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Leases | 6 Months Ended
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Feb. 29, 2020
Leases [Abstract] |
Leases | Leases Effective September 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) using the modified retrospective approach and also elected to apply the package of practical expedients, which among other things, allows entities to maintain the historical lease classification for existing leases. The Company has lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company has elected the practical expedient to combine lease and non-lease components for building and real estate leases. The Company primarily has leases for buildings and real estate with lease terms ranging from 1 year to 36 years. Leases for other classes of assets are not significant. For any leases with an initial term in excess of 12 months, the Company determines whether an arrangement is a lease at contract inception by evaluating if the contract conveys the right to use and control the specific property or equipment. Certain lease agreements contain purchase or renewal options. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized based on the present value of future lease payments over the lease term at the lease commencement date. When determining the present value of future payment, the Company uses the incremental borrowing rate when the implicit rate is not readily determinable. Any payment deemed probable under residual value guarantees is included in lease payments. Any variable payments, other than those that depend on an index or rate, are excluded from right-of-use assets and lease liabilities. Leases with an initial term of 12 months or less are not recorded as right-of-use assets and lease liabilities in the Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. Upon adoption of ASU 2016-02, the Company recorded $414.6 million and $437.5 million of right-of-use assets and lease liabilities, respectively, related to its existing operating lease portfolio. The accounting for the Company's finance leases remained substantially unchanged and balances were not significant on the adoption date. The adoption of this standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows. The following table sets forth the amount of lease assets and lease liabilities included on the Company's Condensed Consolidated Balance Sheets, as of the period indicated (in thousands):
|  | Financial Statement Line Item |  | February 29, 2020
Assets |  |  |  |
Operating lease assets (1) |  | Operating lease right-of-use assets |  | $ | 373,413 |
Finance lease assets (2) |  | Property, plant and equipment, net |  | 151,401 |
Total lease assets |  |  |  | $ | 524,814 |
Liabilities |  |  |  |
Current |  |  |  |
Operating lease liabilities |  | Current operating lease liabilities |  | $ | 100,033 |
Finance lease liabilities |  | Accrued expenses |  | 6,906 |
Non-current |  |  |  |
Operating lease liabilities |  | Non-current operating lease liabilities |  | 311,879 |
Finance lease liabilities |  | Other liabilities |  | 156,798 |
Total lease liabilities |  |  |  | $ | 575,616 |
(1) | Net of accumulated amortization of $49.2 million.
(2) | Net of accumulated amortization of $9.6 million.
The following table is a summary of expenses related to leases included on the Company's Condensed Consolidated Statements of Operations, for the periods indicated (in thousands):
| Three months ended |  | Six months ended
| February 29, 2020 |  | February 29, 2020
Operating lease cost | $ | 27,810 |  |  | $ | 55,546 |
Finance lease cost |  |  |
Amortization of leased assets | 1,445 |  |  | 2,581 |
Interest on lease liabilities | 1,254 |  |  | 2,443 |
Other | 1,655 |  |  | 4,183 |
Net lease cost(1) | $ | 32,164 |  |  | $ | 64,753 |
(1) | Lease costs are primarily recognized in cost of revenue.
The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases, as of the period indicated:
| February 29, 2020
| Weighted-average remaining lease term |  | Weighted-average discount rate
Operating leases | 5.5 years |  | 3.22 | %
Finance leases | 6.3 years |  | 4.31 | %
The following table sets forth other supplemental information related to the Company's lease portfolio (in thousands):
| Six months ended
| February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows for operating leases(1) | $ | 55,592 |
Operating cash flows for finance leases(1) | 2,443 |
Financing activities for finance leases(2) | 2,808 |
Non-cash right-of-use assets obtained in exchange for new lease liabilities: |
Operating leases | 34,213 |
Finance leases | 111,591 |
(1) | Included in accounts payable, accrued expenses and other liabilities in Operating Activities of the Company's Condensed Consolidated Statements of Cash Flows.
(2) | Included in payments toward debt agreements in Financing Activities of the Company's Condensed Consolidated Statements of Cash Flows.
The future minimum lease payments under operating and finance leases as of February 29, 2020 were as follows (in thousands):
Twelve months ended February 29, | Operating Leases(1) |  | Finance Leases |  | Total
2020 | $ | 110,692 |  |  | $ | 11,849 |  |  | $ | 122,541 |
2021 | 89,479 |  |  | 12,375 |  |  | 101,854 |
2022 | 69,928 |  |  | 11,744 |  |  | 81,672 |
2023 | 53,400 |  |  | 11,879 |  |  | 65,279 |
2024 | 41,472 |  |  | 15,644 |  |  | 57,116 |
Thereafter | 92,529 |  |  | 128,763 |  |  | 221,292 |
Total minimum lease payments | $ | 457,500 |  |  | $ | 192,254 |  |  | $ | 649,754 |
Less: Interest | (45,588 | ) |  | (28,550 | ) |  | (74,138 | )
Present value of lease liabilities | $ | 411,912 |  |  | $ | 163,704 |  |  | $ | 575,616 |
(1) | Excludes $28.2 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.
As disclosed in the Company’s Form 10-K for the fiscal year ended August 31, 2019, the future minimum lease payments of non-cancelable operating leases prior to the adoption of ASU 2016-02 were as follows (in thousands):
Fiscal Year Ending August 31, | Amount
2020 | $ | 118,312 |
2021 | 102,915 |
2022 | 84,729 |
2023 | 63,206 |
2024 | 51,091 |
Thereafter | 182,932 |
Total minimum lease payments | $ | 603,185 |
Total operating lease expense prior to the adoption of ASU 2016-02 was approximately $125.4 million, $130.2 million and $117.2 million for fiscal years 2019, 2018 and 2017, respectively.
