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LEASES

9 Months Ended

Jul. 26, 2020

The Company has operating leases for manufacturing facilities, office space, warehouses, transportation equipment, and miscellaneous real estate and equipment contracts. Finance leases primarily include turkey growing facilities and an aircraft. The Company's lessor portfolio consists primarily of immaterial operating leases of farm land to third parties.

The Company determines if an arrangement contains a lease at inception. Right-of-use assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. Leases with an initial term of twelve months or less are not recorded on the Consolidated Statements of Financial Position. The Company combines lease and non-lease components together in determining the minimum lease payments for all leases.

The length of the lease term used in recording right-of-use assets and lease liabilities is based on the contractually required lease term adjusted for any options to renew, early terminate, or purchase the lease that are reasonably certain of being exercised. Most leases include one or more options to renew or terminate. The exercise of lease renewal and termination options is at the Company’s discretion and generally is not reasonably certain at lease commencement. The Company’s lease agreements typically do not contain material residual value guarantees. The Company has one lease with an immaterial residual value guarantee that is included in the minimum lease payments.

Certain lease agreements include rental payment increases over the lease term that can be fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index or rate are recognized as incurred.

If the rate implicit in the lease is not readily determinable, the Company used its periodic incremental borrowing rate, based on the information available at commencement date, to determine the present value of future lease payments. For the initial implementation of ASU 2016-02, Leases (Topic 842) the incremental borrowing rate on October 28, 2019, was used to determine the present value of existing operating right-of-use assets and lease liabilities.

Lease information included in the Consolidated Statements of Financial Position are:



(in thousands)	Location on Consolidated Statements of Financial Position	July 26, 2020
Right-of-Use Assets
Operating	Other Assets	$	55,761
Finance	Net Property, Plant and Equipment	63,049
Total Right-of-Use Assets		$	118,810
Liabilities
Current
Operating	Accrued Expenses	$	12,760
Finance	Current Maturities of Long-Term Debt	8,307
Noncurrent
Operating	Other Long-term Liabilities	45,042
Finance	Long-term Debt - Less Current Maturities	54,784
Total Lease Liabilities		$	120,893

Lease expenses are:



	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	July 26, 2020		July 26, 2020
Operating Lease Cost ⁽¹⁾	$	4,625	$	15,115
Finance Lease Cost
Amortization of Right-of-Use Assets	2,000		6,000
Interest on Lease Liabilities	566		1,758
Variable Lease Cost ⁽²⁾	104,450		313,983
Net Lease Cost	$	111,640	$	336,856


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

⁽²⁾

ASC 842 - Leases requires disclosure of payments related to agreements with an embedded lease that are not otherwise reflected on the balance sheet. The Company's variable lease costs primarily include inventory related expenses, such as materials, labor, and overhead from manufacturing and service agreements that contain embedded leases. Variability of these costs is determined based on usage or output and may vary for other reasons such as changes in material prices.

The weighted-average remaining lease term and discount rate for lease liabilities included in the Consolidated Statements of Financial Position are:



	July 26, 2020
Weighted Average Remaining Lease Term
Operating Leases	7.35 years
Finance Leases	8.36 years
Weighted Average Discount Rate
Operating Leases	2.30	%
Finance Leases	3.56	%

Supplemental cash flow and other information related to leases for the thirty-nine weeks ended July 26, 2020, are:



(in thousands)	July 26, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Operating Leases	$	11,113
Operating Cash Flows from Finance Leases	1,758
Financing Cash Flows from Finance Leases	6,129

Right-of-Use Assets obtained in exchange for new operating lease liabilities	4,190

The maturity of the Company's lease liabilities as of July 26, 2020, are:



(in thousands)	Operating Leases		Finance Leases ⁽¹⁾		Total
2020 (thirteen weeks remaining)	$	4,655	$	2,613	$	7,267
2021	12,839		10,322		23,160
2022	10,176		9,934		20,109
2023	8,512		9,738		18,250
2024	5,648		9,612		15,260
2025	3,458		8,117		11,575
2026 and beyond	18,644		21,192		39,836
Total Lease Payments	$	63,932	$	71,527	$	135,459
Less: Imputed Interest	6,130		8,436		14,566
Present Value of Lease Liabilities	$	57,802	$	63,091	$	120,893

⁽¹⁾

Over the life of the lease contracts, finance lease payments include $8.7 million related to purchase options which are reasonably certain of being exercised.

