LEASES

3 Months Ended

Oct. 26, 2019

The Company leases 27 retail stores, as well as the corporate headquarters and equipment at October 26, 2019. The majority of initial lease terms range from 20 to 30 years. Most of the Company’s leases contain renewal options at increased rents of five to ten years each at the Company’s sole discretion. These options enable Village to retain the use of facilities in desirable operating areas. Each renewal option is evaluated when recognizing the lease right-of-use assets and liabilities, and the Company utilizes the lease term for which it is reasonably certain to use the underlying asset. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on maintenance and a percentage of sales in excess of stipulated amounts. The Company accounts for rent holidays, escalating rent provisions, and construction allowances on a straight-line basis over the term of the lease.

The composition of total lease cost is as follows:



		13 Weeks Ended
	Consolidated Statement of Operations Classification	October 26, 2019
Operating lease cost	Operating and administrative expense	$	4,779
Finance lease cost
Amortization of leased assets	Depreciation and amortization	237
Interest on lease liabilities	Interest expense	517
Variable lease cost	Operating and administrative expense	3,695

Total lease cost		$	9,228

As of October 26, 2019, finance lease right-of-use assets of $14,464 are included in Property, equipment and fixtures, net in the Company's Consolidated Balance Sheet. Maturities of operating and finance lease liabilities, including options to extend lease terms that are reasonably certain of being exercised, are as follows as of October 26, 2019:



	Operating leases		Finance leases		Total
Remainder of 2020	$	12,663	$	2,000	$	14,663
2021	15,453		2,689		18,142
2022	14,658		2,689		17,347
2023	14,504		2,689		17,193
2024	12,369		2,689		15,058
Thereafter	79,309		24,428		103,737
Total lease payments	148,956		37,184		186,140
Less amount representing interest	40,539		13,173		53,712

Present value of lease liabilities	$	108,417	$	24,011	$	132,428

The Company has approximately $9,280 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of October 26, 2019.

For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate as the discount rate implicit within its leases is generally not determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the lease. As of October 26, 2019, the Company's lease terms and discount rates are as follows:



	October 26, 2019
Weighted-average remaining lease term (years)
Operating leases	12.2
Finance leases	16.3
Weighted-average discount rate
Operating leases	5.3	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:



	13 Weeks Ended
	October 26, 2019
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,380
Operating cash flows from finance leases	517
Financing cash flows from finance leases	113

In the first quarter of fiscal 2020, the Company adopted ASU 2016-02, and as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments by year and in the aggregate for all non-cancelable leases with initial terms of one year or more consisted of the following at July 27, 2019:



	Capital and financing leases		Operating leases
2020	$	5,173	$	13,573
2021	5,240		12,972
2022	5,240		10,348
2023	5,305		9,747
2024	5,342		7,457
Thereafter	43,708		61,043
Minimum lease payments	70,008		$	115,140
Less amount representing interest	28,233

Present value of minimum lease payments	41,775

Less current portion	1,022
	$	40,753

LEASES

The composition of total lease cost is as follows:



		13 Weeks Ended
	Consolidated Statement of Operations Classification	October 26, 2019
Operating lease cost	Operating and administrative expense	$	4,779
Finance lease cost
Amortization of leased assets	Depreciation and amortization	237
Interest on lease liabilities	Interest expense	517
Variable lease cost	Operating and administrative expense	3,695

Total lease cost		$	9,228



	Operating leases		Finance leases		Total
Remainder of 2020	$	12,663	$	2,000	$	14,663
2021	15,453		2,689		18,142
2022	14,658		2,689		17,347
2023	14,504		2,689		17,193
2024	12,369		2,689		15,058
Thereafter	79,309		24,428		103,737
Total lease payments	148,956		37,184		186,140
Less amount representing interest	40,539		13,173		53,712

Present value of lease liabilities	$	108,417	$	24,011	$	132,428

The Company has approximately $9,280 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of October 26, 2019.



	October 26, 2019
Weighted-average remaining lease term (years)
Operating leases	12.2
Finance leases	16.3
Weighted-average discount rate
Operating leases	5.3	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:



	13 Weeks Ended
	October 26, 2019
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,380
Operating cash flows from finance leases	517
Financing cash flows from finance leases	113



	Capital and financing leases		Operating leases
2020	$	5,173	$	13,573
2021	5,240		12,972
2022	5,240		10,348
2023	5,305		9,747
2024	5,342		7,457
Thereafter	43,708		61,043
Minimum lease payments	70,008		$	115,140
Less amount representing interest	28,233

Present value of minimum lease payments	41,775

Less current portion	1,022
	$	40,753