Note 5.     Leases

The Company leases its facilities and automobiles under operating lease agreements (one distribution facility, located in Glendale Heights, IL, is leased from the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”), which is the grantor trust of Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder). Our operating lease agreements expire on various dates through September 2027 and require minimum rental payments ranging from $1,000 to $27,000 per month. Certain of the leases contain options for renewal under varying terms.

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The discount rate used on the operating ROU assets represented the Company’s incremental borrowing rate at lease inception.

Minimum future rental payments under operating leases are as follows:

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Operating lease costs under these leases were approximately $2,026,000 and $1,647,000 for the six months ended February 28, 2026 and 2025, respectively. Operating lease costs under these leases were approximately $874,000 and $843,000 for the three months ended February 28, 2026 and 2025, respectively.  Cash paid for amounts included in the measurement of lease liabilities were approximately $1,908,000 and $1,837,000 for the six months ended February 28, 2026 and 2025, respectively. Cash paid for amounts included in the measurement of lease liabilities were approximately $1,025,000 and $932,000 for the three months ended February 28, 2026 and 2025, respectively.