NOTE 5 – LEASES

Lessee Obligations

In the normal course of business we rent office space, primarily for international sales administration offices, in commercial office complexes that are conducive to sales and administrative operations. We also rent warehousing and distribution facilities that are designed to provide secure storage and efficient distribution of our training products, books, and accessories. All of these leases are classified as operating leases. Operating lease assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. Since most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For operating leases, expense is recognized on a straight-line basis over the lease term. We do not have significant amounts of variable lease payments.

Some of our operating leases contain renewal options that may be exercised at our discretion after the completion of the base rental term. At February 29, 2020, we had operating leases with remaining terms ranging from less than one year to approximately six years. The amounts of assets and liabilities (in thousands) and other information related to our operating leases follows:



	Balance Sheet		February 29,
	Caption		2020
Assets:
Operating lease right of use assets	Other long-term assets	$	1,662

Liabilities:
Current:
Operating lease liabilities	Accrued liabilities		921
Long-Term:
Operating lease liabilities	Other long-term liabilities		741
		$	1,662

Weighted Average Remaining Lease Term:
Operating leases (years)			2.7

Weighted Average Discount Rate:
Operating leases			4.2	%

During the quarter and two quarters ended February 29, 2020, lease expense totaled $0.4 million and $0.8 million, respectively. For the quarter and two quarters ended February 28, 2019, lease expense also totaled $0.4 million and $0.8 million. Operating lease expense is reported in selling, general, and administrative expense in our condensed consolidated statements of operations.

The approximate future minimum lease payments under our operating leases at February 29, 2020, is as follows (in thousands):



YEAR ENDING AUGUST 31,		Amount
Remainder of 2020	$	541
2021		727
2022		202
2023		116
2024		93
Thereafter		98
Total operating lease payments		1,777
Less imputed interest		(115)
Present value of operating lease liabilities	$	1,662

Lessor Accounting

We have subleased the majority of our corporate headquarters campus located in Salt Lake City, Utah to multiple tenants. These sublease agreements are accounted for as operating leases. We recognize sublease income on a straight-line basis over the life of the sublease agreement. The cost basis of our corporate campus was $36.0 million, which had a carrying value of $6.6 million at February 29, 2020. The following future minimum lease payments due to us from our sublease agreements at February 29, 2020, are as follows (in thousands):



YEAR ENDING AUGUST 31,		Amount
Remainder of 2020	$	1,955
2021		2,341
2022		1,514
2023		1,514
2024		1,527
Thereafter		1,275
	$	10,126

For the quarter and two quarters ended February 29, 2020, sublease revenue totaled $1.0 million and $1.9 million, respectively. During the quarter and two quarters ended February 28, 2019, sublease revenue also totaled $1.0 million and $1.9 million. Sublease revenues are included in net sales in the accompanying condensed consolidated statements of operations.