Leases

3 Months Ended

Oct. 31, 2019

Leases of Lessee Disclosure [Text Block]

NOTE 4 – Leases

The Company leases certain facilities and certain equipment under non-cancelable capital and operating leases, which are recorded as right-of-use assets and lease liabilities. Certain leases provide the Company with either a right of first refusal to acquire or an option to purchase a facility at fair value. Certain leases also have renewal options to extend the leases for additional periods at the Company’s discretion. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the right-of-use asset and the lease liabilities. The effects of these escalation clauses or concessions have been reflected in lease expense on a straight-line basis over the expected lease term and any variable lease payments subsequent to establishing the lease liability are expensed as incurred. The lease term commences on the date when the Company has the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Certain of the Company’s leases have renewal periods up to 40 years, exercisable at the Company’s option, and generally require the Company to pay property taxes, insurance and maintenance costs, in addition to the lease payments. At lease inception, the Company includes all renewals or option periods that are reasonably certain to exercise when determining the expected lease term, as failure to renew the lease would impose an economic penalty.

The Company determines whether a contract is or contains a lease at the inception of the contract. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in the Company’s leases.

Components of lease expense for the three months ended October 31, 2019 were as follows:



		Three Months Ended October 31,
(In thousands)		2019
Operating lease expense		$	7,976
Finance lease expense:
	Amortization of right-of-use assets	155
	Interest on finance lease liabilities	7
Short-term lease expense		1,995
Variable lease expense		144
Total lease expense		$	10,277

The components of right-of-use assets and lease liabilities on the consolidated balance sheet are as follows (in thousands):



Lease Asset and Liabilities	Balance Sheet Classification (In thousands)	October 31, 2019
Operating lease right-of-use assets	Operating lease right-of-use assets	$	136,368
Finance lease right-of-use assets	Property and equipment, net	1,561
Total lease assets, net		$	137,929

Operating lease liabilities - current	Current portion of operating lease liabilities	$	27,055
Finance lease liabilities - current	Current portion of revolving loan facility and finance lease liabilities	590
Operating lease liabilities - non-current	Operating lease liabilities, net of current portion	113,263
Finance lease liabilities - non-current	Long-term debt, revolving loan facility and finance lease liabilities, net of discount	978
Total lease liabilities		$	141,886

The weighted-average remaining lease terms and discount rates as of October 31, 2019 are as follows:



(in thousands)	Weighted-Average Remaining Lease Term (in years)	Weighted-Average Discount Rate⁽¹⁾
Operating leases	9.12	3.03	%
Finance leases	2.55	1.73	%


(1)	We cannot determine the interest rate implicit in the Company’s leases. Therefore, the discount rate represents the Company’s incremental borrowing rate and is determined based on the risk-free rate, adjusted for the risk premium attributed to our corporate credit rating for a secured or collateralized instrument.

Supplemental cash flow information related to leases:



(in thousands)		Three Months Ended October 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows related to operating leases	$	7,753
	Operating cash flows related to finance leases	7
	Financing cash flows related to finance leases	159
Right-of-use assets obtained in exchange for new operating lease liabilities		9,009
Right-of-use assets obtained in exchange for new finance lease liabilities		—

The annual maturities of our lease liabilities as of October 31, 2019 are as follows:



Fiscal year (In thousands)	Finance leases			Operating leases
2020 (remaining nine months)	$	478		$	22,918
2021	619			26,450
2022	505			21,574
2023	—			18,831
2024	—			14,492
Thereafter	—			59,518
Total future lease commitments	$	1,602		$	163,783
Less: imputed interest	(34		)	(23,465		)
Present value of lease liabilities	$	1,568		$	140,318