Leases

12 Months Ended

Jul. 31, 2020

11. Leases

As further discussed in Note 2 under the “Lease” discussion in the “Recent Accounting Standards Adopted” section, in 2020, the Company adopted new accounting guidance for leases. As part of the adoption of the new accounting guidance for leases, the Company elected to not separate lease and non-lease components. Additionally, the Company 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, the Company 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 Company has entered into agreements for real estate leases that are not recorded as right-of-use assets or lease liabilities as it has not yet taken possession. These leases are expected to commence in 2021 with undiscounted future payments of $246,622. This amount includes the sale and leaseback transaction completed in August 2020 discussed below.

The following table summarizes the components of lease cost for operating leases for the year ended July 31, 2020:

	Year Ended July 31, 2020
Operating lease cost	$	82,963
Short term lease cost		2,896
Variable lease cost		1,719
Total lease cost	$	87,578

Prior to the adoption of the new lease accounting guidance in 2020, rent expense under operating leases, including the sale-leaseback transactions discussed below, for 2019 and 2018 was:

Year	Minimum		Contingent		Total
2019	$	78,044	$	280	$	78,324
2018		76,445		255		76,700

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

	Year Ended July 31, 2020
Operating cash flow information:
Gain on sale and leaseback transaction	$	69,954
Cash paid for amounts included in the measurement of lease liabilities		80,265
Noncash information:
Right-of-use assets obtained in exchange for new operating lease liabilities		267,266
Lease modifications or reassessments increasing or decreasing right-of-use assets		29,793
Lease modifications removing right-of-use assets		(19,939	)

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

Weighted-average remaining lease term	19.05 Years
Weighted-average discount rate	4.50%

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

Year	Total
2021	$	71,184
2022		57,183
2023		52,785
2024		50,886
2025		49,768
Thereafter		762,624
Total future minimum lease payments		1,044,430
Less imputed remaining interest		(369,499	)
Total present value of operating lease liabilities	$	674,931

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 the Company’s Form 10-K for the fiscal year ended August 2, 2019:

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

Sale and Leaseback Transactions

In 2009, the Company completed sale and 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 and leaseback transaction involving 65 of its owned Cracker Barrel 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 included specified renewal options for up to 20 additional years. On July 29, 2020, the Company entered into an agreement with the original lessor and a third party financier to obtain ownership of 64 of the 65 Cracker Barrel properties and simultaneously entered into a sale and leaseback transaction with the financier for an aggregate purchase price, net of closing costs, of $198,083. The Company purchased the remaining property for approximately $3,200. In connection with the sale and leaseback transaction, the Company entered into lease agreements for each of the properties for initial terms of 20 years and renewal options up to 50 years. The aggregate initial annual rent payment for the properties is approximately $14,379 and includes 1% annual rent increases over the initial lease terms. All the properties qualified for sale and leaseback and operating lease accounting classification and the Company recorded a gain on the sale and leaseback transaction of $69,954 which is recorded in the gain on sale and leaseback transaction line in the Consolidated Statements of Income (Loss). The Company also recorded operating lease right-of-use assets and corresponding operating lease liabilities of $261,698 and $182,649, respectively.

Subsequent to July 31, 2020, the Company completed a sale and leaseback transaction involving 62 of its owned Cracker Barrel stores for an aggregate purchase price, net of closing costs, of $146,357. Under the transaction, the land, buildings and building improvements at the locations were sold and leased back for initial terms of 20 years and renewal options up to 50 years. The aggregate initial annual rent payment for the properties is approximately $10,393 and includes 1% annual rent increases over the initial lease terms. All of the properties qualified for sale and leaseback and operating lease accounting classification, and the Company recorded total gains of $217,722. The Company also recorded operating lease right-of-use assets and corresponding operating lease liabilities of $309,656 and $133,695, respectively.