Leases

6 Months Ended

Jan. 31, 2020

11. Leases

The Company has ground leases for its leased stores and office space leases that are recorded as operating leases under various non-cancellable operating leases. The Company also leases advertising billboards, vehicle fleets, and certain equipment under various non-cancellable operating leases. Additionally, the Company also completed sale-leaseback transactions in 2000 and 2009. In 2009, the Company completed sale-leaseback transactions involving 15 of its owned stores and its retail distribution center. Under the transactions, the land, buildings and improvements at the locations were sold and leased back for terms of 20 and 15 years, respectively. Equipment was not included. The leases include specified renewal options for up to 20 additional years. In 2000, the Company completed a sale-leaseback transaction involving 65 of its owned stores. Under the transaction, the land, buildings and building improvements at the locations were sold and leased back for a term of 21 years. The leases for these stores include specified renewal options for up to 20 additional years and certain financial covenants which include maintenance of a minimum fixed charge coverage for the leased stores. At January 31, 2020 and August 2, 2019, the Company was in compliance with these covenants.

To determine whether a contract is or contains a lease, the Company determines at contract inception whether it contains the right to control the use of an identified asset for a period of time in exchange for consideration. If the contract has the right to obtain substantially all of the economic benefit from use of the identified asset and the right to direct the use of the identified asset, the Company recognizes a right-of-use asset and lease liability. The Company’s leases all have varying terms and expire at various dates through 2055. Restaurant leases typically have base terms of ten years with four to five optional renewal periods of five years each. The Company uses a lease life that generally begins on the commencement date, including the rent holiday periods, and generally extends through certain renewal periods that can be exercised at the Company’s option. The Company has included lease renewal options in the lease term for calculations of the right-of-use asset and liability for which at the commencement of the lease it is reasonably certain that the Company will exercise those renewal options. Additionally, some of the leases have contingent rent provisions and others require adjustments for inflation or index. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company has entered into agreements for real estate leases that are not recorded as right-of-use assets or lease liabilities as we have not yet taken possession. These leases are expected to commence in the in 2021 with undiscounted future payments of $15,900.

As further discussed in Note 1 under the lease discussion in the “Recent Accounting Standards Adopted” section, the Company has elected to not separate lease and non-lease components. Additionally, the Company has elected to apply the short term lease exemption to all asset classes and the short term lease expense for the period reasonably reflects the short term lease commitments. As the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at the time of commencement or modification date in determining the present value of lease payments. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, we used the incremental borrowing rate as of the adoption date. Assumptions used in determining the Company’s incremental borrowing rate include the Company’s implied credit rating and an estimate of secured borrowing rates based on comparable market data.

The following table summarizes the components of lease cost for operating leases for the quarter and six months ended January 31, 2020:

	Quarter Ended January 31, 2020		Six Months Ended January 31, 2020
Operating lease cost	$	20,462	$	40,318
Short term lease cost		1,892		2,276
Variable lease cost		479		930
Total lease cost	$	22,833	$	43,524

The following table summarizes supplemental cash flow information and non-cash activity related to the Company’s operating leases for the quarter and six months ended January 31, 2020:

	Quarter Ended January 31, 2020			Six Months Ended January 31, 2020
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	20,286		$	39,832
Noncash information:
Right-of-use assets obtained in exchange for new operating lease liabilities		601			4,439
Lease modifications granting additional right-of-use assets		5,691			12,517
Lease modifications removing right-of-use assets		(280	)		(929	)

The following table summarizes the weighted-average remaining lease term and the weighted-average discount rate for operating leases as of January 31, 2020:

Weighted-average remaining lease term		18.04 Years
Weighted-average discount rate			3.86	%

The following table summarizes the maturities of undiscounted cash flows reconciled to the total lease liability as of January 31, 2020:

Year	Total
Remainder of 2020	$	39,873
2021		50,982
2022		41,429
2023		37,390
2024		36,726
Thereafter		533,084
Total future minimum lease payments		739,484
Less imputed remaining interest		(229,122	)
Total present value of operating lease liabilities	$	510,362

The following table summarizes the maturities of lease commitments as of August 2, 2019, prior to the adoption of the new lease guidance, as previously disclosed in our 2019 Form 10-K:

Year	Total
2020	$	69,249
2021		40,962
2022		36,280
2023		33,639
2024		34,020
Thereafter		515,169
Total	$	729,319