XML 38 R22.htm IDEA: XBRL DOCUMENT
v3.21.2

LEASES | 9 Months Ended
--- | ---
Jun. 30, 2021
Leases [Abstract] |
LEASES | 12. LEASES Lessee Accounting The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of its natural gas meters. Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. The variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use lease asset and liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns. Generally, the Company’s solar land leases terms are between 15 and 35 years and may include multiple options to extend the terms for an additional five to 10 years. The Company’s office leases vary in duration, ranging from one to 17 years and may or may not include extension or early purchase options. The majority of the Company’s meter leases are for terms of seven years with purchase options available prior to the end of the seven year term. Equipment leases include general office equipment that also vary in duration, most of which are for a term of five years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The Company has elected an accounting policy that exempts leases with an original term of one year or less from the recognition requirements of ASC 842, Leases. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not considered material to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. The following table presents the Company's lease costs included in the Unaudited Condensed Consolidated Statements of Operations:
|  | Three Months Ended | Nine Months Ended |  |
|  | June 30, | June 30, |  |
(Thousands) | Income Statement Location | 2021 | 2020 | 2021 | 2020 |  |
Operating lease cost (1) | Operation and maintenance | $ | 2,366 |  | 1,650 |  | 5,811 |  | 4,761 |  |  |
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets | Depreciation and amortization | $ | 640 |  | $ | 1,274 |  | $ | 3,077 |  | $ | 3,734 |  |  |
Interest on lease liabilities | Interest expense, net of capitalized interest | 193 |  | 248 |  | 527 |  | 796 |  |  |
Total finance lease cost |  | 833 |  | 1,522 |  | 3,604 |  | 4,530 |  |  |
Short-term lease cost | Operation and maintenance | 127 |  | 95 |  | 381 |  | 721 |  |  |
Variable lease cost | Operation and maintenance | 262 |  | 597 |  | 964 |  | 1,707 |  |  |
Total lease cost |  | $ | 3,588 |  | $ | 3,864 |  | $ | 10,760 |  | $ | 11,719 |  |  |
(1)Net of capitalized costs. The following table presents supplemental cash flow information related to leases:
| Nine Months Ended |  |
| June 30, |  |
(Thousands) | 2021 | 2020 |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows for operating leases | $ | 4,539 |  | $ | 4,133 |  |  |
Operating cash flows for finance leases | $ | 984 |  | $ | 952 |  |  |
Financing cash flows for finance leases | $ | 6,930 |  | $ | 5,505 |  |  |
There were no assets obtained or modified through amendments in exchange for operating lease liabilities during the three months ended June 30, 2021. Assets obtained or modified for operating lease liabilities totaled approximately $12.8 million during the nine months ended June 30, 2021, and totaled approximately $270,000 and $34.2 million during the three and nine months ended June 30, 2020, respectively. There were no assets obtained or modified through finance lease liabilities during the three and nine months ended June 30, 2021 and during the three months ended June 30, 2020. Assets obtained or modified through finance lease liabilities totaled approximately $49.7 million during the nine months ended June 30, 2020. The following table presents the balance and classifications of the Company's right of use assets and lease liabilities included in the Unaudited Condensed Consolidated Balance Sheets:
(Thousands) | Balance Sheet Location | June 30, 2021 | September 30, 2020
Assets |  |  |
Noncurrent |  |  |
Operating lease assets | Operating lease assets | $ | 142,753 |  | $ | 131,769 |
Finance lease assets | Utility plant | 13,853 |  | 71,085 |
Total lease assets |  | $ | 156,606 |  | $ | 202,854 |
Liabilities |  |  |
Current |  |  |
Operating lease liabilities | Operating lease liabilities | $ | 4,588 |  | $ | 6,724 |
Finance lease liabilities | Current maturities of long-term debt | 5,625 |  | 10,416 |
Noncurrent |  |  |
Operating lease liabilities | Operating lease liabilities | 109,993 |  | 95,030 |
Finance lease liabilities | Long-term debt | 15,761 |  | 63,743 |
Total lease liabilities |  | $ | 135,967 |  | $ | 175,913 |
NJNG previously had a sale leaseback for its headquarters building with a 16-year term that would have expired in June 2037. On May 26, 2021, NJNG exercised a purchase option of the lease to acquire the building for $41.1 million, which is included in utility plant on the Unaudited Condensed Consolidated Balance Sheets. Following the purchase of the building, NJNG removed the present value of the future lease payments of $46.9 million, which was reflected within utility plant and $45.6 million as presented within finance lease liabilities on the Unaudited Condensed Consolidated Balance Sheets. For operating lease assets and liabilities, the weighted average remaining lease term was 27.9 years and 25.5 years and the weighted average discount rate used in the valuation over the remaining lease term was 3.3 percent and 3.2 percent as of June 30, 2021 and September 30, 2020, respectively. For finance lease assets and liabilities as of June 30, 2021 and September 30, 2020, the weighted average remaining lease term was 3.6 years and 11.5 years, respectively, and the weighted average discount rate used in the valuation over the remaining lease term is 3.5 percent and 2.5 percent as of June 30, 2021 and September 30, 2020, respectively.
