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Leases

12 Months Ended

Sep. 30, 2022

NOTE 12: LEASES

The table below presents balances of our lease assets and liabilities and there balance sheet locations for both operating and financing leases:


(in thousands)	Balance Sheet Location	September 30, 2022		September 30, 2021

Lease assets:
Operating lease right-of-use assets	Right-of-use assets, net	$	221,405	$	200,990
Financing lease assets	Right-of-use assets, net	181		—
Total lease assets		$	221,586	$	200,990

Lease liabilities:
Current:
Operating lease liabilities	Operating lease liabilities, current	$	52,334	$	52,263
Financing lease liabilities	Accounts payable, accrued expenses and other current liabilities	37		—
Total current lease liabilities		52,371		52,263

Non-current:
Operating Lease liabilities	Operating lease liabilities	180,756		161,330
Financing lease liabilities	Other long-term liabilities	148		—
Total non-current lease liabilities		180,904		161,330
Total lease liabilities		$	233,275	$	213,593

The table below provides major components of our lease costs:


	Fiscal Year Ended September 30,
(in thousands)	2022		2021

Operating lease cost:
Operating lease cost *	$	67,414	$	61,980
Variable lease cost	15,229		13,000
Total operating lease cost	82,643		$	74,980

Financing lease cost:
Amortization of financing lease assets	3		—
Interest on financing lease liabilities	1		—
Total financing lease cost	4		—
Total lease cost	$	82,647	$	74,980

* Includes a reduction for sublease rental income of $3.6 million and $3.4 million for fiscal years ending September 2022 and 2021, respectively.

Lease expense is recognized on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense are included in “Store expenses” and “General and administrative” expense, based on the underlying lease use. Cash paid for operating leases are $72.3 million and $61.9 million for the fiscal years ended September 30, 2022 and 2021, respectively.

The weighted- average term and discount rates for leases are as follows:


	Fiscal Year Ended September 30,
	2022		2021
Weighted-average remaining lease term (years):
Operating leases	5.12		5.08
Financing leases	4.10		—

Weighted-average discount rate:
Operating leases	8.32	%	5.92	%
Financing leases	11.14	%	—	%

As of September 30, 2022, maturities of lease liabilities under ASC 842 by fiscal year were as follows (in thousands):


	Operating Leases		Financing Leases
Fiscal 2023	$	69,106	$	63
Fiscal 2024	59,734		56
Fiscal 2025	49,924		56
Fiscal 2026	39,621		55
Fiscal 2027	27,107		5
Thereafter	40,681		—
Total lease liabilities	286,173		235
Less: portion representing Imputed interest	53,083		50
Total net lease liabilities	233,090		185
Less: current portion	52,334		37
Total long term net lease liabilities	$	180,756	$	148

In December 2014, we entered into a non-cancelable 13-year operating lease for our corporate offices, with rent payments beginning February 2016 and ending March 2029. Annual rent, net of square footage subsequently terminated as a result of negotiations with the landlord, escalate from $2.5 million at lease inception to $3.9 million in the terminal year of the lease.

The lease includes two five-year extension options at the end of the initial lease term. The estimated minimum future rental payments under the lease are approximately $24.4 million as of September 30, 2022. During fiscal 2017 and 2016, we initiated subleases for a portion of our corporate operating office lease for estimated minimum future sublease payments of approximately $12.2 million. In addition to the above subleases, during fiscal 2018 we entered into an amendment to the operating lease surrendering another 15% of the initial leased premises. As a result, sublease payments were expected to fully offset our original operating lease obligations through August 2022, with renewal options available until the end of the master operating lease in March 2029.

During the second quarter of fiscal 2015, we entered into cancellable subleases for our Miami office for an estimated minimum future sublease payment of approximately $2.9 million. Sublease payments are expected to offset substantially all of our original operating lease obligations over the nine-year period beginning March 2015 and ending September 2024. During the fourth quarter of fiscal 2022, the Miami office lease and sublease were terminated with no fees, and the deposit to the subtenant was returned.

As a result of the COVID-19 pandemic, we believe there was a significant adverse change in the business climate that impacted the office leasing market and a significant decrease in the market prices of an asset or asset group that affected the value of the right of use asset for our corporate office. We determined the undiscounted cash flows of the subleases did not exceed the net book value of the right of use asset. We then determined the discounted cash flows of the subleases did not exceed the book value of the right of use asset, and an impairment charge of $5.0 million was recorded in fiscal year 2020 to “Impairment of goodwill, intangible and other assets” in the Consolidated Statements of Operations.

We recorded $69.4 million and $62.8 million in non-cash additions to our right of use assets and lease liabilities for the fiscal year ended September 30, 2022 and 2021, respectively.

Leases