Leases

9 Months Ended

Sep. 30, 2020

Note 9: Leases

The Company leases its retail stores, certain distribution space, and office space. Leases generally have a term of ten to fifteen years, and contain renewal options. Assets acquired under operating leases are included in the Company’s right of use assets in the accompanying Consolidated Balance Sheet. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. The depreciable life of assets and leasehold improvements is limited by the expected lease term.

In accordance with the FASB’s April 2020 Staff Q&A regarding rent concessions related to the effects of the COVID-19 pandemic, the Company has elected to account for the concessions verbally agreed to by landlords that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee as though enforceable rights and obligations for those concessions existed in the original lease agreements, and the Company has elected to not re-measure the related lease liabilities and right-of-use assets. For qualifying rent abatement concessions, the Company has recorded negative lease expense for the amount of the concession during the period of relief. During the three and nine months ended September 30, 2020, the Company recognized $0.1 million of negative lease expense related to rent abatement concessions. For qualifying deferrals of rental payments, the Company has recognized a non-interest bearing payable classified as a Current portion of lease liability in the Consolidated Balance Sheet in lieu of recognizing a decrease in cash for the lease payment that would have been made based on the original terms of the lease agreement. The deferred rent payment balance will be reduced in future periods as amounts due are repaid. The deferred rent balance outstanding as of September 30, 2020 was $3.3 million. The majority of the remaining repayments are expected to occur between the fourth quarter of 2020 and the third quarter of 2021.


Leases (in thousands)	Classification		September 30, 2020		December 31, 2019
Assets
Operating lease assets	Right of use asset	$	133,256	$	137,737
Financing lease assets	Property, plant and equipment, net of accumulated depreciation		-		113
Total leased assets		$	133,256	$	137,850

Liabilities
Current
Operating	Current portion of lease liability	$	28,239	$	26,993
Financing	Other accrued liabilities		-		162
Noncurrent
Operating	Long-term lease liability, net		124,678		131,451
Financing	Financing lease obligation, net		-		274
Total lease liabilities		$	152,917	$	158,880



		Three Months Ended
Lease cost (in thousands)	Classification		September 30, 2020		September 30, 2019
Operating lease cost	SG&A expenses	$	8,285	$	8,258
Financing lease cost
Amortization of leased assets	SG&A expenses		12		13
Interest on lease liabilities	Interest expense		13		19
Variable lease cost⁽¹⁾	SG&A expenses		3,494		3,470
Short term lease cost	SG&A expenses		145		197
Net lease cost		$	11,949	$	11,957


		Nine Months Ended
Lease cost (in thousands)	Classification		September 30, 2020		September 30, 2019
Operating lease cost	SG&A expenses	$	24,758	$	24,268
Financing lease cost
Amortization of leased assets	SG&A expenses		37		37
Interest on lease liabilities	Interest expense		43		59
Variable lease cost⁽¹⁾	SG&A expenses		10,399		10,177
Short term lease cost	SG&A expenses		531		679
Net lease cost		$	35,768	$	35,220

(1)Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities.



	Nine Months Ended
Other Information (in thousands)		September 30, 2020		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(26,808)	$	(26,109)
Operating cash flows from financing leases	$	43	$	50
Financing cash flows from financing leases	$	(162)	$	(153)
Lease right-of-use assets obtained or modified in exchange for lease obligations	$	14,010	$	5,993