and equipment, at cost	$	104,083		$	85,324
Accumulated depreciation	(17,582)			(10,913)
Property, plant, and equipment, net	$	86,501		$	74,411
Accrued liabilities and other	$	7,828		$	5,621
Other long-term liabilities	82,945			71,225
Total finance lease liabilities	$	90,773		$	76,846
Weighted average remaining lease term in years:
Operating leases	6.3			6.9
Finance leases	20.7			23.1
Weighted average discount rates:
Operating leases	5.2		%	5.0		%
Finance leases	6.5		%	6.5		%

Maturities of lease liabilities were as follows:

	June 29, 2024
	Operating Leases		Finance Leases
2024	$	3,945	$	3,243
2025	14,795		12,798
2026	14,214		12,516
2027	12,795		11,763
2028	10,452		10,766
Thereafter	24,902		146,993
Total lease payments	81,103		198,079
Less: imputed interest	(12,555)		(107,306)
Total	$	68,548	$	90,773

Lessee, Finance Leases

Leases

We lease certain manufacturing facilities, office space and machinery and equipment globally. At inception, we evaluate whether a contractual arrangement contains a lease. Specifically, we consider whether we control the underlying asset and have the right to obtain substantially all the economic benefits or outputs from the asset. If the contractual arrangement contains a lease, we then determine the classification of the lease, operating or finance, using the classification criteria described in ASC 842. We then determine the term of the lease based on terms and conditions of the contractual arrangement, including whether the options to extend or terminate the lease are reasonably certain to be exercised. We have elected to not separate lease components from non-lease components, such as common area maintenance charges and instead, account for the lease and non-lease components as a single component.

Our lease right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and our lease liabilities represent our obligation to make lease payments. Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Condensed Balance Sheets. Finance lease ROU assets are included in Property, plant and equipment and finance lease liabilities are included in Accrued liabilities and other, and Other long-term liabilities on the Consolidated Condensed Balance Sheets. Operating lease cost is included in Cost of sales and Selling, general and administrative on the Consolidated Condensed Statements of Earnings. Finance lease cost is included in Cost of sales, Selling, general and administrative and Interest on the Consolidated Condensed Statements of Earnings.

The ROU assets and lease liabilities for both operating and finance leases are recognized as of the commencement date at the net present value of the fixed minimum lease payments over the term of the lease, using the discount rate described below. Variable lease payments are recorded in the period in which the obligation for the payment is incurred. Variable lease payments based on an index or rate are initially measured using the index or rate as of the commencement date of the lease and included in the fixed minimum lease payments. For short-term leases that have a term of 12 months or less as of the commencement date, we do not recognize a ROU asset or lease liability on our balance sheet; we recognize expense as the lease payments are made over the lease term.

The discount rate used to calculate the present value of our leases is the rate implicit in the lease. If the information necessary to determine the rate implicit in the lease is not available, we use our incremental borrowing rate for collateralized debt, which is determined using our credit rating and other information available as of the lease commencement date.

The components of lease expense were as follows:

	Three Months Ended				Nine Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Operating lease cost	$	7,897	$	7,386	$	23,112	$	22,341
Finance lease cost:
Amortization of right-of-use assets	$	2,365	$	1,471	$	6,263	$	3,589
Interest on lease liabilities	1,421		959		3,988		1,750
Total finance lease cost	$	3,786	$	2,430	$	10,251	$	5,339

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
	June 29, 2024		July 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow for operating leases	$	23,631	$	22,523
Operating cash flow for finance leases	3,988		1,750
Financing cash flow for finance leases	4,468		3,449
Assets obtained in exchange for lease obligations:
Operating leases	$	10,125	$	4,857
Finance leases	16,909		51,826

Supplemental balance sheet information related to leases was as follows:

	June 29, 2024			September 30, 2023
Operating Leases:
Operating lease right-of-use assets	$	57,669		$	56,067
Accrued liabilities and other	$	11,807		$	11,283
Other long-term liabilities	56,741			56,398
Total operating lease liabilities	$	68,548		$	67,681
Finance Leases:
Property, plant, and equipment, at cost	$	104,083		$	85,324
Accumulated depreciation	(17,582)			(10,913)
Property, plant, and equipment, net	$	86,501		$	74,411
Accrued liabilities and other	$	7,828		$	5,621
Other long-term liabilities	82,945			71,225
Total finance lease liabilities	$	90,773		$	76,846
Weighted average remaining lease term in years:
Operating leases	6.3			6.9
Finance leases	20.7			23.1
Weighted average discount rates:
Operating leases	5.2		%	5.0		%
Finance leases	6.5		%	6.5		%

Maturities of lease liabilities were as follows:

	June 29, 2024
	Operating Leases		Finance Leases
2024	$	3,945	$	3,243
2025	14,795		12,798
2026	14,214		12,516
2027	12,795		11,763
2028	10,452		10,766
Thereafter	24,902		146,993
Total lease payments	81,103		198,079
Less: imputed interest	(12,555)		(107,306)
Total	$	68,548	$	90,773