LEASES | 12. LEASES Lessee Accounting The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of its natural gas meters. Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. The variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use lease asset and liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns. Generally, the Company’s solar land leases terms are between 15 and 35 years and may include multiple options to extend the terms for an additional five to 10 years. The Company’s office leases vary in duration, ranging from one to 17 years and may or may not include extension or early purchase options. The majority of the Company’s meter leases are for terms of seven years with purchase options available prior to the end of the seven year term. Equipment leases include general office equipment that also vary in duration, most of which are for a term of five years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The Company has elected an accounting policy that exempts leases with an original term of one year or less from the recognition requirements of ASC 842, Leases. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not considered material to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. The following table presents the Company's lease costs included in the Unaudited Condensed Consolidated Statements of Operations:
|  | Three Months Ended | Nine Months Ended |  |
|  | June 30, | June 30, |  |
(Thousands) | Income Statement Location | 2021 | 2020 | 2021 | 2020 |  |
Operating lease cost (1) | Operation and maintenance | $ | 2,366 |  | 1,650 |  | 5,811 |  | 4,761 |  |  |
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets | Depreciation and amortization | $ | 640 |  | $ | 1,274 |  | $ | 3,077 |  | $ | 3,734 |  |  |
Interest on lease liabilities | Interest expense, net of capitalized interest | 193 |  | 248 |  | 527 |  | 796 |  |  |
Total finance lease cost |  | 833 |  | 1,522 |  | 3,604 |  | 4,530 |  |  |
Short-term lease cost | Operation and maintenance | 127 |  | 95 |  | 381 |  | 721 |  |  |
Variable lease cost | Operation and maintenance | 262 |  | 597 |  | 964 |  | 1,707 |  |  |
Total lease cost |  | $ | 3,588 |  | $ | 3,864 |  | $ | 10,760 |  | $ | 11,719 |  |  |
(1)Net of capitalized costs. The following table presents supplemental cash flow information related to leases:
| Nine Months Ended |  |
| June 30, |  |
(Thousands) | 2021 | 2020 |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows for operating leases | $ | 4,539 |  | $ | 4,133 |  |  |
Operating cash flows for finance leases | $ | 984 |  | $ | 952 |  |  |
Financing cash flows for finance leases | $ | 6,930 |  | $ | 5,505 |  |  |
There were no assets obtained or modified through amendments in exchange for operating lease liabilities during the three months ended June 30, 2021. Assets obtained or modified for operating lease liabilities totaled approximately $12.8 million during the nine months ended June 30, 2021, and totaled approximately $270,000 and $34.2 million during the three and nine months ended June 30, 2020, respectively. There were no assets obtained or modified through finance lease liabilities during the three and nine months ended June 30, 2021 and during the three months ended June 30, 2020. Assets obtained or modified through finance lease liabilities totaled approximately $49.7 million during the nine months ended June 30, 2020. The following table presents the balance and classifications of the Company's right of use assets and lease liabilities included in the Unaudited Condensed Consolidated Balance Sheets:
(Thousands) | Balance Sheet Location | June 30, 2021 | September 30, 2020
Assets |  |  |
Noncurrent |  |  |
Operating lease assets | Operating lease assets | $ | 142,753 |  | $ | 131,769 |
Finance lease assets | Utility plant | 13,853 |  | 71,085 |
Total lease assets |  | $ | 156,606 |  | $ | 202,854 |
Liabilities |  |  |
Current |  |  |
Operating lease liabilities | Operating lease liabilities | $ | 4,588 |  | $ | 6,724 |
Finance lease liabilities | Current maturities of long-term debt | 5,625 |  | 10,416 |
Noncurrent |  |  |
Operating lease liabilities | Operating lease liabilities | 109,993 |  | 95,030 |
Finance lease liabilities | Long-term debt | 15,761 |  | 63,743 |
Total lease liabilities |  | $ | 135,967 |  | $ | 175,913 |
NJNG previously had a sale leaseback for its headquarters building with a 16-year term that would have expired in June 2037. On May 26, 2021, NJNG exercised a purchase option of the lease to acquire the building for $41.1 million, which is included in utility plant on the Unaudited Condensed Consolidated Balance Sheets. Following the purchase of the building, NJNG removed the present value of the future lease payments of $46.9 million, which was reflected within utility plant and $45.6 million as presented within finance lease liabilities on the Unaudited Condensed Consolidated Balance Sheets. For operating lease assets and liabilities, the weighted average remaining lease term was 27.9 years and 25.5 years and the weighted average discount rate used in the valuation over the remaining lease term was 3.3 percent and 3.2 percent as of June 30, 2021 and September 30, 2020, respectively. For finance lease assets and liabilities as of June 30, 2021 and September 30, 2020, the weighted average remaining lease term was 3.6 years and 11.5 years, respectively, and the weighted average discount rate used in the valuation over the remaining lease term is 3.5 percent and 2.5 percent as of June 30, 2021 and September 30, 2020, respectively.

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeFinanceLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeOperatingLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration