Leases

9 Months Ended

Jan. 25, 2020

During the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. The guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability.

The Company leases real estate for retail stores, distribution centers, warehouses, plants, showrooms and office space. We also have equipment leases for tractors/trailers, IT and office equipment and vehicles. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all the economic benefits from the use of that identified asset. Most of our real estate leases include options to renew or terminate early. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet these criteria are included in the lease term at lease commencement.

Most of our leases do not have an interest rate implicit in the lease. As a result, for purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by applying a spread above the U.S. Treasury borrowing rates. In the case an interest rate is implicit in a lease we will use that rate as the discount rate for that lease. Some of our leases contain variable rent payments based on a Consumer Price Index or percentage of sales. Due to the variable nature of these costs, they are not included in the measurement of the ROU asset and lease liability.

The Company has elected to apply the practical expedients permitted under transition guidance to forgo the restatement of comparative periods and to not reassess leases entered into prior to adoption. In addition, we have elected the practical expedient to not separate lease and non-lease components when determining the ROU asset and lease liability. We have also made an accounting policy election to not recognize an ROU asset and lease liability on the balance sheet for those leases with an initial term of one year or less and instead, such liabilities will be expensed on a straight-line basis over the lease term.

Supplemental balance sheet information related to leases:



(Unaudited, amounts in thousands)	1/25/20
Operating leases
ROU assets	$	318,124
Lease liabilities, short-term	65,089
Lease liabilities, long-term	267,955
Finance leases
ROU assets	$	38
Lease liabilities, short-term	39
Lease liabilities, long-term	—

The ROU assets by segment are as follows:



(Unaudited, amounts in thousands)	1/25/20
Upholstery	$	57,800
Casegoods	4,214
Retail	242,987
Corporate & Other	13,161
Total ROU assets	$	318,162

The components of lease cost are as follows for the respective periods ended January 25, 2020:



(Unaudited, amounts in thousands)	Quarter Ended			Nine Months Ended
Operating lease cost	$	18,987		$	57,024
Financing lease cost	40			139
Short-term lease cost	25			76
Variable lease cost	48			142
Less: Sublease income	(633		)	(1,893		)
Total lease cost	$	18,467		$	55,488

The following tables present supplemental lease disclosures:



	Nine Months Ended January 25, 2020
(Unaudited, amounts in thousands)	Operating Leases		Financing Leases
Cash paid for amounts included in the measurement of lease liabilities	$	57,851	$	138
Lease liabilities arising from new ROU assets	52,954		—

The following table presents our undiscounted cash flows as of January 25, 2020, and our minimum contractual obligations on our leases as of April 27, 2019:



	1/25/20				4/27/19
(Unaudited, amounts in thousands)	Operating Leases		Financing Leases		Operating Leases		Financing Leases
Within one year	$	76,348	$	40	$	76,508	$	180
After one year and within two years	66,953		—		71,544		19
After two years and within three years	55,988		—		58,763		—
After three years and within four years	44,375		—		46,541		—
After four years and within five years	37,576		—		36,082		—
After five years	95,660		—		102,782		—
Total lease payments	376,900		40		$	392,220	$	199
Less: Interest	43,856		1
Total lease obligations	$	333,044	$	39

(Unaudited, amounts in thousands)

Operating Leases

Financing Leases

Weighted-average remaining lease term (years)

Weighted-average discount rate