Annual report pursuant to Section 13 and 15(d)

Leases

v3.23.1
Leases
 12 Months Ended
Mar. 31, 2023
Leases [Abstract]  
Leases Leases
Description of Leases
The significant majority of our lease obligations are for real property. We lease numerous facilities relating to our operations, primarily for office, manufacturing and warehouse facilities, as well as, from time to time, both long-term and short-term employee housing. Leases for real property have terms ranging from month-to-month to ten years. We also lease various types of equipment, including vehicles, office equipment (such as copiers and postage machines), heavy warehouse equipment (such as fork lifts), heavy construction equipment (such as cranes), medium and light construction equipment used for customer project needs (such as pipe threading machines) and mobile offices and other general equipment that is normally associated with an office environment. Equipment leases generally have terms ranging from six months to five years.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us.
    We lease temporary power products produced by our Thermon Power Solutions Inc. (“TPS”) division to our customers on a short-term basis. Lease contracts associated with such rental of the temporary power products have historically been month-to-month contracts without purchase options. No lease contracts in which the Company was the lessor have had an initial term in excess of one year.
Variable Lease Payments
A majority of our lease agreements include fixed rental payments. A small number of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on an index or rate such as CPI are included in the lease payments based on the commencement date index or rate. Estimated changes to the index or rate during the lease term are not considered in the determination of the lease payments.
Options to Extend or Terminate Leases
Most of our real property leases include early termination options and/or one or more options to renew, with renewal terms that can extend the lease term for an additional one to five years or longer. The exercise of lease termination and renewal options is at our sole discretion. If it is reasonably certain that we will exercise such renewal options, the periods covered by such renewal options are included in the lease term and are recognized as part of our Right of Use ("ROU") assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount Rate
The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. A large concentration of the Company's operating lease liabilities are attributed to our United States and Latin America operations. Our EMEA operations and APAC operations have limited borrowing needs and rely on cash from operations. However, the U.S. operating subsidiary can make intercompany loans if necessary from its available credit capacity given the more preferential rates available to our U.S. operating subsidiary and the ease with which funds can be drawn from the debt facilities already established within the United States. With this in mind, the Company has utilized its U.S. credit facility rate as the worldwide incremental borrowing rate. The Company used incremental borrowing rates as of April 1, 2019 for operating leases that commenced prior to April 1, 2019 to establish the lease liabilities. For operating leases that commenced subsequent to April 1, 2019 and during the fiscal year ended March 31, 2023, rates applicable at or close to the time of the inception of the lease were used to establish the new lease liabilities.
Lease Term and Discount Rate March 31, 2023 March 31, 2022
Weighted average remaining lease term
Operating 5.9 5.4
Finance 1.5 2.5
Weighted average discount rate
Operating 4.19  % 4.72  %
Finance 6.13  % 6.18  %
Supplemental balance sheet information related to leases was as follows:
Assets Classification March 31, 2023 March 31, 2022
Operating Operating lease right-of-use assets $ 13,570  $ 10,534 
Finance Property, plant and equipment 131  351 
Total right-of-use assets $ 13,701  $ 10,885 
Liabilities
Current
Operating Lease liabilities $ 3,258  $ 3,472 
Finance Lease liabilities 106  152 
Non-current
Operating Non-current lease liabilities 12,427  9,476 
Finance Non-current lease liabilities 52  183 
Total lease liabilities $ 15,843  $ 13,283 
Supplemental statement of operations information related to leases was as follows:
Lease expense Classification Year-Ended March 31, 2023 Year-Ended March 31, 2022 Year-Ended March 31, 2021
Operating lease expense Selling, general, and administrative expenses $ 4,382  $ 4,164  $ 4,697 
Finance lease expense:
Amortization of ROU assets Selling, general, and administrative expenses 134  166 266
Interest expense on finance lease liabilities Interest expense 15  27 21
Short-term lease expense Selling, general, and administrative expenses 250  248  240 
Net lease expense $ 4,781  $ 4,605  $ 5,224 
Supplemental statement of cash flows information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities Year-Ended March 31, 2023 Year-Ended March 31, 2022 Year-Ended March 31, 2021
Operating cash used for operating leases $ 4,603  $ 4,538  $ 4,566 
Operating cash flows used for finance leases 12  27  39 
Financing cash flows used for finance leases 142  155  276 
Future lease payments under non-cancellable leases as of March 31, 2023 were as follows:
Future Lease Payments Operating Leases Finance Leases
Twelve months ending March 31,
2024 $ 4,115  $ 123 
2025 3,448 56
2026 2,739 — 
2027 2,464 — 
2028 1,830 — 
Thereafter 3,639 —
Total lease payments $ 18,235  $ 179 
Less imputed interest (2,550) (21)
Total lease liability $ 15,685  $ 158 
Leases Leases
Description of Leases
The significant majority of our lease obligations are for real property. We lease numerous facilities relating to our operations, primarily for office, manufacturing and warehouse facilities, as well as, from time to time, both long-term and short-term employee housing. Leases for real property have terms ranging from month-to-month to ten years. We also lease various types of equipment, including vehicles, office equipment (such as copiers and postage machines), heavy warehouse equipment (such as fork lifts), heavy construction equipment (such as cranes), medium and light construction equipment used for customer project needs (such as pipe threading machines) and mobile offices and other general equipment that is normally associated with an office environment. Equipment leases generally have terms ranging from six months to five years.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us.
