LEASES

12 Months Ended

Jul. 25, 2020

Leases [Abstract]

LEASES

LEASES

Description of leasing arrangements

The Company leases 33 retail stores, as well as a production distribution center (the "PDC"), the corporate headquarters and equipment at July 25, 2020. 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 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:

		Years ended
	Consolidated Statement of Operations Classification	July 25, 2020
Operating lease cost	Operating and administrative expense	$	22,911
Finance lease cost
Amortization of leased assets	Depreciation and amortization	947
Interest on lease liabilities	Interest expense	2,059
Variable lease cost	Operating and administrative expense	16,473
Total lease cost		$	42,390

As of July 25, 2020, finance lease right-of-use assets of $13,753 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 July 25, 2020:

	Operating leases		Finance leases		Total
2021	$	34,103	$	2,689	$	36,792
2022	35,555		2,689		38,244
2023	35,186		2,689		37,875
2024	33,298		2,689		35,987
2025	31,950		2,820		34,770
Thereafter	242,775		29,081		271,856
Total lease payments	412,867		42,657		455,524
Less amount representing interest	95,719		19,113		114,832
Present value of lease liabilities	$	317,148	$	23,544	$	340,692

The Company has approximately $16,671 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of July 25, 2020.

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 July 25, 2020, the Company's lease terms and discount rates are as follows:

	July 25, 2020
Weighted-average remaining lease term (years)
Operating leases	13.3
Finance leases	15.4
Weighted-average discount rate
Operating leases	3.9	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:

	2020
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	21,287
Operating cash flows from finance leases	2,059
Financing cash flows from finance leases	572

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

Related party leases

The Company leases a supermarket from a realty firm 30% owned by certain officers of Village. The Company paid rent to related parties under this lease of $688 in both fiscal 2020 and 2019, and has a related lease obligation of $3,772 at July 25, 2020. This lease expires in fiscal 2021 with options to extend at increasing annual rent.

The Company has ownership interests in three real estate partnerships. Village paid aggregate rents to two of these partnerships for leased stores of $1,556 and $1,455 in fiscal 2020 and 2019, respectively, and has related aggregate lease obligations of $13,179 at July 25, 2020.

One of these partnerships is a variable interest entity, which is not consolidated as Village is not the primary beneficiary. This partnership owns one property, a stand-alone supermarket leased to the Company since 1974. Village is a general partner entitled to 33% of the partnership's profits and losses.

The Company subleases the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $1,355 in both fiscal 2020 and 2019, and has related aggregate lease obligations of $3,521 at July 25, 2020. Both leases contain normal periodic rent increases and options to extend the lease.

LEASES

LEASES

Description of leasing arrangements

The Company leases 33 retail stores, as well as a production distribution center (the "PDC"), the corporate headquarters and equipment at July 25, 2020. 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 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:

		Years ended
	Consolidated Statement of Operations Classification	July 25, 2020
Operating lease cost	Operating and administrative expense	$	22,911
Finance lease cost
Amortization of leased assets	Depreciation and amortization	947
Interest on lease liabilities	Interest expense	2,059
Variable lease cost	Operating and administrative expense	16,473
Total lease cost		$	42,390

As of July 25, 2020, finance lease right-of-use assets of $13,753 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 July 25, 2020:

	Operating leases		Finance leases		Total
2021	$	34,103	$	2,689	$	36,792
2022	35,555		2,689		38,244
2023	35,186		2,689		37,875
2024	33,298		2,689		35,987
2025	31,950		2,820		34,770
Thereafter	242,775		29,081		271,856
Total lease payments	412,867		42,657		455,524
Less amount representing interest	95,719		19,113		114,832
Present value of lease liabilities	$	317,148	$	23,544	$	340,692

The Company has approximately $16,671 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of July 25, 2020.

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 July 25, 2020, the Company's lease terms and discount rates are as follows:

	July 25, 2020
Weighted-average remaining lease term (years)
Operating leases	13.3
Finance leases	15.4
Weighted-average discount rate
Operating leases	3.9	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:

	2020
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	21,287
Operating cash flows from finance leases	2,059
Financing cash flows from finance leases	572

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

Related party leases

The Company leases a supermarket from a realty firm 30% owned by certain officers of Village. The Company paid rent to related parties under this lease of $688 in both fiscal 2020 and 2019, and has a related lease obligation of $3,772 at July 25, 2020. This lease expires in fiscal 2021 with options to extend at increasing annual rent.

The Company has ownership interests in three real estate partnerships. Village paid aggregate rents to two of these partnerships for leased stores of $1,556 and $1,455 in fiscal 2020 and 2019, respectively, and has related aggregate lease obligations of $13,179 at July 25, 2020.

One of these partnerships is a variable interest entity, which is not consolidated as Village is not the primary beneficiary. This partnership owns one property, a stand-alone supermarket leased to the Company since 1974. Village is a general partner entitled to 33% of the partnership's profits and losses.

The Company subleases the Galloway and Vineland stores from Wakefern under sublease agreements which provided for combined annual rents of $1,355 in both fiscal 2020 and 2019, and has related aggregate lease obligations of $3,521 at July 25, 2020. Both leases contain normal periodic rent increases and options to extend the lease.