Leases

12 Months Ended

Feb. 28, 2023

LEASE COMMITMENTS

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 do not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 13.

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 restrictive 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:


	Years Ended February 28
(In thousands)	2023		2022		2021
Operating lease cost (1)	$	90,925	$	75,629	$	57,325
Finance lease cost:
Depreciation of lease assets	16,039		13,230		8,362
Interest on lease liabilities	21,969		17,015		10,724
Total finance lease cost	38,008		30,245		19,086
Total lease cost	$	128,933	$	105,874	$	76,411

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

Supplemental balance sheet information related to leases was as follows:


		As of February 28
(In thousands)	Classification	2023		2022
Assets:
Operating lease assets	Operating lease assets	$	545,677	$	537,357
Finance lease assets	Property and equipment, net (1)	145,372		127,183
Total lease assets		$	691,049	$	664,540
Liabilities:
Current:
Operating leases	Current portion of operating lease liabilities	$	53,287	$	44,197
Finance leases	Accrued expenses and other current liabilities	18,788		10,290
Long-term:
Operating leases	Operating lease liabilities, excluding current portion	523,828		523,269
Finance leases	Other liabilities	165,135		145,179
Total lease liabilities		$	761,038	$	722,935

(1) Finance lease assets are recorded net of accumulated depreciation of $46.7 million as of February 28, 2023 and $30.7 million as of February 28, 2022.

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


	As of February 28
Lease Term and Discount Rate	2023		2022
Weighted Average Remaining Lease Term (in years)
Operating leases	16.35		17.31
Finance leases	10.84		12.42

Weighted Average Discount Rate
Operating leases	4.91	%	4.80	%
Finance leases	19.34	%	14.35	%

Supplemental cash flow information related to leases was as follows:


	Years Ended February 28
(In thousands)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	89,321	$	72,371	$	56,762
Operating cash flows from finance leases	$	19,371	$	11,194	$	8,517
Financing cash flows from finance leases	$	12,200	$	11,923	$	7,424

Lease assets obtained in exchange for lease obligations:
Operating leases	$	58,121	$	50,911	$	14,010
Finance leases	$	37,931	$	32,052	$	45,857

Maturities of lease liabilities were as follows:


	As of February 28, 2023
(In thousands)	Operating Leases (1)		Finance Leases (1)
Fiscal 2024	$	79,608	$	41,264
Fiscal 2025	78,703		38,894
Fiscal 2026	73,122		40,043
Fiscal 2027	66,658		36,123
Fiscal 2028	62,472		29,132
Thereafter	539,664		198,587
Total lease payments	900,227		384,043
Less: interest	(323,112)		(200,120)
Present value of lease liabilities	$	577,115	$	183,923

(1) Lease payments exclude $22.9 million of legally binding minimum lease payments for leases signed but not yet commenced.