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Leases | 6 Months Ended
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Aug. 31, 2024
Leases [Abstract] |
Leases | 11. Leases We are a lessee under various leases for facilities and equipment. As of August 31, 2024, we were the lessee for 148 operating leases and 55 finance leases with terms of 12 months or more. These leases are reflected on our balance sheet in "Right-of-use assets," "Lease liability - short-term" and "Lease liability - long-term." Our leases are primarily for (i) operating facilities, (ii) vehicles and equipment used in operations, (iii) facilities used for back-office functions, (iv) equipment used for back-office functions, and (v) temporary storage. The majority of our vehicle and equipment leases have both a fixed and variable component. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. We have a significant number of short-term leases, including month-to-month agreements. Our short-term lease agreements include expenses incurred hourly, daily, monthly and for other durations of time of one year or less. Our future lease commitments as of August 31, 2024 do not reflect all of our short-term lease commitments. The following table outlines the classification of right-of-use ("ROU") asset and lease liabilities in the consolidated balance sheets as of August 31, 2024 and February 29, 2024 (in thousands):
| Balance Sheet Classification |  | As of
|  | August 31, 2024 |  | February 29, 2024
Assets |  |  |  |  |
Operating right-of-use assets | Right-of-use assets |  | $ | 17,194 |  |  | $ | 19,808 |
Finance right-of-use assets | Right-of-use assets |  | 4,859 |  |  | 3,931 |
Liabilities |  |  |  |  |
Operating lease liabilities ― short-term | Lease liability - short-term |  | $ | 5,579 |  |  | $ | 5,893 |
Operating lease liabilities ― long-term | Lease liability - long-term |  | 12,284 |  |  | 14,606 |
Finance lease liabilities ― short-term | Lease liability - short-term |  | 995 |  |  | 766 |
Finance lease liabilities ― long-term | Lease liability - long-term |  | 3,979 |  |  | 3,221 |
Supplemental information related to AZZ's leases was as follows (in thousands, except years and percentages):
| Three Months Ended August 31, |  | Six Months Ended August 31,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating cash flows from operating leases included in lease liabilities | $ | 1,794 |  |  | $ | 1,834 |  |  | $ | 3,561 |  |  | $ | 3,654 |
Lease liabilities obtained from new ROU assets - operating | 410 |  |  | 373 |  |  | 628 |  |  | 1,895 |
Decrease in ROU assets related to lease terminations | — |  |  | (1,294) |  |  | — |  |  | (1,302) |
Financing cash flows from finance leases included in lease liabilities | 236 |  |  | 92 |  |  | 432 |  |  | 162 |
Operating cash flows from finance leases included in lease liabilities | 83 |  |  | 21 |  |  | 151 |  |  | 37 |
Lease liabilities obtained from new ROU assets - finance leases | 1,009 |  |  | 599 |  |  | 1,419 |  |  | 599 |
| As of
| August 31, 2024 |  | February 29, 2024
Weighted-average remaining lease term - operating leases | 3.8 years |  | 4.12 years
Weighted-average discount rate - operating leases | 4.62 | % |  | 4.49 | %
Weighted-average remaining lease term - finance leases | 4.84 years |  | 5.21 years
Weighted-average discount rate - finance leases | 7.08 | % |  | 6.70 | %
The following table outlines the classification of lease expense related to operating and finance leases in the statements of operations (in thousands):
| Three Months Ended August 31, |  | Six Months Ended August 31,
| 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease expense: |  |  |  |  |  |  |
Cost of sales | $ | 3,026 |  |  | $ | 3,035 |  |  | $ | 6,029 |  |  | $ | 6,060 |
Selling, general and administrative | 488 |  |  | 506 |  |  | 977 |  |  | 1,005 |
Total operating lease expense | 3,514 |  |  | 3,541 |  |  | $ | 7,006 |  |  | $ | 7,065 |
Financing lease expense: |  |  |  |  |  |  |
Cost of sales | 269 |  |  | 101 |  |  | 492 |  |  | 177 |
Interest expense | 83 |  |  | 21 |  |  | 151 |  |  | 37 |
Total financing lease expense | 352 |  |  | 122 |  |  | 643 |  |  | 214 |
Total lease expense | $ | 3,866 |  |  | $ | 3,663 |  |  | $ | 7,649 |  |  | $ | 7,279 |
As of August 31, 2024, maturities of our lease liabilities were as follows (in thousands):
Fiscal year: | Operating Leases |  | Finance Leases |  | Total
2025 | $ | 3,259 |  |  | $ | 665 |  |  | $ | 3,924 |
2026 | 5,912 |  |  | 1,263 |  |  | 7,175 |
2027 | 4,598 |  |  | 1,224 |  |  | 5,822 |
2028 | 2,542 |  |  | 1,137 |  |  | 3,679 |
2029 | 1,918 |  |  | 920 |  |  | 2,838 |
2030 | 462 |  |  | 499 |  |  | 961 |
Thereafter | 796 |  |  | 170 |  |  | 966 |
Total lease payments | $ | 19,487 |  |  | $ | 5,878 |  |  | $ | 25,365 |
Less imputed interest | (1,624) |  |  | (904) |  |  | (2,528) |
Total | $ | 17,863 |  |  | $ | 4,974 |  |  | $ | 22,837 |
We sublease multiple buildings in Columbia, South Carolina to multiple subtenants. The Columbia sublease agreements are by and between AZZ Precoat Metals and multiple subtenants. Sublease income is recognized over the term of the sublease on a straight-line basis and is reported in the consolidated statement of operations as a reduction to "Cost of sales." Sublease income for the three and six months ended August 31, 2024 and 2023 was as follows (in thousands):
| Three Months Ended August 31, |  | Six Months Ended August 31,
| 2024 |  | 2023 |  | 2024 |  | 2023
Sublease income | $ | 254 |  |  | $ | 248 |  |  | $ | 509 |  |  | $ | 488 |

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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 -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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