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Lease Accounting

9 Months Ended

Sep. 30, 2023

Leases [Abstract]

Lease Accounting

Lease Accounting

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining lease terms of 2 year or less to 36 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 5 to 20 years or more. The exercise of lease renewal options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors, technology changes, demographic shifts and behavior, environmental regulatory requirements and other information that impacts decisions as to store location, management has determined that it was not reasonably certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or otherwise modify its lease agreements to determine if changes are required to the right-of-use assets and liabilities.

As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lessor — We have various arrangements for certain spaces for food service and vending equipment as well as subleases under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is immaterial.

Lessee — We lease land for 435 stores and store sites, one terminal, a hangar and various equipment. Our lease agreements do not contain any material residual value guarantees. Included in our leased land are 102

properties leased from Walmart which contain restrictive covenants, though the restrictions are deemed to have an immaterial impact.

Leases are reflected in the following balance sheet accounts:

(Millions of dollars)			Classification						September 30, 2023						December 31, 2022
Assets
Operating (Right-of-use)			Operating lease right-of-use assets, net						$	451.9					$	449.6
Finance			Property, plant, and equipment, at cost, less accumulated depreciation of $38.9 at September 30, 2023 and $30.5 at December 31, 2022						116.3						124.6
Total leased assets									$	568.2					$	574.2
Liabilities
Current
Operating			Trade accounts payable and accrued liabilities						$	21.6					$	20.5
Finance			Current maturities of long-term debt						11.0						11.0
Noncurrent
Operating			Non-current operating lease liabilities						449.8						444.2
Finance			Long-term debt, including capitalized lease obligations						117.3						122.6
Total lease liabilities									$	599.7					$	598.3

Lease Cost:

												Three Months Ended September 30,												Nine Months Ended September 30,
(Millions of dollars)						Classification						2023						2022						2023						2022
Operating lease cost						Store and other operating expenses						$	14.2					$	13.6					$	40.8					$	38.1
Finance lease cost
Amortization of leased assets						Depreciation and amortization						3.8						4.0						11.4						11.9
Interest on lease liabilities						Interest expense						2.1						2.2						6.7						6.8
Net lease costs												$	20.1					$	19.8					$	58.9					$	56.8

Cash flow information:

									Nine Months Ended September 30,
(Millions of dollars)									2023						2022
Cash paid for amounts included in the measurement of liabilities
Operating cash flows from operating leases									$	37.6					$	33.8
Operating cash flows from finance leases									$	6.7					$	6.8
Financing cash flows from finance leases									$	8.6					$	8.4

Maturity of Lease Liabilities at September 30, 2023:

(Millions of dollars)						Operating leases						Finance leases
2023						$	12.9					$	4.9
2024						52.2						18.8
2025						51.1						17.7
2026						50.4						16.5
2027						49.6						15.8
After 2027						568.4						122.2
Total lease payments						784.6						195.9
less: interest						313.2						67.6
Present value of lease liabilities						$	471.4					$	128.3

Lease Term and Discount Rate:

									Nine Months Ended September 30,
									2023
Weighted average remaining lease term (years)
Finance leases									12.4
Operating leases									15.2
Weighted average discount rate
Finance leases									6.7		%
Operating leases									6.5		%

Lease Accounting

Lease Accounting

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining lease terms of 2 year or less to 36 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 5 to 20 years or more. The exercise of lease renewal options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors, technology changes, demographic shifts and behavior, environmental regulatory requirements and other information that impacts decisions as to store location, management has determined that it was not reasonably certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or otherwise modify its lease agreements to determine if changes are required to the right-of-use assets and liabilities.

As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lessor — We have various arrangements for certain spaces for food service and vending equipment as well as subleases under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is immaterial.

Lessee — We lease land for 435 stores and store sites, one terminal, a hangar and various equipment. Our lease agreements do not contain any material residual value guarantees. Included in our leased land are 102

properties leased from Walmart which contain restrictive covenants, though the restrictions are deemed to have an immaterial impact.

Leases are reflected in the following balance sheet accounts:

(Millions of dollars)			Classification						September 30, 2023						December 31, 2022
Assets
Operating (Right-of-use)			Operating lease right-of-use assets, net						$	451.9					$	449.6
Finance			Property, plant, and equipment, at cost, less accumulated depreciation of $38.9 at September 30, 2023 and $30.5 at December 31, 2022						116.3						124.6
Total leased assets									$	568.2					$	574.2
Liabilities
Current
Operating			Trade accounts payable and accrued liabilities						$	21.6					$	20.5
Finance			Current maturities of long-term debt						11.0						11.0
Noncurrent
Operating			Non-current operating lease liabilities						449.8						444.2
Finance			Long-term debt, including capitalized lease obligations						117.3						122.6
Total lease liabilities									$	599.7					$	598.3

Lease Cost:

												Three Months Ended September 30,												Nine Months Ended September 30,
(Millions of dollars)						Classification						2023						2022						2023						2022
Operating lease cost						Store and other operating expenses						$	14.2					$	13.6					$	40.8					$	38.1
Finance lease cost
Amortization of leased assets						Depreciation and amortization						3.8						4.0						11.4						11.9
Interest on lease liabilities						Interest expense						2.1						2.2						6.7						6.8
Net lease costs												$	20.1					$	19.8					$	58.9					$	56.8

Cash flow information:

									Nine Months Ended September 30,
(Millions of dollars)									2023						2022
Cash paid for amounts included in the measurement of liabilities
Operating cash flows from operating leases									$	37.6					$	33.8
Operating cash flows from finance leases									$	6.7					$	6.8
Financing cash flows from finance leases									$	8.6					$	8.4

Maturity of Lease Liabilities at September 30, 2023:

(Millions of dollars)						Operating leases						Finance leases
2023						$	12.9					$	4.9
2024						52.2						18.8
2025						51.1						17.7
2026						50.4						16.5
2027						49.6						15.8
After 2027						568.4						122.2
Total lease payments						784.6						195.9
less: interest						313.2						67.6
Present value of lease liabilities						$	471.4					$	128.3

Lease Term and Discount Rate:

									Nine Months Ended September 30,
									2023
Weighted average remaining lease term (years)
Finance leases									12.4
Operating leases									15.2
Weighted average discount rate
Finance leases									6.7		%
Operating leases									6.5		%

X

- References

No definition available.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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