Leases (Notes)

9 Months Ended

Nov. 30, 2020

Leases of Lessee Disclosure [Text Block]

Leases

Our leases primarily consist of operating and finance leases related to retail stores, office space, land and equipment. We also have stores subject to sale-leaseback transactions that did not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 9.

The initial term for real property leases is typically 5 to 20 years. For equipment leases, the initial term generally ranges from 3 to 8 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20 years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option.

ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We include variable lease payments in the initial measurement of ROU assets and lease liabilities only to the extent they depend on an index or rate. Changes in such indices or rates are accounted for in the period the change occurs, and do not result in the remeasurement of the ROU asset or liability. We are also responsible for payment of certain real estate taxes, insurance and other expenses on our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. For certain equipment leases, we apply a portfolio approach to account for the lease assets and liabilities.

Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a 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 components of lease expense were as follows:


	Three Months Ended November 30				Nine Months Ended November 30
(In thousands)	2020		2019		2020		2019
Operating lease cost (1)	$	14,340	$	14,262	$	43,075	$	43,074
Finance lease cost:
Depreciation of lease assets	2,149		1,563		5,523		4,114
Interest on lease liabilities	2,680		2,053		7,328		5,499
Total finance lease cost	4,829		3,616		12,851		9,613
Total lease cost	$	19,169	$	17,878	$	55,926	$	52,687

(1) Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:


		As of November 30		As of February 29
(In thousands)	Classification	2020		2020
Assets:
Operating lease assets	Operating lease assets	$	439,074	$	449,094
Finance lease assets	Property and equipment, net (1)	97,281		75,320
Total lease assets		$	536,355	$	524,414
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	30,726	$	30,980
Finance leases	Accrued expenses and other current liabilities	9,520		5,066
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	431,068		440,671
Finance leases	Other liabilities	102,154		79,327
Total lease liabilities		$	573,468	$	556,044

(1) Finance lease assets are recorded net of accumulated depreciation of $14.6 million as of November 30, 2020 and $9.1 million as of February 29, 2020.

Lease term and discount rate information related to leases was as follows:


	As of November 30		As of February 29
Lease Term and Discount Rate	2020		2020
Weighted Average Remaining Lease Term (in years)
Operating leases	19.49		19.98
Finance leases	12.72		13.55

Weighted Average Discount Rate
Operating leases	5.37	%	5.40	%
Finance leases	11.34	%	10.32	%

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended November 30
(In thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	42,711	$	42,712
Operating cash flows from finance leases	$	5,972	$	2,572
Financing cash flows from finance leases	$	4,871	$	2,813

Lease assets obtained in exchange for lease obligations:
Operating leases	$	13,650	$	25,029
Finance leases	$	30,596	$	52,102

Maturities of lease liabilities were as follows:


	As of November 30, 2020
(In thousands)	Operating Leases (1)		Finance Leases (1)
Fiscal 2021, remaining	$	13,411	$	5,071
Fiscal 2022	53,101		20,803
Fiscal 2023	50,891		18,902
Fiscal 2024	50,017		21,647
Fiscal 2025	48,920		17,964
Thereafter	574,547		130,878
Total lease payments	790,887		215,265
Less: interest	(329,093)		(103,591)
Present value of lease liabilities	$	461,794	$	111,674

(1) Lease payments exclude $112.1 million of legally binding minimum lease payments for leases signed but not yet commenced.