Operating Leases

3 Months Ended

Jul. 31, 2022

Note 5 — Operating Leases

Lessee

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 lease standard and we perform the lease classification test as of the lease commencement date. Right-of-use (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 leasing standard, leases that are more than one year in duration are capitalized and recorded on our 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 lease liabilities are presented on our Unaudited Condensed Consolidated Statement of Financial Position as follows:

	July 31, 2022		April 30, 2022
Operating lease ROU assets	$	103,196	$	111,719
Short-term portion of operating lease liabilities		19,788		20,576
Operating lease liabilities, non-current	$	127,055	$	132,541

During the three months ended July 31, 2022, we added less than $0.1 million to the ROU assets and operating lease liabilities due to new leases, as well as modifications and remeasurements to our existing operating leases.

As a result of the Fiscal Year 2023 Restructuring Program, which included the exit of certain leased office space beginning in the three months ended July 31, 2022, we incurred an initial pretax restructuring charge of $20.0 million in the three months ended July 31, 2022. This initial charge included severance, impairment charges and acceleration of expense associated with certain operating lease ROU assets. See Note 9, “Restructuring and Related Charges (Credits)” for more information on this program and the charges incurred.

Our total net lease costs are as follows:

	Three Months Ended July 31,
	2022			2021
Operating lease cost	$	5,182		$	5,917
Variable lease cost		278			344
Short-term lease cost		115			20
Sublease income		(198	)		(201	)
Total net lease cost ⁽¹⁾	$	5,377		$	6,080

⁽¹⁾

Total net lease cost does not include those costs and sublease income included in Restructuring and related charges (credits) on our Unaudited Condensed Consolidated Statements of Net (Loss) Income. This includes operating leases we identified as part of our restructuring programs that would be subleased. See Note 9, “Restructuring and Related Charges (Credits)” for more information on these programs.

Other supplemental information includes the following:

	Three Months Ended July 31,
	2022			2021
Weighted-average remaining contractual lease term (years)		8			9
Weighted-average discount rate		5.87	%		5.83	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,341		$	7,974

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 on our Unaudited Condensed Consolidated Statement of Financial Position as of July 31, 2022:

Fiscal Year	Operating Lease Liabilities
2023 (remaining 9 months)	$	20,619
2024		25,940
2025		24,556
2026		22,226
2027		17,871
Thereafter		77,513
Total future undiscounted minimum lease payments		188,725

Less: Imputed interest		41,882

Present value of minimum lease payments		146,843

Less: Current portion		19,788

Noncurrent portion	$	127,055