Leases

3 Months Ended

Nov. 30, 2019

Leases [Abstract]

Leases

Leases

Effective September 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) using the modified retrospective approach and also elected to apply the package of practical expedients, which among other things, allows entities to maintain the historical lease classification for existing leases. The Company has lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company has elected the practical expedient to combine lease and non-lease components for building and real estate leases.

The Company primarily has leases for buildings and real estate with lease terms ranging from 1 year to 36 years. Leases for other classes of assets are not significant. For any leases with an initial term in excess of 12 months, the Company determines whether an arrangement is a lease at contract inception by evaluating if the contract conveys the right to use and control the specific property or equipment. Certain lease agreements contain purchase or renewal options. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants.

Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized based on the present value of future lease payments over the lease term at the lease commencement date. When determining the present value of future payment, the Company uses the incremental borrowing rate when the implicit rate is not readily determinable. Any payment deemed probable under residual value guarantees is included in lease payments. Any variable payments, other than those that depend on an index or rate, are excluded from right-of-use assets and lease liabilities.

Leases with an initial term of 12 months or less are not recorded as right-of-use assets and lease liabilities in the Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Upon adoption of ASU 2016-02, the Company recorded $414.6 million and $437.5 million of right-of-use assets and lease liabilities, respectively, related to its existing operating lease portfolio. The accounting for the Company's finance leases remained substantially unchanged and balances were not significant on the adoption date. The adoption of this standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

The following table sets forth the amount of lease assets and lease liabilities included on the Company's Condensed Consolidated Balance Sheets, as of the period indicated (in thousands):

	Financial Statement Line Item	November 30, 2019
Assets
Operating lease assets (1)	Operating lease right-of-use assets	$	405,895
Finance lease assets (2)	Property, plant and equipment, net	152,846
Total lease assets		$	558,741
Liabilities
Current
Operating lease liabilities	Current operating lease liabilities	$	98,640
Finance lease liabilities	Accrued expenses	6,635
Non-current
Operating lease liabilities	Non-current operating lease liabilities	337,981
Finance lease liabilities	Other liabilities	154,801
Total lease liabilities		$	598,057

⁽¹⁾  Net of accumulated amortization of $24.6 million.

⁽²⁾  Net of accumulated amortization of $8.1 million.

The following table is a summary of expenses and income related to leases included on the Company's Condensed Consolidated Statements of Operations, for the period indicated (in thousands):

	November 30, 2019
Operating lease cost	$	27,735
Finance lease cost
Amortization of leased assets	1,136
Interest on lease liabilities	1,189
Other	2,691
Net lease cost(1)	$	32,751

⁽¹⁾  Lease costs are primarily recognized in cost of revenue.

The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases, as of the period indicated:

	November 30, 2019
	Weighted-average remaining lease term	Weighted-average discount rate
Operating leases	5.7 years	3.25	%
Finance leases	6.5 years	4.35	%

The following table sets forth other supplemental information related to the Company's lease portfolio (in thousands):

	November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	26,864
Operating cash flows from finance leases(1)	1,189
Financing activities from finance leases(2)	1,120
Non-cash right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	17,901
Finance leases	111,591

⁽¹⁾  Included in accounts payable, accrued expenses and other liabilities in Operating Activities of the Company's Condensed Consolidated Statements of Cash Flows.

⁽²⁾  Included in payments toward debt agreements in Financing Activities of the Company's Condensed Consolidated Statements of Cash Flows.

The future minimum lease payments under operating and finance leases as of November 30, 2019 were as follows (in thousands):

Twelve months ended November 30,	Operating Leases(1)			Finance Leases			Total
2020	$	110,223		$	11,635		$	121,858
2021	93,597			11,676			105,273
2022	75,609			12,140			87,749
2023	56,764			11,694			68,458
2024	46,447			11,829			58,276
Thereafter	103,899			132,235			236,134
Total minimum lease payments	$	486,539		$	191,209		$	677,748
Less: Interest	(49,918		)	(29,773		)	(79,691		)
Present value of lease liabilities	$	436,621		$	161,436		$	598,057

⁽¹⁾  Excludes $18.4 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.

As disclosed in the Company’s Form 10-K for the fiscal year ended August 31, 2019, the future minimum lease payments of non-cancelable operating leases prior to the adoption of ASU 2016-02 were as follows (in thousands):

Fiscal Year Ending August 31,	Amount
2020	$	118,312
2021	102,915
2022	84,729
2023	63,206
2024	51,091
Thereafter	182,932
Total minimum lease payments	$	603,185

Total operating lease expense prior to the adoption of ASU 2016-02 was approximately $125.4 million, $130.2 million and $117.2 million for fiscal years 2019, 2018 and 2017, respectively.

