Leases

12 Months Ended

Aug. 31, 2023

The Company leases real estate for its regional sales offices, a research and development facility, and offices located at its international subsidiaries and branch locations. The Company also leases an automobile fleet in the United States. In addition, the Company has identified warehouse leases within certain third-party distribution center service contracts and a lease of a blending room within a third-party manufacturing contract. All other leases are insignificant to the Company’s consolidated financial statements.

Right-of-use assets and lease liabilities consisted of the following (in thousands):


	August 31, 2023		August 31, 2022
Assets:
Operating lease right-of-use assets	$	7,820	$	7,559

Liabilities:
Current operating lease liabilities(1)	2,144		1,703
Long-term operating lease liabilities	5,832		5,999
Total operating lease liabilities	$	7,976	$	7,702

(1)Current operating lease liabilities are classified in accrued liabilities on the Company’s consolidated balance sheets.

The Company’s maturities of its operating lease liabilities, including early termination and renewal options that management is reasonably certain to exercise, are as follows as of August 31, 2023 (in thousands):


	Operating Leases
Fiscal year 2024	2,387
Fiscal year 2025	1,510
Fiscal year 2026	1,247
Fiscal year 2027	913
Fiscal year 2028	798
Thereafter	2,051
Total undiscounted future cash flows	$	8,906
Less: Interest	(930)
Present value of lease liabilities	$	7,976

The Company recorded $2.1 million and $2.0 million in lease expense during the fiscal years ended August 31, 2023 and 2022, respectively. This lease expense was included in selling, general and administrative expenses. The Company recorded $0.5 million of lease expense classified within cost of products sold for the fiscal year ended August 31, 2023, and $0.3 million for the fiscal year ended August 31, 2022. During the fiscal year ended August 31, 2023 and 2022, the Company paid cash of $2.4 million and $2.1 million related to lease liabilities, respectively. Variable lease expense under the Company’s lease agreements was not significant for both the fiscal years ended August 31, 2023 and 2022. As of August 31, 2023, the weighted-average remaining lease term was 5.9 years and the weighted-average discount rate was 3.4% for the Company’s operating leases. As of August 31, 2022, the weighted-average remaining lease term was 6.5 years and the weighted-average discount rate was 3.1% for the Company’s operating leases. The Company had $3.8 million of prepaid deposits for a future right to use a blending facility recorded in other current assets on the Company’s consolidated balance sheets as of August 31, 2023, which converted to an ROU asset after August 31, 2023. In addition, the Company had approximately $1.6 million of leases that commenced after August 31, 2023 that created rights and obligations to the Company. These leases are not included in the preceding schedules.

The Company had no significant short-term leases as of August 31, 2023. The Company obtained additional ROU assets of $1.7 million in exchange for lease obligations related to renewals of existing leases during fiscal year 2023. As of August 31, 2023 and 2022, finance leases were not significant and all leases recorded on the Company’s consolidated balances sheets were operating leases. Residual value guarantees, restrictions, covenants, sublease income, net gains or losses from sale and leaseback transactions, and transactions with related parties associated with leases were also not significant.