Leases (Notes)

3 Months Ended

Oct. 31, 2019

Leases of Lessee Disclosure [Text Block]

4. Leases

The Company’s operating leases consist primarily of commercial and retail space, office space, employee residential units, vehicles and other equipment. The Company determines if an arrangement is or contains a lease at contract inception or modification. The Company’s lease contracts generally range from 1 year to 60 years, with some lease contracts containing one or more lease extension options, exercisable at the Company’s discretion. The Company generally does not include these lease extension options in the initial lease term as it is not reasonably certain that it will exercise such options at contract inception. In addition, certain lease arrangements contain fixed and variable lease payments. The variable lease payments are primarily contingent rental payments

based on: (i) a percentage of revenue related to the leased property; (ii) payments based on a percentage of sales over contractual levels; or (iii) lease payments adjusted for changes in an index or market value. These variable lease payments are typically recognized when the underlying event occurs and are included in operating expenses in the Company's Consolidated Condensed Statements of Operations in the same line item as the expense arising from fixed lease payments. The Company’s lease agreements may also include non-lease components, such as common area maintenance and insurance, which are accounted for separately as non-lease components. Future lease payments that are contingent and non-lease components are not included in the measurement of the operating lease liability. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants. Lease expense related to lease payments is recognized on a straight-line basis over the term of the lease.

The Company’s leases do not provide a readily determinable implicit rate. As a result, the Company measures the lease liability using an estimated incremental borrowing rate which is intended to reflect the rate of interest the Company would pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company applies the estimated incremental borrowing rates at a portfolio level based on the economic environment associated with the lease.

The Company uses the long-lived assets impairment guidance to determine recognition and measurement of an ROU asset impairment, if any. The Company monitors for events or changes in circumstances that require a reassessment.

The components of lease expense for the three months ended October 31, 2019, were as follows (in thousands):



	Three Months Ended October 31, 2019
Finance leases:
Amortization of the finance ROU assets	$	2,438
Interest on lease liabilities	$	8,509
Operating leases:
Operating lease expense	$	10,037
Short-term lease expense¹	$	2,353
Variable lease expense	$	843

¹Short-term lease expense is attributable to leases with terms of 12 months or less which are not included within the Company’s Consolidated Condensed Balance Sheet.

The following table presents the supplemental cash flow information associated with the Company’s leasing activities for the three months ended October 31, 2019 (in thousands):



	Three Months Ended October 31, 2019
Cash flow supplemental information:
Operating cash outflows for operating leases	$	11,218
Operating cash outflows for finance leases	$	1,049
Financing cash outflows for finance leases	$	5,387

Weighted-average remaining lease terms and discount rates are as follows:



	As of October 31, 2019
Weighted-average remaining lease term (in years)
Operating leases	10.9
Finance leases	43.6
Weighted-average discount rate
Operating leases	4.5	%
Finance leases	10.0	%

Future minimum lease payments for operating and finance leases as of October 31, 2019 reflected by fiscal year (August 1 through July 31) are as follows (in thousands):



	Operating Leases			Finance Leases
2020 (November 2019 through July 2020)	$	38,383		$	21,190
2021	44,188			28,818
2022	41,256			29,394
2023	36,656			29,982
2024	32,899			30,582
Thereafter	165,267			1,805,047
Total future minimum lease payments	358,649			1,945,013
Less amount representing interest	(92,331		)	(1,603,309		)
Total lease liabilities	$	266,318		$	341,704

Future minimum lease payments in accordance with Topic 840 as of July 31, 2019, reflected by fiscal year, are as follows (in thousands):



	Operating Leases		Capital Leases
2020	$	44,984	$	28,253
2021	42,512		28,818
2022	39,440		29,394
2023	34,840		29,982
2024	30,836		30,582
Thereafter	142,526		1,805,048
Total future minimum lease payments	$	335,138	$	1,952,077
Less amount representing interest			(1,611,816		)
Net future minimum lease payments			$	340,261

The current portion of operating lease liabilities of approximately $35.1 million as of October 31, 2019 is recorded within accounts payables and accrued liabilities in the Consolidated Condensed Balance Sheet. Finance lease liabilities are recorded within long-term debt, net in the Consolidated Condensed Balance Sheets.

The Canyons finance lease obligation represents the only material finance lease entered into by the Company as of October 31, 2019. As of October 31, 2019, the Company has recorded $125.1 million of finance lease ROU assets in connection with the Canyons lease, net of $58.5 million of accumulated amortization, which is included within property, plant and equipment in the Company’s Consolidated Condensed Balance Sheet.