Leases | Leases Effective September 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) using the modified retrospective approach and also elected to apply the package of practical expedients, which among other things, allows entities to maintain the historical lease classification for existing leases. The Company has lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company has elected the practical expedient to combine lease and non-lease components for building and real estate leases. The Company primarily has leases for buildings and real estate with lease terms ranging from 1 year to 36 years. Leases for other classes of assets are not significant. For any leases with an initial term in excess of 12 months, the Company determines whether an arrangement is a lease at contract inception by evaluating if the contract conveys the right to use and control the specific property or equipment. Certain lease agreements contain purchase or renewal options. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized based on the present value of future lease payments over the lease term at the lease commencement date. When determining the present value of future payment, the Company uses the incremental borrowing rate when the implicit rate is not readily determinable. Any payment deemed probable under residual value guarantees is included in lease payments. Any variable payments, other than those that depend on an index or rate, are excluded from right-of-use assets and lease liabilities. Leases with an initial term of 12 months or less are not recorded as right-of-use assets and lease liabilities in the Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term. Upon adoption of ASU 2016-02, the Company recorded $414.6 million and $437.5 million of right-of-use assets and lease liabilities, respectively, related to its existing operating lease portfolio. The accounting for the Company's finance leases remained substantially unchanged and balances were not significant on the adoption date. The adoption of this standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows. The following table sets forth the amount of lease assets and lease liabilities included on the Company's Condensed Consolidated Balance Sheets, as of the period indicated (in thousands):
|  | Financial Statement Line Item |  | February 29, 2020
Assets |  |  |  |
Operating lease assets (1) |  | Operating lease right-of-use assets |  | $ | 373,413 |
Finance lease assets (2) |  | Property, plant and equipment, net |  | 151,401 |
Total lease assets |  |  |  | $ | 524,814 |
Liabilities |  |  |  |
Current |  |  |  |
Operating lease liabilities |  | Current operating lease liabilities |  | $ | 100,033 |
Finance lease liabilities |  | Accrued expenses |  | 6,906 |
Non-current |  |  |  |
Operating lease liabilities |  | Non-current operating lease liabilities |  | 311,879 |
Finance lease liabilities |  | Other liabilities |  | 156,798 |
Total lease liabilities |  |  |  | $ | 575,616 |
(1) | Net of accumulated amortization of $49.2 million.
(2) | Net of accumulated amortization of $9.6 million.
The following table is a summary of expenses related to leases included on the Company's Condensed Consolidated Statements of Operations, for the periods indicated (in thousands):
| Three months ended |  | Six months ended
| February 29, 2020 |  | February 29, 2020
Operating lease cost | $ | 27,810 |  |  | $ | 55,546 |
Finance lease cost |  |  |
Amortization of leased assets | 1,445 |  |  | 2,581 |
Interest on lease liabilities | 1,254 |  |  | 2,443 |
Other | 1,655 |  |  | 4,183 |
Net lease cost(1) | $ | 32,164 |  |  | $ | 64,753 |
(1) | Lease costs are primarily recognized in cost of revenue.
The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases, as of the period indicated:
| February 29, 2020
| Weighted-average remaining lease term |  | Weighted-average discount rate
Operating leases | 5.5 years |  | 3.22 | %
Finance leases | 6.3 years |  | 4.31 | %
The following table sets forth other supplemental information related to the Company's lease portfolio (in thousands):
| Six months ended
| February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows for operating leases(1) | $ | 55,592 |
Operating cash flows for finance leases(1) | 2,443 |
Financing activities for finance leases(2) | 2,808 |
Non-cash right-of-use assets obtained in exchange for new lease liabilities: |
Operating leases | 34,213 |
Finance leases | 111,591 |
(1) | Included in accounts payable, accrued expenses and other liabilities in Operating Activities of the Company's Condensed Consolidated Statements of Cash Flows.
(2) | Included in payments toward debt agreements in Financing Activities of the Company's Condensed Consolidated Statements of Cash Flows.
The future minimum lease payments under operating and finance leases as of February 29, 2020 were as follows (in thousands):
Twelve months ended February 29, | Operating Leases(1) |  | Finance Leases |  | Total
2020 | $ | 110,692 |  |  | $ | 11,849 |  |  | $ | 122,541 |
2021 | 89,479 |  |  | 12,375 |  |  | 101,854 |
2022 | 69,928 |  |  | 11,744 |  |  | 81,672 |
2023 | 53,400 |  |  | 11,879 |  |  | 65,279 |
2024 | 41,472 |  |  | 15,644 |  |  | 57,116 |
Thereafter | 92,529 |  |  | 128,763 |  |  | 221,292 |
Total minimum lease payments | $ | 457,500 |  |  | $ | 192,254 |  |  | $ | 649,754 |
Less: Interest | (45,588 | ) |  | (28,550 | ) |  | (74,138 | )
Present value of lease liabilities | $ | 411,912 |  |  | $ | 163,704 |  |  | $ | 575,616 |
(1) | Excludes $28.2 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.
As disclosed in the Company’s Form 10-K for the fiscal year ended August 31, 2019, the future minimum lease payments of non-cancelable operating leases prior to the adoption of ASU 2016-02 were as follows (in thousands):
Fiscal Year Ending August 31, | Amount
2020 | $ | 118,312 |
2021 | 102,915 |
2022 | 84,729 |
2023 | 63,206 |
2024 | 51,091 |
Thereafter | 182,932 |
Total minimum lease payments | $ | 603,185 |
Total operating lease expense prior to the adoption of ASU 2016-02 was approximately $125.4 million, $130.2 million and $117.2 million for fiscal years 2019, 2018 and 2017, respectively.

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- 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
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- 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
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