Operating Leases

9 Months Ended

Jan. 31, 2020

Note 5 — Operating Leases

On May 1, 2019, we adopted a new accounting standard for leases. For further information, see Note 2, “Recent Accounting Standards.”

We have contractual obligations as a lessee with respect to offices, warehouses and distribution centers, automobiles, and office equipment.

We determine if an arrangement is a lease at inception of the contract in accordance with guidance detailed in the new standard and we perform the lease classification test as of the lease commencement date. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The present value of the lease payments is calculated using an incremental borrowing rate, which was determined based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use an unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate.

Under the new leasing standard, leases that are more than one year in duration are capitalized and recorded on the Unaudited Condensed Consolidated Statements of Financial Position. Some of our leases offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation.

For operating leases, the ROU assets and liabilities are presented in our Unaudited Condensed Consolidated Statement of Financial Position as follows:

	January 31, 2020
Operating lease right-of-use Assets	$	142,308
Short-term portion of operating lease liabilities		18,950
Operating lease liabilities, non-current	$	160,781

During the nine months ended January 31, 2020, we added $13.3 million to the ROU assets and $14.9 million to the operating lease liabilities due to new leases as well as modifications and remeasurements to our existing operating leases.

Our total net lease costs are as follows:

	Three Months Ended January 31, 2020			Nine Months Ended January 31, 2020
Operating lease cost	$	6,286		$	19,346
Variable lease cost		1,004			3,122
Sublease income		(180	)		(519	)
Total net lease cost	$	7,110		$	21,949

Other supplemental information includes the following:

	Weighted-Average Remaining Contractual Lease Term (Years)		Nine Months Ended January 31, 2020
Operating leases		10

Weighted-average discount rate:
Operating leases				5.91	%

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	22,029

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded in the Unaudited Condensed Consolidated Statement of Financial Position as of January 31, 2020:

Fiscal Year	Operating Lease Liabilities
2020 (remaining 3 months)	$	9,372
2021		28,426
2022		25,386
2023		22,938
2024		22,061
Thereafter		135,373
Total undiscounted lease payments		243,556

Less: Imputed interest		63,825

Present Value of Minimum Lease Payments		179,731

Less: Current portion		18,950

Noncurrent portion	$	160,781