Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases

(3)

LEASES

The Company determines if an arrangement is a lease at inception, and, if a lease, what type of lease it is. The Company regularly enters into non-cancellable operating leases for automobiles, retail stores, and real estate leases for offices, showrooms and distribution facilities. Most leases have fixed rental payments. Leases for retail stores typically have initial terms ranging from 5 to 10 years. Other real estate or facility leases may have initial lease terms of up to 20 years.  These leases are included within operating lease ROU assets and liabilities on the Company’s condensed consolidated balance sheet as of June 30, 2019.  The predominant asset for most real estate leases is the right to occupy the space which the Company has determined is the single lease component. Many of the Company’s real estate leases include options to extend or to terminate the lease that are not reasonably certain at the time of determining the expected lease term. In addition the Company’s real estate leases may also require additional payments for real estate taxes and other occupancy-related costs.  The Company considers renewal options and other occupancy-related costs which it considers as non-lease components. Percentage rent expense, which is specified in the lease agreement, is owed when sales at individual retail store locations exceed a base amount. Percentage rent expense is recognized in the condensed consolidated financial statements when incurred. Rent expense for leases having rent holidays, landlord incentives or scheduled rent increases is recorded on a straight-line basis over the earlier of the beginning of the lease term or when the Company takes possession or control of the leased premises. The amount of the excess straight-line rent expense over scheduled payments is recorded as an operating lease liability.  Operating lease ROU assets and operating lease liabilities are recognized based upon the present value of the future lease payments over the lease term at the commencement date. Most of the Company’s leases do not provide an implicit borrowing rate.  Therefore the Company uses an estimated incremental borrowing rate based upon a combination of market-based factors, such as market quoted forward yield curves and Company specific factors, such as lease size and duration.  The incremental borrowing rate is then used at the commencement date of the lease to determine the present value of future lease payments. The operating lease ROU asset also includes lease payments made and lease incentives and initial direct costs incurred. Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term.  As of June 30, 2019, current liabilities related to operating leases were $170.9 million.

The future minimum obligations under operating leases in effect as of December 31, 2018 having a noncancelable term in excess of one year as determined prior to the adoption of ASU 842 are as follows (in thousands):

 

 

 

December 31, 2018

 

2019

 

$

251,711

 

2020

 

 

228,716

 

2021

 

 

203,979

 

2022

 

 

178,850

 

2023

 

 

181,227

 

Thereafter

 

 

596,901

 

 

 

$

1,641,384

 

 

 

 

 

 

 

Operating lease cost and other information (in thousands):

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30, 2019

 

 

June 30, 2019

 

Fixed lease cost

 

$

62,098

 

 

$

116,600

 

Variable lease cost

 

$

2,306

 

 

$

8,938

 

Operating cash flows used for leases

 

$

67,398

 

 

$

124,322

 

Noncash right-of-use assets recorded for lease liabilities:

 

 

 

 

 

 

 

 

For January 1 adoption of Topic 842

 

$

 

 

$

1,035,062

 

In exchange for new lease liabilities during the period

 

$

28,570

 

 

$

40,042

 

Weighted-average remaining lease term

 

5 years

 

 

5 years

 

Weighted-average discount rate

 

4.24%

 

 

4.24%

 

 

The maturities of lease liabilities were as follows (in thousands):

 

 

 

June 30, 2019

 

2019 (remaining months)

 

$

108,352

 

2020

 

 

201,117

 

2021

 

 

177,550

 

2022

 

 

153,085

 

2023

 

 

139,204

 

Thereafter

 

 

476,782

 

Total lease payments

 

 

1,256,090

 

Less: Imputed interest

 

 

(180,985

)

 

 

$

1,075,105

 

 

 

 

 

 

 

As of June 30, 2019, the Company has additional operating leases, primarily for new retail stores, that have not yet commenced which will generate additional right-of-use assets of $6.0 million. These operating leases will commence in 2019 with lease terms ranging from 1 year to 10 years.