LEASES

The Company adopted ASC 842 as of April 1, 2019, using the modified retrospective transition approach wherein the Company applied the new lease standard at the adoption date. Accordingly, all periods prior to April 1, 2019 were presented in accordance with the previous ASC Topic 840 - Leases ("ASC 840"), and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in the recording of operating lease ROU assets of $51,486,000, operating lease liabilities of $50,180,000, a reduction of favorable lease assets of $2,866,000 and a reduction of net deferred rent liabilities of $1,560,000 as of April 1, 2019. Finance leases are not material to the Company and are not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s consolidated statements of operations or cash flows.

The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain equipment and vehicles. Leases with an initial term of 12 months or less, which are immaterial to the Company, are not recorded in the balance sheet. For all asset classes, the Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not recorded in the balance sheet.

ROU assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized on the adoption date for existing leases and on the commencement date for new leases based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available on the adoption date for existing leases and as of the commencement date for new leases in determining the present value of lease payments. The Company applies the portfolio approach based on the rate of interest that it would have to pay to borrow an amount equal to the lease payments on collateralized basis over a similar term to the development of its discount rates.

The components of lease costs are as follows (in thousands):



	Three Months Ended
	June 30, 2019
Lease costs:
Operating lease costs	$	2,888
Variable operating lease costs	77
Total	$	2,965

Supplemental cash flow information is as follows (in thousands):



	Three Months Ended
	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	2,003
Total	$	2,003



	Three Months Ended
	June 30, 2019
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	51,597
Total	$	51,597

The aggregate future lease payments for operating leases as of June 30, 2019 is projected to be as follows (in thousands):



Remainder of fiscal 2020	$	9,739
Fiscal 2021	8,763
Fiscal 2022	8,182
Fiscal 2023	6,882
Fiscal 2024	5,959
Thereafter	20,028
Total lease payments	59,553
Less: Interest	(11,284		)
Present value of lease liabilities	$	48,269

The future minimum lease payments associated with all non-cancelable lease obligations under ASC 840 as of March 31, 2019 is as follows (in thousands):



Fiscal 2020	$	10,520
Fiscal 2021	9,360
Fiscal 2022	8,446
Fiscal 2023	7,364
Fiscal 2024	6,200
Thereafter	21,818
Total lease payments	$	63,708

Weighted-average lease terms and discount rates are as follows:



	June 30, 2019
Weighted-average remaining lease term (years) of operating leases	7.1
Weighted-average discount rate of operating leases	5.77	%