Note 5. Leases

Effective the first quarter of Fiscal 2020 (April 28, 2019), we adopted FASB ASC 842, Leases (Topic 842), which requires us to recognize lease assets and lease liabilities on the condensed consolidated balance sheets for substantially all lease arrangements. We adopted this standard using a modified retrospective basis, with no restatement of prior periods. We elected the package of practical expedients permitted under the transition guidance for existing or expired contracts and did not reassess whether such contracts contain leases, the lease classification or the initial direct costs. Additionally, we utilized the historical lease term and did not utilize the practical expedient allowing the use of hindsight in determining the lease term and in assessing impairment of its right-of-use (“ROU”) assets. Additionally, we elected to apply the available practical expedient allowing for the election of an accounting policy by class of underlying asset to combine lease and non-lease components for all of our asset classes.

Our portfolio of leases consists of operating leases comprised of operations agreements which grant us the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. We do not have finance leases or short-term leases (i.e., those with a term of twelve months or less).

We recognize a ROU asset and lease liability in our condensed consolidated balance sheets for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. Our lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year.

Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises ("variable commissions"), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, we recognize lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Our lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

We used our incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. We utilized an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later.

The following table summarizes lease expense as of July 27, 2019:



	13 weeks ended
	July 27, 2019
Variable lease expense	$	6,870
Operating lease expense	25,394
Net lease expense	$	32,264

The following table summarizes our minimum fixed lease obligations, excluding variable commissions, as of July 27, 2019:



	As of
	July 27, 2019
Remainder of Fiscal 2020	$	118,447
Fiscal 2021	77,212
Fiscal 2022	49,907
Fiscal 2023	40,430
Fiscal 2024	32,273
Thereafter	60,223
Total lease payments	378,492
Less: imputed interest	(40,803		)
Operating lease liabilities at period end	$	337,689

Future lease payment obligations related to leases that were entered into, but did not commence as of July 27, 2019, were not material.

The following summarizes additional information related to our operating leases:



	As of
	July 27, 2019
Weighted average remaining lease term (in years)	4.6 years
Weighted average discount rate	4.0		%

Supplemental cash flow information:
Cash payments for lease liabilities within operating activities	$	33,366
ROU assets obtained in exchange for lease liabilities from initial recognition	$	73,003