Leases

12 Months Ended

Jun. 30, 2023

Leases [Abstract]

Operating leases

Leases

The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet.

Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases assets are recorded in property, plant and equipment, net, and finance lease liabilities within other accrued liabilities and other liabilities on our Consolidated Balance Sheets. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.

Operating leases are recorded in other assets and operating lease liabilities, current and non-current on our Consolidated Balance Sheets. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.

Our lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred. We account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our lease assets and corresponding liabilities. Our lease terms and conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that we will exercise that option.

Our lease assets also include any lease payments made, and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The following table presents lease costs, which include leases for arrangements with an initial term of more than 12 months, lease term, and discount rates ($000):

Year Ended June 30,	2023			2022			2021
Finance Lease Cost
Amortization of right-of-use assets	$	1,667		$	1,671		$	1,667
Interest on lease liabilities	1,124			1,200			1,328
Total finance lease cost	2,791			2,871			2,995
Operating lease cost	53,127			36,716			37,361
Sublease income	—			507			1,471
Total lease cost	$	55,918		$	39,080		$	38,885
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases	1,124			1,200			1,268
Operating cash flows from operating leases	50,503			35,481			35,641
Financing cash flows from finance leases	1,430			1,290			1,152
Assets Obtained in Exchange for Lease Liabilities
Right-of-use assets obtained in acquisitions	56,315			—			13,391
Right-of-use assets obtained in exchange for new operating lease liabilities	27,720			18,161			52,839
Total assets obtained in exchange for new operating lease liabilities	84,035			18,161			66,230
Weighted-Average Remaining Lease Term (in Years)
Finance leases	8.5			9.5			10.5
Operating leases	6.9			6.6			7.0
Weighted-Average Discount Rate
Finance leases	5.6		%	5.6		%	5.6		%
Operating leases	5.5		%	5.7		%	6.1		%

The following table presents future minimum lease payments, which includes leases for arrangements with an initial term of more than 12 months ($000):

Future Years	Operating Leases		Finance Leases		Total
Year 1	$	46,619	$	2,624	$	49,244
Year 2	40,401		2,697		43,098
Year 3	32,359		2,771		35,129
Year 4	25,848		2,847		28,695
Year 5	18,705		2,925		21,630
Thereafter	55,493		10,763		66,256
Total minimum lease payments	$	219,425	$	24,627	$	244,052
Less: amounts representing interest	40,406		5,160		45,565
Present value of total lease liabilities	$	179,019	$	19,467	$	198,486

From time-to-time, we enter into commercial agreements with our customers that include advance payments from our customers, the cash flow from which we use to fund our capital expansion. We determine at the inception or modification of the contract if the arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. In determining if a contract contains a lease, we evaluate whether the contract, either explicitly or implicitly, is for the use of an identified asset, and whether the customer has the right to direct the use of, and obtain substantially all of the economic benefit from, the identified asset.

Financing leases

Leases

The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the balance sheet.

Finance leases are generally those that allow us to substantially utilize or pay for the entire asset over its estimated useful life. Finance leases assets are recorded in property, plant and equipment, net, and finance lease liabilities within other accrued liabilities and other liabilities on our Consolidated Balance Sheets. Finance lease assets are amortized in operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term, with the interest component for lease liabilities included in interest expense and recognized using the effective interest method over the lease term.

Operating leases are recorded in other assets and operating lease liabilities, current and non-current on our Consolidated Balance Sheets. Operating lease assets are amortized on a straight-line basis in operating expenses over the lease term.

Our lease liabilities are recognized based on the present value of the remaining fixed lease payments, over the lease term, using a discount rate of similarly secured borrowings available to the Company. For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred. We account for non-lease components, such as common area maintenance, as a component of the lease, and include it in the initial measurement of our lease assets and corresponding liabilities. Our lease terms and conditions may include options to extend or terminate. An option is recognized when it is reasonably certain that we will exercise that option.

Our lease assets also include any lease payments made, and exclude any lease incentives received prior to commencement. Our lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The following table presents lease costs, which include leases for arrangements with an initial term of more than 12 months, lease term, and discount rates ($000):

Year Ended June 30,	2023			2022			2021
Finance Lease Cost
Amortization of right-of-use assets	$	1,667		$	1,671		$	1,667
Interest on lease liabilities	1,124			1,200			1,328
Total finance lease cost	2,791			2,871			2,995
Operating lease cost	53,127			36,716			37,361
Sublease income	—			507			1,471
Total lease cost	$	55,918		$	39,080		$	38,885
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flows from finance leases	1,124			1,200			1,268
Operating cash flows from operating leases	50,503			35,481			35,641
Financing cash flows from finance leases	1,430			1,290			1,152
Assets Obtained in Exchange for Lease Liabilities
Right-of-use assets obtained in acquisitions	56,315			—			13,391
Right-of-use assets obtained in exchange for new operating lease liabilities	27,720			18,161			52,839
Total assets obtained in exchange for new operating lease liabilities	84,035			18,161			66,230
Weighted-Average Remaining Lease Term (in Years)
Finance leases	8.5			9.5			10.5
Operating leases	6.9			6.6			7.0
Weighted-Average Discount Rate
Finance leases	5.6		%	5.6		%	5.6		%
Operating leases	5.5		%	5.7		%	6.1		%

The following table presents future minimum lease payments, which includes leases for arrangements with an initial term of more than 12 months ($000):

Future Years	Operating Leases		Finance Leases		Total
Year 1	$	46,619	$	2,624	$	49,244
Year 2	40,401		2,697		43,098
Year 3	32,359		2,771		35,129
Year 4	25,848		2,847		28,695
Year 5	18,705		2,925		21,630
Thereafter	55,493		10,763		66,256
Total minimum lease payments	$	219,425	$	24,627	$	244,052
Less: amounts representing interest	40,406		5,160		45,565
Present value of total lease liabilities	$	179,019	$	19,467	$	198,486

From time-to-time, we enter into commercial agreements with our customers that include advance payments from our customers, the cash flow from which we use to fund our capital expansion. We determine at the inception or modification of the contract if the arrangement is, or contains, a lease, which exists when the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. In determining if a contract contains a lease, we evaluate whether the contract, either explicitly or implicitly, is for the use of an identified asset, and whether the customer has the right to direct the use of, and obtain substantially all of the economic benefit from, the identified asset.