Leases

3 Months Ended

Nov. 21, 2020

Leases.

Leases

Note K – Leases

The Company’s leases primarily relate to its retail stores, distribution centers and vehicles under various non-callable leases. Retail leases typically have initial terms of between one and 20 years, with one to six optional renewal periods of one to five years each. Finance leases for vehicles typically have original terms between one and five years, and finance leases for real estate leases typically have terms of 20 or more years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet are as follows:

		November 21,		August 29,
(in thousands)	Classification	2020		2020
Assets:
Operating	Operating lease right-of-use assets	$	2,607,019	$	2,581,677
Finance	Property and equipment		328,153		327,006
Total lease assets		$	2,935,172	$	2,908,683
Liabilities:
Current:
Operating	Current portion of operating lease liabilities	$	246,332	$	223,846
Finance	Accrued expenses and other		63,408		67,498
Noncurrent:
Operating	Operating lease liabilities, less current portion		2,524,008		2,501,560
Finance	Other long-term liabilities		169,513		155,855
Total lease liabilities		$	3,003,261	$	2,948,759

Accumulated amortization related to finance lease assets was $95.0 million as of November 21, 2020 and $107.3 million as of August 29, 2020.

Lease costs for finance and operating leases for the twelve week period ended November 21, 2020 are as follows:

		Twelve Weeks Ended
		November 21,		November 23,
(in thousands)	Statement of Income Location	2020		2019
Finance lease cost:
Amortization of lease assets	Depreciation and amortization	$	9,319	$	12,656
Interest on lease liabilities	Interest expense, net		703		1,385
Operating lease cost(1)	Selling, general and administrative expenses		84,103		81,799
Total lease cost		$	94,125	$	95,840

(1) Includes short-term leases, variable lease costs and sublease income, which are immaterial.

The following table summarizes the Company’s lease term and discount rate assumptions:

	November 21,
	2020
Weighted-average remaining lease term in years, inclusive of renewal options that are reasonably certain to be exercised:
Finance leases – real estate	27
Finance leases – vehicles	4
Operating leases	15
Weighted-average discount rate:
Finance leases – real estate	3.48	%
Finance leases – vehicles	2.04	%
Operating leases	3.46	%

The following table summarizes the other information related to the Company’s lease liabilities:

	Twelve Weeks Ended
	November 21,		November 23,
(in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities – operating cash flows from operating leases	$	49,171	$	50,526
Leased assets obtained in exchange for new finance lease liabilities		23,136		18,297
Leased assets obtained in exchange for new operating lease liabilities		94,105		19,656

As of November 21, 2020, the Company has entered into additional leases which have not yet commenced and are therefore not part of the right-of-use asset and liability. These leases have undiscounted future payments of approximately $36.8 million for real estate and $85.0 million for vehicles, of which the majority will replace existing leased vehicles, and will commence when the Company obtains possession of the underlying leased asset. Commencement dates are expected to be from fiscal 2021 to fiscal 2022.