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Leases | 6 Months Ended
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Feb. 27, 2021
Leases [Abstract] |
Leases | Note 7. Leases The Company’s lease portfolio includes certain real estate (branch offices, customer fulfillment centers, and regional inventory centers), automobiles, and other equipment. The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Operating leases are recorded on the balance sheet with operating lease assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. For real estate leases, the Company has elected the practical expedient which allows lease components and non-lease components, such as common area maintenance, to be grouped as a single lease component. The Company has also elected the practical expedient which allows leases with an initial term of 12 months or less to be excluded from the balance sheet. The Company does not guarantee any residual value in its lease agreements, there are no material restrictions or covenants imposed by lease arrangements, and there are no lease transactions with related parties. Real estate leases typically include one or more options to extend the lease. The Company regularly evaluates the renewal options, and when it is reasonably certain of exercise, the Company includes the renewal period in its lease term. The automobile leases contain variable lease payments based on inception and subsequent interest rate fluctuations. For the thirteen- and twenty-six-week periods ended February 27, 2021 and February 29, 2020, the variable lease cost was a benefit due to low current interest rates. When readily determinable, the Company uses the interest rate implicit in its leases to discount lease payments. When the implicit rate is not readily determinable, as is the case with substantially all of the real estate leases, the Company utilizes the incremental borrowing rate. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The rate for each lease was determined using primarily the Company’s credit spread, the lease term, and currency. In the second quarter of fiscal year 2021, the Company announced an enhanced customer support model, including a transition from the branch office network to virtual customer care hubs. This transition included the closure of 73 branch offices, all of which were under operating leases. As a result, the Company recorded an impairment charge of $16,736 for impacted operating lease assets which is included in Restructuring costs on the unaudited Condensed Consolidated Statements of Income for the thirteen and twenty-six weeks ended February 27, 2021. See Note 9 “Restructuring Costs” for additional information. The components of lease cost for the thirteen- and twenty-six-week periods ended February 27, 2021 and February 29, 2020 were as follows:
|  | Thirteen Weeks Ended | Thirteen Weeks Ended
|  | February 27, 2021 | February 29, 2020
Operating lease cost |  | $ | 6,182 |  | $ | 6,188
Variable lease benefit |  |  | (538) |  |  | (51)
Short-term lease cost |  |  | 244 |  |  | 220
Finance lease cost: |  |  |  |  |  |
Amortization of leased assets |  |  | 322 |  |  | 311
Interest on leased liabilities |  |  | 21 |  |  | 30
Total Lease Cost |  | $ | 6,231 |  | $ | 6,698
|  | Twenty-Six Weeks Ended | Twenty-Six Weeks Ended
|  | February 27, 2021 | February 29, 2020
Operating lease cost |  | $ | 12,866 |  | $ | 12,360
Variable lease benefit |  |  | (1,021) |  |  | (91)
Short-term lease cost |  |  | 403 |  |  | 484
Finance lease cost: |  |  |  |  |  |
Amortization of leased assets |  |  | 644 |  |  | 573
Interest on leased liabilities |  |  | 45 |  |  | 55
Total Lease Cost |  | $ | 12,937 |  | $ | 13,381
Supplemental balance sheet information relating to operating and finance leases is as follows:
|  | As of |  |  | As of
|  | February 27, |  | August 29,
| Classification | 2021 |  |  | 2020
Assets |  |
Operating lease assets | Operating lease assets | $ | 41,758 | (2) | $ | 56,173
Finance lease assets (1) | Property, plant and equipment, net |  | 2,981 |  |  | 3,625
Total leased assets |  | $ | 44,739 |  | $ | 59,798
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating | Current portion of operating lease liabilities | $ | 19,956 |  | $ | 21,815
Finance | Current portion of debt including obligations under finance leases |  | 1,280 |  |  | 1,262
Noncurrent |  |  |  |  |  |
Operating | Noncurrent operating lease liabilities |  | 37,640 |  |  | 34,379
Finance | Long-term debt including obligations under finance leases |  | 1,793 |  |  | 2,453
Total lease liabilities |  | $ | 60,669 |  | $ | 59,909
(1) Finance lease assets are net of accumulated amortization of $2,083 and $1,439 as of February 27, 2021 and August 29, 2020, respectively.
(2) During the twenty-six-week period ended February 27, 2021, the Company recorded an impairment charge of $16,736 for impacted operating lease assets which is included in Restructuring costs on the unaudited Condensed Consolidated Statements of Income for the thirteen-and twenty-six weeks ended February 27, 2021. See Note 9 “Restructuring Costs” for additional information.
|  | As of |  | As of
|  | February 27, |  | February 29,
|  | 2021 |  | 2020
Weighted-average remaining lease term (in years) |  |  |  |  |  |
Operating Leases |  | 4.7 |  |  | 4.0 |
Finance Leases |  | 2.5 |  |  | 3.4 |
Weighted-average discount rate |  |  |  |  |  |
Operating Leases |  | 3.7 | % |  | 3.5 | %
Finance Leases |  | 2.7 | % |  | 2.6 | %
The following sets forth supplemental cash flow information related to operating and finance leases:
|  | Twenty-Six Weeks Ended |  | Twenty-Six Weeks Ended
|  | February 27, 2021 |  | February 29, 2020
Operating Cash Outflows from Operating Leases |  | $ | 12,785 |  | $ | 12,188
Operating Cash Outflows from Finance Leases |  |  | 45 |  |  | 55
Financing Cash Outflows from Finance Leases |  |  | 642 |  |  | 504
Leased assets obtained in exchange for new lease liabilities: |  |  |  |  |  |
Operating Leases |  | $ | 9,670 |  | $ | 9,817
Finance Leases |  |  | - |  |  | 1,973
As of February 27, 2021, future lease payments were as follows:
Fiscal Year (1) |  | Operating Leases |  | Finance Leases |  | Total
2021 (excluding six months) |  | $ | 11,778 |  | $ | 687 |  | $ | 12,465
2022 |  |  | 16,970 |  |  | 1,344 |  |  | 18,314
2023 |  |  | 10,403 |  |  | 1,018 |  |  | 11,421
2024 |  |  | 7,187 |  |  | 152 |  |  | 7,339
2025 |  |  | 4,940 |  |  | 3 |  |  | 4,943
Thereafter |  |  | 11,584 |  |  | - |  |  | 11,584
Total Lease Payments |  |  | 62,862 |  |  | 3,204 |  |  | 66,066
Less: Imputed Interest |  |  | 5,266 |  |  | 131 |  |  | 5,397
Present Value of Lease Liabilities (2) |  | $ | 57,596 |  | $ | 3,073 |  | $ | 60,669
(1) Future lease payments by fiscal year are based on contractual lease obligations
(2) Includes the curren t portion of $19,956 for operating leases and $1,280 for fin ance leases

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