Leases

6 Months Ended

Aug. 31, 2023

12. Leases

The Company is a lessee under various leases for facilities and equipment. As of August 31, 2023, the Company was the lessee for 156 operating leases and 24 finance leases with terms of 12 months or more. Many of the operating leases either have renewal options of between one and five years or convert to month-to-month agreements at the end of the specified lease term.

The Company’s operating leases are primarily for (i) operating facilities, (ii) vehicles and equipment used in operations, (iii) facilities used for back-office functions and (iv) equipment used for back-office functions, and (v) temporary storage. The majority of the Company’s long-term lease expenses have both a fixed and variable component.

Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has a significant number of short-term leases, including month-to-month agreements. The Company's short-term lease agreements include expenses incurred hourly, daily, monthly and for other durations of time of one year or less. The Company’s future lease commitments as of August 31, 2023 do not reflect all of the Company’s short-term lease commitments.

The following table outlines the classification of the Company's right-of-use asset and lease liabilities in the balance sheets as of August 31, 2023 and February 28, 2023 (in thousands):


	Balance Sheet Classification	As of
		August 31, 2023		February 28, 2023
Assets
Right-of-use assets	Right-of-use assets	$	24,273	$	26,392
Liabilities
Operating lease liabilities ― short-term	Lease liability - short-term	$	6,145	$	6,119
Operating lease liabilities ― long-term	Lease liability - long-term	17,093		19,659
Finance lease liabilities ― short-term	Lease liability - short-term	427		284
Finance lease liabilities ― long-term	Lease liability - long-term	1,341		1,045

Supplemental information related to the Company's portfolio of operating leases from continuing operations was as follows (in thousands, except years and percentages):


	Three Months Ended August 31,				Six Months Ended August 31,
	2023		2022		2023		2022
Operating cash flows from operating leases included in lease liabilities	$	1,834	$	1,999	$	3,654	$	3,133
Lease liabilities obtained from new ROU assets - operating	373		2,775		1,895		2,885
Decrease in ROU assets related to lease terminations	(1,294)		—		(1,302)		—
Operating and financing cash flows from financing leases included in lease liabilities	113		49		199		94
Lease liabilities obtained from new ROU assets - financing	599		277		599		277


	As of
	August 31, 2023		February 28, 2023
Weighted-average remaining lease term - operating leases	4.46 years		5.04 years
Weighted-average discount rate - operating leases	4.41	%	4.31	%
Weighted-average remaining lease term - financing leases	4.31 years		4.61 years
Weighted-average discount rate - financing leases	5.39	%	5.15	%

The following table outlines the classification of lease expense related to operating leases from continuing operations, in the statements of operations (in thousands):


	Three Months Ended August 31,				Six Months Ended August 31,
	2023		2022		2023		2022
Cost of sales	$	3,136	$	3,214	$	6,237	$	5,283
Selling, general and administrative	506		567		1,005		941
Total lease cost	$	3,642	$	3,781	$	7,242	$	6,224

As of August 31, 2023, maturities of the Company's lease liabilities, excluding lease liabilities associated with our discontinued operations, were as follows (in thousands):


Fiscal year:	Operating Leases		Finance Leases		Total
2024	$	3,583	$	254	$	3,837
2025	6,505		500		7,005
2026	5,574		423		5,997
2027	4,401		386		4,787
2028	2,435		312		2,747
2029	1,869		101		1,970
Thereafter	1,252		5		1,257
Total lease payments	$	25,619	$	1,981	$	27,600
Less imputed interest	(2,380)		(214)		(2,594)
Total	$	23,239	$	1,767	$	25,006

The Company subleases multiple buildings in Columbia, South Carolina to multiple subtenants. The Columbia sublease agreements are by and between Precoat Metals and multiple subtenants. Sublease income is recognized over the term of the sublease on a straight-line basis and is reported in the consolidated statement of operations in "Cost of sales." The Company recognized $0.2 million and $0.5 million of income from subleases during the three and six months ended August 31, 2023, respectively.