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Leases

9 Months Ended

May 30, 2020

The Company's leases primarily include operating leases for office and manufacturing space and equipment. The Company's 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. The Company has lease agreements that contain both lease and non-lease components, and has 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; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. When the terms of multiple lease agreements are materially consistent, the Company has 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. The Company generally uses a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. The assumed lease terms of the Company generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised.

Some of the Company's real estate operating leases require payment of real estate taxes, common area maintenance, and insurance. In addition, certain of the leases are subject to annual changes in the consumer price index. These components comprise the majority of the Company's variable lease cost and are excluded from the present value of the lease obligations. Fixed payments may contain predetermined fixed rent escalations. For operating leases, the Company recognizes 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 the Company's leases:


(in thousands)	Classification	May 30, 2020
Assets
Operating leases	Operating lease assets	$	29,790
Finance leases	Other assets	$	4,542
Total lease assets		$	34,332

Liabilities
Current: Operating leases	Accrued expenses: Other	$	2,507
Current: Finance leases	Accrued expenses: Other	532
Non-Current: Operating leases	Operating lease liabilities	27,366
Non-Current: Financing leases	Non-current liabilities: Other	$	5,005
Total lease liabilities		$	35,410

The following table details the operating lease cost incurred:


		Three Months Ended		Nine Months Ended
(in thousands)	Classification	May 30, 2020		May 30, 2020
Operating lease expense⁽¹⁾	Costs of goods sold and SG&A	$	1,647	$	5,183
Finance lease cost:
Depreciation of lease assets	Costs of goods sold and SG&A	144		331
Interest on lease liabilities	Interest expense	86		205
Total lease cost		$	1,877	$	5,719

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

The Company's future lease commitments for future fiscal years as of May 30, 2020 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	$	225	$	854	$	1,079	$	214
Fiscal 2021	900		3,330		4,230		855
Fiscal 2022	900		3,014		3,914		851
Fiscal 2023	1,500		2,757		4,257		842
Fiscal 2024	1,800		2,587		4,387		845
Thereafter	9,600		11,912		21,512		3,443
Total future undiscounted lease payments	14,925		24,454		39,379		7,050
Less: Interest	4,042		5,464		9,506		1,513
Total reported lease liabilities	$	10,883	$	18,990	$	29,873	$	5,537

The Company's future minimum lease payments for future fiscal years as determined prior to the adoption of ASC 842, Leases, and as disclosed in the Company's 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 the Company's leases:


	Nine Months Ended
(in thousands)	May 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,807
Operating cash flows from finance leases	205
Financing cash flows from finance leases	232
Leased assets obtained in exchange for lease liabilities:
Operating leases	1,663
Finance leases⁽¹⁾	5,664

	May 30, 2020
Weighted average remaining lease term (in years):
Operating leases	8.9
Finance leases	8.0
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.

Leases