LEASES

Lease information included in the Consolidated Statements of Financial Position are:



(in thousands)	Location on Consolidated Statements of Financial Position	July 26, 2020
Right-of-Use Assets
Operating	Other Assets	$	55,761
Finance	Net Property, Plant and Equipment	63,049
Total Right-of-Use Assets		$	118,810
Liabilities
Current
Operating	Accrued Expenses	$	12,760
Finance	Current Maturities of Long-Term Debt	8,307
Noncurrent
Operating	Other Long-term Liabilities	45,042
Finance	Long-term Debt - Less Current Maturities	54,784
Total Lease Liabilities		$	120,893

Lease expenses are:



	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	July 26, 2020		July 26, 2020
Operating Lease Cost ⁽¹⁾	$	4,625	$	15,115
Finance Lease Cost
Amortization of Right-of-Use Assets	2,000		6,000
Interest on Lease Liabilities	566		1,758
Variable Lease Cost ⁽²⁾	104,450		313,983
Net Lease Cost	$	111,640	$	336,856


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

⁽²⁾

The weighted-average remaining lease term and discount rate for lease liabilities included in the Consolidated Statements of Financial Position are:



	July 26, 2020
Weighted Average Remaining Lease Term
Operating Leases	7.35 years
Finance Leases	8.36 years
Weighted Average Discount Rate
Operating Leases	2.30	%
Finance Leases	3.56	%

Supplemental cash flow and other information related to leases for the thirty-nine weeks ended July 26, 2020, are:



(in thousands)	July 26, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Operating Leases	$	11,113
Operating Cash Flows from Finance Leases	1,758
Financing Cash Flows from Finance Leases	6,129

Right-of-Use Assets obtained in exchange for new operating lease liabilities	4,190

The maturity of the Company's lease liabilities as of July 26, 2020, are:



(in thousands)	Operating Leases		Finance Leases ⁽¹⁾		Total
2020 (thirteen weeks remaining)	$	4,655	$	2,613	$	7,267
2021	12,839		10,322		23,160
2022	10,176		9,934		20,109
2023	8,512		9,738		18,250
2024	5,648		9,612		15,260
2025	3,458		8,117		11,575
2026 and beyond	18,644		21,192		39,836
Total Lease Payments	$	63,932	$	71,527	$	135,459
Less: Imputed Interest	6,130		8,436		14,566
Present Value of Lease Liabilities	$	57,802	$	63,091	$	120,893

⁽¹⁾

Over the life of the lease contracts, finance lease payments include $8.7 million related to purchase options which are reasonably certain of being exercised.

LEASES

Lease information included in the Consolidated Statements of Financial Position are:



(in thousands)	Location on Consolidated Statements of Financial Position	July 26, 2020
Right-of-Use Assets
Operating	Other Assets	$	55,761
Finance	Net Property, Plant and Equipment	63,049
Total Right-of-Use Assets		$	118,810
Liabilities
Current
Operating	Accrued Expenses	$	12,760
Finance	Current Maturities of Long-Term Debt	8,307
Noncurrent
Operating	Other Long-term Liabilities	45,042
Finance	Long-term Debt - Less Current Maturities	54,784
Total Lease Liabilities		$	120,893

Lease expenses are:



	Thirteen Weeks Ended		Thirty-Nine Weeks Ended
(in thousands)	July 26, 2020		July 26, 2020
Operating Lease Cost ⁽¹⁾	$	4,625	$	15,115
Finance Lease Cost
Amortization of Right-of-Use Assets	2,000		6,000
Interest on Lease Liabilities	566		1,758
Variable Lease Cost ⁽²⁾	104,450		313,983
Net Lease Cost	$	111,640	$	336,856


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

⁽²⁾

The weighted-average remaining lease term and discount rate for lease liabilities included in the Consolidated Statements of Financial Position are:



	July 26, 2020
Weighted Average Remaining Lease Term
Operating Leases	7.35 years
Finance Leases	8.36 years
Weighted Average Discount Rate
Operating Leases	2.30	%
Finance Leases	3.56	%

Supplemental cash flow and other information related to leases for the thirty-nine weeks ended July 26, 2020, are:



(in thousands)	July 26, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Operating Leases	$	11,113
Operating Cash Flows from Finance Leases	1,758
Financing Cash Flows from Finance Leases	6,129

Right-of-Use Assets obtained in exchange for new operating lease liabilities	4,190

The maturity of the Company's lease liabilities as of July 26, 2020, are:



(in thousands)	Operating Leases		Finance Leases ⁽¹⁾		Total
2020 (thirteen weeks remaining)	$	4,655	$	2,613	$	7,267
2021	12,839		10,322		23,160
2022	10,176		9,934		20,109
2023	8,512		9,738		18,250
2024	5,648		9,612		15,260
2025	3,458		8,117		11,575
2026 and beyond	18,644		21,192		39,836
Total Lease Payments	$	63,932	$	71,527	$	135,459
Less: Imputed Interest	6,130		8,436		14,566
Present Value of Lease Liabilities	$	57,802	$	63,091	$	120,893

⁽¹⁾

Over the life of the lease contracts, finance lease payments include $8.7 million related to purchase options which are reasonably certain of being exercised.