Leases (Notes)

9 Months Ended

Aug. 31, 2021

LeasesWe lease certain property and equipment for use in our operations. We recognize lease expense for these leases generally on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Lease right-of-use assets and lease liabilities are recorded on our consolidated balance sheets for leases with an expected term at the commencement date of more than 12 months in accordance with Accounting Standards Codification Topic 842, “Leases” (“ASC 842”). Some of our leases include one or more renewal options, the exercise of which is generally at our discretion. Such options are excluded from the expected term of the lease unless we determine it is reasonably certain the option will be exercised. Lease liabilities are equal to the present value of the remaining lease payments while the amount of lease right-of-use assets is based on the lease liabilities, subject to adjustment, such as for lease incentives. Our leases do not provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term, market interest rates, current interest rates on our senior notes and the effects of collateralization. Our lease population at August 31, 2021 was comprised of operating leases where we are the lessee, primarily real estate leases for our corporate offices, division offices and design studios, as well as certain equipment leases. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

Lease expense is included in selling, general and administrative expenses in our consolidated statements of operations and includes costs for leases with terms of more than 12 months as well as short-term leases with terms of 12 months or less. Our total lease expense for the three months ended August 31, 2021 and 2020 was $4.3 million and $4.2 million, respectively, and included short-term lease costs of $1.2 million and $1.1 million, respectively. For the nine months ended August 31, 2021 and 2020, our total lease expense was $12.9 million and $13.6 million, respectively, and included short-term lease costs of $3.7 million and $4.8 million, respectively. Variable lease costs and external sublease income for the three-month and nine-month periods ended August 31, 2021 and 2020 were immaterial.

The following table presents our lease right-of-use assets, lease liabilities and the weighted average remaining lease term and weighted average discount rate (incremental borrowing rate) used in calculating the lease liabilities (dollars in thousands):


	August 31, 2021			November 30, 2020
Lease right-of-use assets (a)	$	30,112		$	36,270
Lease liabilities (b)	32,011			38,000
Weighted average remaining lease term	4.0 years			4.5 years
Weighted average discount rate (incremental borrowing rate)	5.1		%	5.1		%

(a)Represents lease right-of-use assets within our homebuilding operations and financial services operations of $29.9 million and $.2 million, respectively, at August 31, 2021, and $36.0 million and $.3 million, respectively, at November 30, 2020.

(b)Represents lease liabilities within our homebuilding operations and financial services operations of $31.8 million and $.2 million, respectively, at August 31, 2021, and $37.7 million and $.3 million, respectively, at November 30, 2020.

The following table presents additional information about our leases (in thousands):


	Three Months Ended August 31,				Nine Months Ended August 31,
	2021		2020		2021		2020


Lease right-of-use assets obtained in exchange for new lease liabilities	$	18	$	2,977	$	1,517	$	9,045

Cash payments on lease liabilities	2,979		2,831		8,648		8,468

As of August 31, 2021, the future minimum lease payments required under our leases are as follows (in thousands):


Years Ending November 30,
2021	$	2,962
2022	10,549
2023	8,280
2024	6,139
2025	4,503
Thereafter	3,112
Total lease payments	35,545
Less: Interest	(3,534)
Present value of lease liabilities	$	32,011