Note 6 - Leases

3 Months Ended

Feb. 29, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

Note 6: Leases

We adopted ASU No. 2016-02 and related standards (collectively, “ASC 842”), which replaced previous lease accounting guidance, during the first quarter ended February 29, 2020 using the modified retrospective method of adoption. As a result of electing this transition method, prior periods have not been restated. The adoption of ASC 842 resulted in the recording of right of use assets and associated lease liabilities of approximately $28,254 each as of the first day of the quarter ended February 29, 2020. ASC 842 did not have a material impact on our Consolidated Statement of Income. We elected the package of practical expedients permitted under the transition guidance within ASC 842, which includes not reassessing lease classification of existing leases. We did not elect the hindsight practical expedient.

As a lessee, the Company leases office, manufacturing and warehouse space and equipment. Certain lease agreements include rental payments adjusted annually based on changes in an inflation index. Our leases do not contain material residual value guarantees or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term. We determine if an arrangement is a lease upon inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose the asset is used.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is the Company’s incremental borrowing rate. We determine the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region.

Certain leases include one or more options to renew, with terms that can extend the lease term up to five years. We include options to renew the lease as part of the right of use lease asset and liability when it is reasonably certain we will exercise the option. In addition, certain leases contain termination options with an associated penalty. In general, the Company is not reasonably certain to exercise such options.

For the measurement and classification of its lease agreements, we group lease and non-lease components into a single lease component for all underlying asset classes. Variable lease payments primarily include payments for non-lease components, such as maintenance costs, payments for leased assets used beyond their non-cancelable lease term as adjusted for contractual options to terminate or renew, and payments for non-components such as sales tax. Certain leases contain immaterial variable lease payments based on usage.

We also enter into insignificant finance leases.

The components of lease expense are as follows:

	Three Months Ended
	February 29,
	2020
Operating lease cost	$	3,261
Variable lease cost		758
Total net lease cost	$	4,019

Supplemental balance sheet information related to leases is as follows:

			Three Months Ended
	Location on		February 29,
	Balance Sheet		2020
Operating leases:
Operating lease right of use assets		Other assets	$	26,669
Current operating lease liabilities		Other accrued expenses	$	9,477
Noncurrent operating lease liabilities		Other liabilities		17,068
Total operating lease liabilities			$	26,545

The weighted average remaining lease term is 4.5 years and the weighted average discount rate is 3.7% as of February 29, 2020. 

Supplemental cash flow information and other related to leases is as follows:

	Three Months Ended
	February 29,
	2020
Cash paid amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,230
Right of use assets obtained in exchange for lease liabilities:
Operating leases	$	521

Maturities of lease liabilities as follows:

Fiscal Year	Amount
Remainder of 2020	$	8,378
2021		7,078
2022		4,419
2023		3,278
2024		2,283
2025 and beyond		3,376
Total		28,812
Less: amounts representing interest		(2,267	)
Present value of future minimum payments		26,545
Less: current obligations		(9,477	)
Noncurrent operating lease liabilities	$	17,068

Disclosures related to periods prior to adoption of new lease standard

The minimum lease payments, related to buildings, equipment and vehicles, that are expected to be made in each of the years indicated based on operating leases in effect at November 30, 2019 were:

Fiscal Year	Remainder 2020		2021		2022		2023		2024 and Beyond		Total Minimum Lease Payments
Operating leases	$	11,492	$	7,984	$	5,497	$	4,686	$	8,217	$	37,876

Rent expense for all operating leases, which includes minimum lease payments and other charges such as common area maintenance fees, was $19,618 and $20,620 in 2019 and 2018, respectively.