The Company leases certain of its distribution centers, retail stores, office facilities, transportation equipment, and other operating equipment from third parties. Many of these leases include renewal options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.



Lease Type	Consolidated Balance Sheets Location	August 1, 2020
Operating lease assets	Operating lease assets	$	982,808
Finance lease assets	Property and equipment, net	129,517
Total lease assets		$	1,112,325

Operating liabilities	Current portion of operating lease liabilities	$	131,022
Finance liabilities	Current portion of long-term debt and finance lease liabilities	12,746
Operating liabilities	Long-term operating lease liabilities	873,990
Finance liabilities	Long-term finance lease liabilities	143,303
Total lease liabilities		$	1,161,061

Lease assets and liabilities presented in the table above include lease contracts related to our discontinued operations, as the Company expects to remain primarily obligated under these leases.



(in thousands)	Consolidated Statements of Operations Location	August 1, 2020
Operating lease cost	Operating expenses	$	223,016
Short-term lease cost	Operating expenses	30,992
Variable lease cost	Operating expenses	151,065
Sublease income	Operating expenses	(3,504		)
Sublease income	Net sales	(22,543		)
Other sublease income, net	Restructuring, acquisition and integration related expenses⁽²⁾	(5,075		)
Net operating lease cost⁽¹⁾		373,951
Amortization of leased assets	Operating expenses	16,052
Interest on lease liabilities	Interest expense, net	11,617
Finance lease cost		27,669
Total net lease cost		$	401,620

On October 23, 2018, the Company received $101.0 million in aggregate proceeds, excluding taxes and closing costs, for the sale and leaseback of its final distribution center of eight distribution center sale-leaseback transactions entered into by Supervalu in April 2018. On October 26, 2018, the Company received $48.5 million in aggregate proceeds, excluding taxes and closing costs, for the sale and leaseback of a separate distribution center under an agreement entered into by Supervalu in March 2018, as amended. Both distribution center sale-leasebacks qualified for sale accounting, with the lease-backs being classified as operating leases. No gain or loss was recognized or deferred on the sale of these facilities, as the fair value of these facilities as of the Supervalu acquisition date was determined to be equal to their contractual sale–leaseback amounts.

In fiscal 2019, the Company entered into a lease for a new distribution facility in California for approximately 1.2 million square feet. The Company had identified two buildings on the same distribution center campus: one in which it was deemed the accounting owner of related to construction activity and another for which it was a lessee. Upon the adoption of ASC 842, the Company continued to account for the building as if it was the accounting owner of due to ongoing construction activity. On February 24, 2020, the Company executed a purchase option to acquire the entire distribution center campus. Upon execution of the purchase option, the previously constructed facility accounted for as an operating lease has been re-classified as a finance lease. Upon completion of the construction in fiscal 2020, the Company did not qualify for sale accounting on the other building due to the outstanding purchase option.

The Company leases certain of its distribution centers and leases most of its retail stores, and leases certain office facilities and equipment from third parties. Many of these leases include renewal options and, in certain instances, also include options to purchase. Rent expense, other operating lease expense and subtenant rentals all under operating leases included within Operating expenses, and subtenant rentals under operating leases with customers included within Net sales, consisted of the following. Rent expense as presented below under ASC 840 excludes variable lease rent that is included in total net lease cost under ASC 842 in the table above.



(in thousands)	2019			2018
Rent expense⁽¹⁾	$	211,807		$	88,697
Less subtenant rentals recorded in Net sales	(17,475		)	—
Less subtenant rentals recorded in Operating expenses	(13,683		)	(1,649		)
Total net rent expense	$	180,649		$	87,048

The Company leases certain property to third parties and receives lease and subtenant rental payments under operating leases, including assigned leases for which the Company has future minimum lease payment obligations. Future minimum lease payments (“Lease Liabilities”) include payments to be made by the Company or certain third parties in the case of assigned noncancellable operating leases and finance leases. Future minimum lease and subtenant rentals (“Lease Receipts”) include expected cash receipts from operating subleases, and in the case of assigned noncancellable leases receipts for stores sold to third parties, which they operate. As of August 1, 2020, these Lease Liabilities and Lease Receipts consisted of the following (in thousands):



	Lease Liabilities						Lease Receipts					Net Lease Obligations
Fiscal Year	Operating Leases⁽¹⁾			Finance Leases⁽²⁾			Operating Leases			Finance Leases		Operating Leases		Finance Leases
2021	$	226,081		$	23,801		$	(51,750	)	$	—	$	174,331	$	23,801
2022	217,353			118,812			(46,642		)	—		170,711		118,812
2023	184,360			14,717			(36,361		)	—		147,999		14,717
2024	157,528			13,602			(28,347		)	—		129,181		13,602
2025	114,577			9,316			(18,155		)	—		96,422		9,316
Thereafter	868,870			6,239			(45,093		)	—		823,777		6,239
Total undiscounted lease liabilities and receipts	$	1,768,769		$	186,487		$	(226,348	)	$	—	$	1,542,421	$	186,487
Less interest⁽³⁾	(763,757		)	(30,438		)
Present value of lease liabilities	1,005,012			156,049
Less current lease liabilities	(131,022		)	(12,746		)
Long-term lease liabilities	$	873,990		$	143,303

As of August 3, 2019, future minimum lease payments to be made by the Company or certain third parties in the case of assigned leases for noncancellable operating leases and finance leases, which have not been reduced for future minimum subtenant rentals under certain operating subleases, including assignments, consisted of the following amounts (in thousands):



	Lease Obligations					Lease Receipts						Net Lease Obligations
Fiscal Year	Operating Leases		Capital Leases			Operating Leases			Capital Leases			Operating Leases		Capital Leases
2020	$	223,612	$	41,550		$	(55,922	)	$	(319	)	$	167,690	$	41,231
2021	190,845		32,804			(41,425		)	—			149,420		32,804
2022	179,326		29,869			(35,998		)	—			143,328		29,869
2023	154,812		26,699			(25,591		)	—			129,221		26,699
2024	135,795		23,095			(18,183		)	—			117,612		23,095
Thereafter	1,063,674		46,999			(59,186		)	—			1,004,488		46,999
Total future minimum obligations (receipts)	$	1,948,064	$	201,016		$	(236,305	)	$	(319	)	$	1,711,759	$	200,697
Less interest			(68,138		)
Present value of capital lease obligations			132,878
Less current capital lease obligations			(24,670		)
Long-term capital lease obligations			$	108,208



Lease Term and Discount Rate	August 1, 2020
Weighted-average remaining lease term (years)
Operating leases	10.4 years
Finance leases	3.1 years
Weighted-average discount rate
Operating leases	10.6	%
Finance leases	8.8	%



Other Information
(in thousands)	2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	231,272
Operating cash flows from finance leases	9,334
Financing cash flows from finance leases	19,972
Leased assets obtained in exchange for new finance lease liabilities	93,060
Leased assets obtained in exchange for new operating lease liabilities	195,087