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Leases

3 Months Ended

Nov. 30, 2019

Leases [Abstract]

Operating Leases

Leases

Our leases primarily include operating leases for office and manufacturing space and equipment. Our finance leases are primarily for real estate. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Condensed Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components, and we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line

basis over the lease term. When the terms of multiple lease agreements are materially consistent, we have elected the portfolio approach for our asset and liability calculations.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We generally use a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our assumed lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Some of our real estate operating leases require payment of real estate taxes, common area maintenance, and insurance. In addition, certain of our leases are subject to annual changes in the consumer price index. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. Fixed payments may contain predetermined fixed rent escalations. For our operating leases, we recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table details the supplemental balance sheet information related to our leases:

(in thousands)	Classification	November 30, 2019
Assets
Operating leases	Operating lease assets	$	30,720
Finance leases	Other assets	4,761
Total lease assets		$	35,481
Liabilities
Current: Operating leases	Accrued expenses: Other	$	2,416
Current: Finance leases	Accrued expenses: Other	516
Non-Current: Operating leases	Operating lease liabilities	28,066
Non-Current: Finance leases	Non-current liabilities: Other	5,275
Total lease liabilities		$	36,273

The following table details the operating lease cost incurred:

		Three Months Ended
(in thousands)	Classification	November 30, 2019
Operating lease expense(1)	Costs of goods sold and SG&A	$	1,763
Finance lease cost:
Depreciation of lease assets	Costs of goods sold and SG&A	43
Interest on lease liabilities	Interest expense	31
Total lease cost		$	1,837

(1) Operating lease expense includes short-term leases and variable lease payments, which are immaterial.

Our future lease commitments for future fiscal years as of November 30, 2019 included the following related party and non-related party leases:

	Operating Leases												Finance Leases
(in thousands)	Related Party Amount				Non-Related Party Amount				Total				Non-Related Party Amount
Fiscal 2020	$	2,147			$	1,036			$	3,183			$	642
Fiscal 2021	2,863				1,220				4,083				855
Fiscal 2022	2,863				904				3,767				851
Fiscal 2023	3,463				646				4,109				842
Fiscal 2024	3,763				477				4,240				845
Thereafter	20,073				1,371				21,444				3,443
Total future undiscounted lease payments	35,172				5,654				40,826				7,478
Less: Interest	9,422				922				10,344				1,687
Total reported lease liabilities	$	25,750			$	4,732			$	30,482			$	5,791

Our future minimum lease payments for future fiscal years as determined prior to the adoption of ASC 842, Leases, and as disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, included the following related party and non-related party leases:

	Operating Leases
(in thousands)	Related Party Amount				Non-Related Party Amount				Total
Fiscal 2020	$	2,864			$	1,236			$	4,100
Fiscal 2021	2,863				1,068				3,931
Fiscal 2022	2,863				759				3,622
Fiscal 2023	3,597				530				4,127
Fiscal 2024	3,963				361				4,324
Thereafter	25,064				1,359				26,423
Total future lease commitments	$	41,214			$	5,313			$	46,527

The following table details additional information related to our leases:

	Three Months Ended
(in thousands)	November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	554
Operating cash flows from finance leases	31
Financing cash flows from finance leases	46
Leased assets obtained in exchange for lease liabilities:
Operating leases	2,317
Finance leases(1)	5,664
	November 30, 2019
Weighted average remaining lease term (in years):
Operating leases	9.5
Finance leases	8.6
Weighted average discount rate:
Operating leases	6.2		%
Finance leases	6.2		%

(1)

Represents the lease liability added. Lease assets are offset by a $1.0 million unfavorable lease liability created by the acquisition of Newmar.

Financing Leases

Leases

Our leases primarily include operating leases for office and manufacturing space and equipment. Our finance leases are primarily for real estate. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Condensed Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. We have lease agreements that contain both lease and non-lease components, and we have elected to combine lease and non-lease components for all classes of assets. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets; we recognize lease expense for these leases on a straight-line

basis over the lease term. When the terms of multiple lease agreements are materially consistent, we have elected the portfolio approach for our asset and liability calculations.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We generally use a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our assumed lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Some of our real estate operating leases require payment of real estate taxes, common area maintenance, and insurance. In addition, certain of our leases are subject to annual changes in the consumer price index. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. Fixed payments may contain predetermined fixed rent escalations. For our operating leases, we recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.

The following table details the supplemental balance sheet information related to our leases:

(in thousands)	Classification	November 30, 2019
Assets
Operating leases	Operating lease assets	$	30,720
Finance leases	Other assets	4,761
Total lease assets		$	35,481
Liabilities
Current: Operating leases	Accrued expenses: Other	$	2,416
Current: Finance leases	Accrued expenses: Other	516
Non-Current: Operating leases	Operating lease liabilities	28,066
Non-Current: Finance leases	Non-current liabilities: Other	5,275
Total lease liabilities		$	36,273

The following table details the operating lease cost incurred:

		Three Months Ended
(in thousands)	Classification	November 30, 2019
Operating lease expense(1)	Costs of goods sold and SG&A	$	1,763
Finance lease cost:
Depreciation of lease assets	Costs of goods sold and SG&A	43
Interest on lease liabilities	Interest expense	31
Total lease cost		$	1,837

(1) Operating lease expense includes short-term leases and variable lease payments, which are immaterial.

Our future lease commitments for future fiscal years as of November 30, 2019 included the following related party and non-related party leases:

	Operating Leases												Finance Leases
(in thousands)	Related Party Amount				Non-Related Party Amount				Total				Non-Related Party Amount
Fiscal 2020	$	2,147			$	1,036			$	3,183			$	642
Fiscal 2021	2,863				1,220				4,083				855
Fiscal 2022	2,863				904				3,767				851
Fiscal 2023	3,463				646				4,109				842
Fiscal 2024	3,763				477				4,240				845
Thereafter	20,073				1,371				21,444				3,443
Total future undiscounted lease payments	35,172				5,654				40,826				7,478
Less: Interest	9,422				922				10,344				1,687
Total reported lease liabilities	$	25,750			$	4,732			$	30,482			$	5,791

Our future minimum lease payments for future fiscal years as determined prior to the adoption of ASC 842, Leases, and as disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, included the following related party and non-related party leases:

	Operating Leases
(in thousands)	Related Party Amount				Non-Related Party Amount				Total
Fiscal 2020	$	2,864			$	1,236			$	4,100
Fiscal 2021	2,863				1,068				3,931
Fiscal 2022	2,863				759				3,622
Fiscal 2023	3,597				530				4,127
Fiscal 2024	3,963				361				4,324
Thereafter	25,064				1,359				26,423
Total future lease commitments	$	41,214			$	5,313			$	46,527

The following table details additional information related to our leases:

	Three Months Ended
(in thousands)	November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	554
Operating cash flows from finance leases	31
Financing cash flows from finance leases	46
Leased assets obtained in exchange for lease liabilities:
Operating leases	2,317
Finance leases(1)	5,664
	November 30, 2019
Weighted average remaining lease term (in years):
Operating leases	9.5
Finance leases	8.6
Weighted average discount rate:
Operating leases	6.2		%
Finance leases	6.2		%

(1)

Represents the lease liability added. Lease assets are offset by a $1.0 million unfavorable lease liability created by the acquisition of Newmar.

X

- References

No definition available.

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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

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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

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