Leases, Codification Topic 842

12 Months Ended

Aug. 31, 2023

We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (i) the right to obtain substantially all economic benefits associated with an identified asset and (ii) the right to direct how and for what purpose the identified asset is used. Certain service agreements may provide us with the right to use an identified asset; however, most of these arrangements are not considered to represent a lease as we do not control how and for what purpose the identified asset is used.

We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our leases are primarily for railcars, equipment, vehicles and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options.

Right of use assets and liabilities for operating and finance leases are recognized under ASC Topic 842 at the lease commencement date for leases in excess of 12 months based on the present value of lease payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants.

Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Consolidated Statements of Operations as of August 31, 2023, 2022 and 2021, are as follows:


	2023		2022		2021
	(Dollars in thousands)
Operating lease expense	$	77,588	$	71,209	$	73,489
Finance lease expense:
Amortization of assets	8,966		8,967		8,065
Interest on lease liabilities	1,646		1,469		938
Short-term lease expense	20,068		16,915		16,955
Variable lease expense	650		1,699		2,300
Total net lease expense*	$	108,918	$	100,259	$	101,747

*Income related to sublease activity is not material and has been excluded from the table above.

Supplemental balance sheet information related to operating and finance leases as of August 31, 2023 and 2022, is as follows:


	Balance Sheet Location	2023		2022
		(Dollars in thousands)
Operating leases
Assets
Operating lease right of use assets	Other assets	$	254,844	$	242,859
Liabilities
Current operating lease liabilities	Accrued expenses	$	61,094	$	54,702
Long-term operating lease liabilities	Other liabilities	200,758		194,250
Total operating lease liabilities		$	261,852	$	248,952

Finance leases
Assets
Finance lease assets	Property, plant and equipment	$	64,381	$	57,932
Liabilities
Current finance lease liabilities	Current portion of long-term debt	$	6,797	$	7,609
Long-term finance lease liabilities	Long-term debt	42,438		37,164
Total finance lease liabilities		$	49,235	$	44,773

Information related to the lease term and discount rate for operating and finance leases as of August 31, 2023 and 2022, is as follows:


	2023		2022
Weighted average remaining lease term (in years)
Operating leases	7.0		7.6
Finance leases	9.6		10.4
Weighted average discount rate
Operating leases	3.50	%	3.00	%
Finance leases	3.78	%	3.42	%

Supplemental cash flow and other information related to operating and finance leases as of August 31, 2023, 2022 and 2021, is as follows:


	2023		2022		2021
	(Dollars in thousands)
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	71,798	$	61,750	$	71,702
Operating cash flows from finance leases	1,646		1,469		938
Financing cash flows from finance leases	8,571		9,171		8,235

Supplemental noncash information:
Right of use assets obtained in exchange for lease liabilities	$	69,837	$	54,199	$	43,991
Right of use asset modifications	28,614		12,887		27,664

Maturities of lease liabilities by fiscal year as of August 31, 2023, were as follows:


	August 31, 2023
	Finance Leases		Operating Leases
	(Dollars in thousands)
2024	$	8,548	$	70,414
2025	6,885		57,904
2026	6,316		46,733
2027	5,943		31,407
2028	5,767		18,246
Thereafter	25,738		74,075
Total maturities of lease liabilities	59,197		298,779
Less amounts representing interest	9,962		36,927
Present value of future minimum lease payments	49,235		261,852
Less current obligations	6,797		61,094
Long-term obligations	$	42,438	$	200,758