Leases

12 Months Ended

Feb. 29, 2020

Leases

Leases

16. Leases

The Company leases most of its retail stores and certain distribution facilities under noncancellable operating and finance leases, most of which have initial lease terms ranging from 5 to 22 years. The Company also leases certain of its equipment and other assets under noncancellable operating leases with initial terms ranging from 3 to 10 years. In addition to minimum rental payments, certain store leases require additional payments based on sales volume, as well as reimbursements for taxes, maintenance and insurance. Most leases contain renewal options, certain of which involve rent increases.

The following table is a summary of the Company’s components of net lease cost for the year ended February 29, 2020:

	Year Ended February 29, 2020
Operating lease cost	$	653,803
Financing lease cost:
Amortization of right-of-use asset		5,722
Interest on long-term finance lease liabilities		3,276
Total finance lease costs	$	8,998
Short-term lease costs		1,160
Variable lease costs		168,849
Less: sublease income		(20,930)
Net lease cost	$	811,880

Supplemental cash flow information related to leases for the year ended February 29, 2020:

	Year Ended February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	641,709
Operating cash flows paid for interest portion of finance leases		3,276
Financing cash flows paid for principal portion of finance leases		6,313
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		365,192
Finance leases		—

Supplemental balance sheet information related to leases as of February 29, 2020 (in thousands, except lease term and discount rate):

	February 29,
	2020
Operating leases:
Operating lease right-of-use asset	$	2,903,256
Short-term operating lease liabilities	$	490,161
Long-term operating lease liabilities		2,710,347
Total operating lease liabilities	$	3,200,508
Finance leases:
Property, plant and equipment, net	$	19,904
Current maturities of long-term debt and lease financing obligations	$	8,840
Lease financing obligations, less current maturities		19,326
Total finance lease liabilities	$	28,166
Weighted average remaining lease term
Operating leases		7.8
Finance leases		8.9
Weighted average discount rate
Operating leases		6.1	%
Finance leases		10.2	%

As a result of the Sale to WBA and the related Amended and Restated Asset Purchase Agreement, the Company has lease guarantee obligations related to 1,393 former stores. The Company is only obligated to pay for the lease guarantees in the event that WBA fails to perform under the lease agreements, as WBA is the primary obligor.

The following table summarizes the maturity of lease liabilities under finance and operating leases as of February 29, 2020:

	February 29, 2020
	Finance		Operating
Fiscal year	Leases		Leases (1)		Total
2021	$	11,307	$	662,644	$	673,951
2022		4,101		609,984		614,085
2023		3,946		556,433		560,379
2024		3,662		493,933		497,595
2025		3,402		395,822		399,224
Thereafter		16,660		1,314,774		1,331,434
Total lease payments		43,078		4,033,590		4,076,668
Less: imputed interest		(14,912)		(833,082)		(847,994)
Total lease liabilities	$	28,166	$	3,200,508	$	3,228,674

(1)– Future operating lease payments have not been reduced by minimum sublease rentals of $48 million due in the future under noncancelable leases.

Sale-Leaseback Transactions:

During the year ended February 29, 2020, the Company sold one owned operating store to an independent third party. Net proceeds from the sale were $4,879. Concurrent with this sale, the Company entered into an agreement to lease the store back from the purchaser over a minimum lease term of 10 years. The Company accounted for this lease as an operating lease right-of-use asset and a corresponding operating lease liability in accordance with the Lease Standard. The transaction resulted in a gain of $4,149 which is included in the gain on sale of assets, net for the fifty-two weeks ended February 29, 2020. During the year ended March 2, 2019, the Company did not enter into any sale-leaseback transactions. The Company has additional capacity under its outstanding debt agreements to enter into additional sale-leaseback transactions.

Prior year disclosure before the adoption of ASU 2016-02:

Total rental expense, net of sublease income of $4,509 and $4,682, was $626,166 and $628,511 in fiscal 2019 and fiscal 2018, respectively. These amounts include contingent rentals of $7,084 and $8,339 in fiscal 2019 and 2018, respectively.

Following are the minimum lease payments for all properties under a lease agreement that will have to be made in each of the years indicated based on non-cancelable leases in effect as of March 2, 2019:

	Lease
	Financing		Operating
Fiscal year	Obligations		Leases
2020	$	19,300	$	687,412
2021		4,811		610,874
2022		4,588		545,863
2023		4,383		490,864
2024		4,042		431,714
Later years		20,470		1,541,408
Total minimum lease payments		57,594	$	4,308,135
Amount representing interest		(17,418)
Present value of minimum lease payments	$	40,176