On June 1, 2019, the Company adopted the new lease accounting standard under U.S. GAAP, Topic 842, which among other things, requires right-of-use (“ROU”) assets and liabilities be recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term. Topic 842 was adopted using the modified retrospective approach as of the effective date of the new standard. As such, comparative financial information for reporting periods beginning prior to June 1, 2019, has not been restated and continues to be reported under the previous accounting standard. As allowed, we elected to carry forward the historical lease classification and to apply the short-term lease measurement and recognition exemption whereby ROU assets and lease liabilities are not recognized for short-term leases. Adoption of the new standard resulted in the recognition of $42,200,000 of net operating lease ROU assets and $43,400,000 of corresponding operating lease liabilities. The net ROU asset includes the effect of reclassifying deferred rent as an offset in accordance with the transition guidance. The impact of the new standard was immaterial to the Company’s results of operations and cash flows.

The Company determines if an arrangement is a lease at inception. Operating lease ROU assets include any initial direct costs and prepayments less lease incentives. Lease terms include options to renew or terminate the lease when it is reasonably certain the Company will exercise such options. As most of our leases do not include an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or selling, general and administrative expense depending on the underlying nature of the leased assets.

We lease certain property and equipment from third parties under non-cancellable operating lease agreements. Certain lease agreements provide for payment of property taxes, maintenance and insurance by the Company. Under Topic 842, we elected the practical expedient to account for lease and non-lease components as a single component for all asset classes. Certain leases include variable lease payments based on usage or an index or rate.

During the second quarter of fiscal 2020, we entered into a non-cancellable financing lease agreement for land and a building which was paid as part of the cash consideration in connection with the acquisition of certain operating assets of Heidtman Steel Products, Inc. (“Heidtman”). Refer to “NOTE P – Acquisitions” for additional information. In the consolidated balance sheets, the financing leases ROU assets are recorded in other assets and the current and long-term portion of the financing leases ROU liabilities are recorded in other accrued items and other liabilities, respectively.

(in thousands)	Three Months Ended November 30, 2019		Six Months Ended November 30, 2019
Operating lease expense	$	2,880	$	6,222
Financing lease expense:
Amortization of leased assets		65		110
Interest on lease liabilities		9		19
Total financing lease expense		74		129
Short-term lease expense		590		996
Variable lease expense		150		304
Total lease expense	$	3,694	$	7,651

During the first quarter of fiscal 2020, ROU assets within the Engineered Cabs operating segment with a book value of $4,843,000 were deemed to be fully impaired and written off. Refer to “NOTE E – Impairment of Long-Lived Assets” for additional information.

Other information related to the Company’s leases, as of and for the six-month period ended November 30, 2019, is provided below:

(dollars in thousands)	Operating Leases			Financing Leases
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows	$	5,702		$	19
Financing cash flows	$	-		$	173
ROU assets obtained in exchange for lease liabilities	$	3,722		$	8,028
Weighted-average remaining lease term (in years)		5.45		3.12
Weighted-average discount rate		3.44	%		3.23	%

Future minimum lease payments for non-cancelable leases having an initial or remaining term in excess of one year at November 30, 2019, were as follows:

(in thousands)	Operating Leases			Financing Leases
Year 1	$	12,436		$	384
Year 2		10,312			376
Year 3		8,014			369
Year 4		5,256			53
Year 5		3,265			-
Thereafter		6,554			-
Total		45,837			1,182
Less: imputed interest		(4,571	)		(56	)
Present value of lease liabilities	$	41,266		$	1,126

As previously disclosed in our 2019 Form 10-K, under the prior accounting guidance, future minimum lease payments for non-cancelable operating leases having an initial or remaining term in excess of one year at May 31, 2019, were as follows:

(in thousands)
Year 1	$	10,774
Year 2		8,398
Year 3		5,428
Year 4		4,054
Year 5		2,098
Thereafter		2,637
Total	$	33,389