Leases (Notes)

9 Months Ended

May 30, 2020

Leases of Lessee Disclosure [Text Block]

On September 1, 2019, we adopted ASU No. 2016-02, Leases (“Topic 842”) using the modified retrospective approach under ASU No. 2018-11, which permits application of the new guidance at the beginning of the period of adoption, with comparative periods continuing to be reported under Topic 840.

Leases are classified as either finance leases or operating leases based on criteria in ASC 842. The Company’s operating leases are generally comprised of real estate and certain equipment used in warehousing our products. The Company’s finance leases are generally comprised of warehouse equipment.

Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The majority of the Company's leases do not provide an implicit rate; therefore, the Company uses its secured incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. Our incremental borrowing rate for a lease is the rate of interest we would pay to borrow on a collateralized basis over a similar term to the lease in a similar economic environment. The Company applied incremental borrowing rates using a portfolio approach. Right-of-use assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term operating leases that have a term of 1 year or less.

The components of lease expense were as follows:



		Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	Statement of Operations Caption	May 30, 2020		May 30, 2020
Operating lease cost:
Lease cost	Cost of goods sold and General and administrative	$	1,479	$	3,726
Variable lease cost ⁽¹⁾	Cost of goods sold and General and administrative	448		1,184
Operating lease cost		1,927		4,910

Short term lease cost	General and administrative	6		30

Finance lease cost:
Amortization of right-of use assets	Cost of goods sold	69		205
Interest on lease liabilities	Interest expense	14		46
Total finance lease cost		83		251

Total lease cost		$	2,016	$	5,191

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.

The gross amounts of assets and liabilities related to both operating and finance leases are as follows:



(in thousands)	Balance Sheet Caption	May 30, 2020
Assets
Operating lease right of use assets	Other long-term assets	$	26,998
Finance lease right of use assets	Property and equipment, net	980
Total lease assets		$	27,978

Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	3,566
Finance lease liabilities	Current maturities of long-term debt	268
Long-term:
Operating lease liabilities	Other long-term liabilities	24,216
Finance lease liabilities	Long-term debt, less current maturities	719
Total lease liabilities		$	28,769

Future maturities of lease liabilities were as follows:



	Operating Leases			Finance Leases
Fiscal year ending:
Remainder of 2020	$	844		$	78
2021	5,664			313
2022	5,118			313
2023	4,196			278
2024	4,102			145
Thereafter	14,686			—
Total lease payments	34,610			1,127
Less: Interest	(6,828		)	(140		)
Present value of lease liabilities	$	27,782		$	987

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases at May 30, 2020 is as follows:

Supplemental and other information related to leases was as follows:



	Thirty-Nine Weeks Ended
	May 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,655
Operating cash flows from finance leases	8
Financing cash flows from finance leases	247

Comparative Information as Reported Under Previous Accounting Standards

The following comparative information is reported based upon previous accounting standards in effect for the periods presented.

Future minimum payments under lease arrangements with a remaining term in excess of one year were as follows as of August 31, 2019:



(in thousands)	August 31, 2019
2020	$	2,546
2021	1,947
2022	1,677
2023	1,093
2024	87
Thereafter	56
Total	$	7,406

For the thirteen weeks ended May 25, 2019 rent expenses for operating leases were $0.5 million. For the thirty-nine weeks ended May 25, 2019 rent expenses for operating leases were $1.6 million.

Operating Leases

Finance Leases

Weighted-average remaining lease term (in years)

Weighted-average discount rate