    We lease temporary power products produced by our Thermon Power Solutions Inc. (“TPS”) division to our customers on a short-term basis. Lease contracts associated with such rental of the temporary power products have historically been month-to-month contracts without purchase options. No lease contracts in which the Company was the lessor have had an initial term in excess of one year.
Variable Lease Payments
A majority of our lease agreements include fixed rental payments. A small number of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on an index or rate such as CPI are included in the lease payments based on the commencement date index or rate. Estimated changes to the index or rate during the lease term are not considered in the determination of the lease payments.
Options to Extend or Terminate Leases
Most of our real property leases include early termination options and/or one or more options to renew, with renewal terms that can extend the lease term for an additional one to five years or longer. The exercise of lease termination and renewal options is at our sole discretion. If it is reasonably certain that we will exercise such renewal options, the periods covered by such renewal options are included in the lease term and are recognized as part of our Right of Use ("ROU") assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount Rate
The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. A large concentration of the Company's operating lease liabilities are attributed to our United States and Latin America operations. Our EMEA operations and APAC operations have limited borrowing needs and rely on cash from operations. However, the U.S. operating subsidiary can make intercompany loans if necessary from its available credit capacity given the more preferential rates available to our U.S. operating subsidiary and the ease with which funds can be drawn from the debt facilities already established within the United States. With this in mind, the Company has utilized its U.S. credit facility rate as the worldwide incremental borrowing rate. The Company used incremental borrowing rates as of April 1, 2019 for operating leases that commenced prior to April 1, 2019 to establish the lease liabilities. For operating leases that commenced subsequent to April 1, 2019 and during the fiscal year ended March 31, 2023, rates applicable at or close to the time of the inception of the lease were used to establish the new lease liabilities.
Lease Term and Discount Rate March 31, 2023 March 31, 2022
Weighted average remaining lease term
Operating 5.9 5.4
Finance 1.5 2.5
Weighted average discount rate
Operating 4.19  % 4.72  %
Finance 6.13  % 6.18  %
Supplemental balance sheet information related to leases was as follows:
Assets Classification March 31, 2023 March 31, 2022
Operating Operating lease right-of-use assets $ 13,570  $ 10,534 
Finance Property, plant and equipment 131  351 
Total right-of-use assets $ 13,701  $ 10,885 
Liabilities
Current
Operating Lease liabilities $ 3,258  $ 3,472 
Finance Lease liabilities 106  152 
Non-current
Operating Non-current lease liabilities 12,427  9,476 
Finance Non-current lease liabilities 52  183 
Total lease liabilities $ 15,843  $ 13,283 
Supplemental statement of operations information related to leases was as follows:
Lease expense Classification Year-Ended March 31, 2023 Year-Ended March 31, 2022 Year-Ended March 31, 2021
Operating lease expense Selling, general, and administrative expenses $ 4,382  $ 4,164  $ 4,697 
Finance lease expense:
Amortization of ROU assets Selling, general, and administrative expenses 134  166 266
Interest expense on finance lease liabilities Interest expense 15  27 21
Short-term lease expense Selling, general, and administrative expenses 250  248  240 
Net lease expense $ 4,781  $ 4,605  $ 5,224 
Supplemental statement of cash flows information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities Year-Ended March 31, 2023 Year-Ended March 31, 2022 Year-Ended March 31, 2021
Operating cash used for operating leases $ 4,603  $ 4,538  $ 4,566 
Operating cash flows used for finance leases 12  27  39 
Financing cash flows used for finance leases 142  155  276 
Future lease payments under non-cancellable leases as of March 31, 2023 were as follows:
Future Lease Payments Operating Leases Finance Leases
Twelve months ending March 31,
2024 $ 4,115  $ 123 
2025 3,448 56
2026 2,739 — 
2027 2,464 — 
2028 1,830 — 
Thereafter 3,639 —
Total lease payments $ 18,235  $ 179 
Less imputed interest (2,550) (21)
Total lease liability $ 15,685  $ 158