LEASES

6 Months Ended

Jan. 25, 2020

The Company leases 27 retail stores, as well as the corporate headquarters and equipment at January 25, 2020. The majority of initial lease terms range from 20 to 30 years. Most of the Company’s leases contain renewal options at increased rents of five to ten years each at the Company’s sole discretion. These options enable Village to retain the use of facilities in desirable operating areas. Each renewal option is evaluated when recognizing the lease right-of-use assets and liabilities, and the Company utilizes the lease term for which it is reasonably certain to use the underlying asset. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company is obligated under all leases to pay for real estate taxes, utilities and liability insurance, and under certain leases to pay additional amounts based on maintenance and a percentage of sales in excess of stipulated amounts. The Company accounts for rent holidays, escalating rent provisions, and construction allowances on a straight-line basis over the term of the lease.

The composition of total lease cost is as follows:



		13 Weeks Ended		26 Weeks Ended
	Consolidated Statement of Operations Classification	January 25, 2020		January 25, 2020
Operating lease cost	Operating and administrative expense	$	4,425	$	9,204
Finance lease cost
Amortization of leased assets	Depreciation and amortization	237		474
Interest on lease liabilities	Interest expense	515		1,032
Variable lease cost	Operating and administrative expense	3,968		7,662

Total lease cost		$	9,145	$	18,372

As of January 25, 2020, finance lease right-of-use assets of $14,227 are included in Property, equipment and fixtures, net in the Company's Consolidated Balance Sheet. Maturities of operating and finance lease liabilities, including options to extend lease terms that are reasonably certain of being exercised, are as follows as of January 25, 2020:



	Operating leases		Finance leases		Total
Remainder of 2020	$	9,352	$	1,345	$	10,697
2021	16,621		2,689		19,310
2022	15,739		2,689		18,428
2023	15,412		2,689		18,101
2024	13,276		2,689		15,965
Thereafter	79,385		24,428		103,813
Total lease payments	149,785		36,529		186,314
Less amount representing interest	39,621		12,673		52,294

Present value of lease liabilities	$	110,164	$	23,856	$	134,020

The Company has approximately $16,671 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of January 25, 2020.

For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate as the discount rate implicit within its leases is generally not determinable. The Company's incremental borrowing rate reflects the rate it would pay to borrow on a secured basis, and incorporates the term and economic environment of the lease. As of January 25, 2020, the Company's lease terms and discount rates are as follows:



	January 25, 2020
Weighted-average remaining lease term (years)
Operating leases	11.8
Finance leases	16.1
Weighted-average discount rate
Operating leases	5.3	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:



	26 Weeks Ended
	January 25, 2020
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	8,695
Operating cash flows from finance leases	1,032
Financing cash flows from finance leases	268

In the first quarter of fiscal 2020, the Company adopted ASU 2016-02, and as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments by year and in the aggregate for all non-cancelable leases with initial terms of one year or more consisted of the following at July 27, 2019:



	Capital and financing leases		Operating leases
2020	$	5,173	$	13,573
2021	5,240		12,972
2022	5,240		10,348
2023	5,305		9,747
2024	5,342		7,457
Thereafter	43,708		61,043
Minimum lease payments	70,008		$	115,140
Less amount representing interest	28,233

Present value of minimum lease payments	41,775

Less current portion	1,022
	$	40,753

LEASES

The composition of total lease cost is as follows:



		13 Weeks Ended		26 Weeks Ended
	Consolidated Statement of Operations Classification	January 25, 2020		January 25, 2020
Operating lease cost	Operating and administrative expense	$	4,425	$	9,204
Finance lease cost
Amortization of leased assets	Depreciation and amortization	237		474
Interest on lease liabilities	Interest expense	515		1,032
Variable lease cost	Operating and administrative expense	3,968		7,662

Total lease cost		$	9,145	$	18,372



	Operating leases		Finance leases		Total
Remainder of 2020	$	9,352	$	1,345	$	10,697
2021	16,621		2,689		19,310
2022	15,739		2,689		18,428
2023	15,412		2,689		18,101
2024	13,276		2,689		15,965
Thereafter	79,385		24,428		103,813
Total lease payments	149,785		36,529		186,314
Less amount representing interest	39,621		12,673		52,294

Present value of lease liabilities	$	110,164	$	23,856	$	134,020

The Company has approximately $16,671 of future payment obligations related to lease agreements that have not yet commenced but have been executed as of January 25, 2020.



	January 25, 2020
Weighted-average remaining lease term (years)
Operating leases	11.8
Finance leases	16.1
Weighted-average discount rate
Operating leases	5.3	%
Finance leases	8.5	%

Supplemental cash flow information related to leases is as follows:



	26 Weeks Ended
	January 25, 2020
Cash paid for amounts in the measurement of lease liabilities
Operating cash flows from operating leases	$	8,695
Operating cash flows from finance leases	1,032
Financing cash flows from finance leases	268



	Capital and financing leases		Operating leases
2020	$	5,173	$	13,573
2021	5,240		12,972
2022	5,240		10,348
2023	5,305		9,747
2024	5,342		7,457
Thereafter	43,708		61,043
Minimum lease payments	70,008		$	115,140
Less amount representing interest	28,233

Present value of minimum lease payments	41,775

Less current portion	1,022
	$	40,753