Leases

Leases

Effective September 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) using the modified retrospective approach and also elected to apply the package of practical expedients, which among other things, allows entities to maintain the historical lease classification for existing leases. The Company has lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company has elected the practical expedient to combine lease and non-lease components for building and real estate leases.

The Company primarily has leases for buildings and real estate with lease terms ranging from 1 year to 36 years. Leases for other classes of assets are not significant. For any leases with an initial term in excess of 12 months, the Company determines whether an arrangement is a lease at contract inception by evaluating if the contract conveys the right to use and control the specific property or equipment. Certain lease agreements contain purchase or renewal options. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants.

Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized based on the present value of future lease payments over the lease term at the lease commencement date. When determining the present value of future payment, the Company uses the incremental borrowing rate when the implicit rate is not readily determinable. Any payment deemed probable under residual value guarantees is included in lease payments. Any variable payments, other than those that depend on an index or rate, are excluded from right-of-use assets and lease liabilities.

Leases with an initial term of 12 months or less are not recorded as right-of-use assets and lease liabilities in the Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Upon adoption of ASU 2016-02, the Company recorded $414.6 million and $437.5 million of right-of-use assets and lease liabilities, respectively, related to its existing operating lease portfolio. The accounting for the Company's finance leases remained substantially unchanged and balances were not significant on the adoption date. The adoption of this standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

The following table sets forth the amount of lease assets and lease liabilities included on the Company's Condensed Consolidated Balance Sheets, as of the period indicated (in thousands):

	Financial Statement Line Item	November 30, 2019
Assets
Operating lease assets (1)	Operating lease right-of-use assets	$	405,895
Finance lease assets (2)	Property, plant and equipment, net	152,846
Total lease assets		$	558,741
Liabilities
Current
Operating lease liabilities	Current operating lease liabilities	$	98,640
Finance lease liabilities	Accrued expenses	6,635
Non-current
Operating lease liabilities	Non-current operating lease liabilities	337,981
Finance lease liabilities	Other liabilities	154,801
Total lease liabilities		$	598,057

⁽¹⁾  Net of accumulated amortization of $24.6 million.

⁽²⁾  Net of accumulated amortization of $8.1 million.

The following table is a summary of expenses and income related to leases included on the Company's Condensed Consolidated Statements of Operations, for the period indicated (in thousands):

	November 30, 2019
Operating lease cost	$	27,735
Finance lease cost
Amortization of leased assets	1,136
Interest on lease liabilities	1,189
Other	2,691
Net lease cost(1)	$	32,751

⁽¹⁾  Lease costs are primarily recognized in cost of revenue.

The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases, as of the period indicated:

	November 30, 2019
	Weighted-average remaining lease term	Weighted-average discount rate
Operating leases	5.7 years	3.25	%
Finance leases	6.5 years	4.35	%

The following table sets forth other supplemental information related to the Company's lease portfolio (in thousands):

	November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	26,864
Operating cash flows from finance leases(1)	1,189
Financing activities from finance leases(2)	1,120
Non-cash right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	17,901
Finance leases	111,591

⁽¹⁾  Included in accounts payable, accrued expenses and other liabilities in Operating Activities of the Company's Condensed Consolidated Statements of Cash Flows.

⁽²⁾  Included in payments toward debt agreements in Financing Activities of the Company's Condensed Consolidated Statements of Cash Flows.

The future minimum lease payments under operating and finance leases as of November 30, 2019 were as follows (in thousands):

Twelve months ended November 30,	Operating Leases(1)			Finance Leases			Total
2020	$	110,223		$	11,635		$	121,858
2021	93,597			11,676			105,273
2022	75,609			12,140			87,749
2023	56,764			11,694			68,458
2024	46,447			11,829			58,276
Thereafter	103,899			132,235			236,134
Total minimum lease payments	$	486,539		$	191,209		$	677,748
Less: Interest	(49,918		)	(29,773		)	(79,691		)
Present value of lease liabilities	$	436,621		$	161,436		$	598,057

⁽¹⁾  Excludes $18.4 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.

As disclosed in the Company’s Form 10-K for the fiscal year ended August 31, 2019, the future minimum lease payments of non-cancelable operating leases prior to the adoption of ASU 2016-02 were as follows (in thousands):

Fiscal Year Ending August 31,	Amount
2020	$	118,312
2021	102,915
2022	84,729
2023	63,206
2024	51,091
Thereafter	182,932
Total minimum lease payments	$	603,185

Total operating lease expense prior to the adoption of ASU 2016-02 was approximately $125.4 million, $130.2 million and $117.2 million for fiscal years 2019, 2018 and 2017, respectively.