Note 9 – Leases

We have operating leases for offices, warehouses, and certain equipment. Our leases have remaining lease terms of between 1 year and 14 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception. Our leases do not have any residual value guarantees or any restrictions or covenants imposed by lessors. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.

As of December 31, 2019, we have entered into two leases for additional retail locations which have not yet commenced. Neither of these locations are under construction.

The table below presents the operating lease assets and liabilities recognized on the consolidated balance sheet as of December 31, 2019 (in thousands):

	December 31, 2019
Operating Lease Assets:
Right-of use lease assets	$	175,474
Operating Lease Liabilities:
Current lease liabilities	$	29,411
Non-current lease liabilities		149,594
Total operating lease liabilities		179,005

Our leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

The weighted average remaining lease term and weighted average discount rate for operating leases as of December 31, 2019 are:

	December 31, 2019
Weighted Average Remaining Lease Term
Operating leases	7.2 years
Weighted Average Discount Rate
Operating leases		6.61	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheet as of December 31, 2019 (in thousands):

	Operating Leases
2020	$	40,228
2021		38,479
2022		33,083
2023		26,532
2024		20,349
Thereafter		78,024
Total undiscounted future minimum lease payments		236,695
Less: difference between undiscounted lease payments and discounted operating lease liabilities		(57,690	)
Total operating lease liabilities	$	179,005

Certain of our lease agreements for retail stores include variable lease payments, generally based on sales volume. The variable portion of payments are not included in the initial measurement of the right‑of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.

Components of lease expense for the year ended December 31 were as follows:

(in thousands)	2019
Operating lease cost	$	41,681
Short-term lease cost		90
Variable lease cost		5,653
Total lease expense	$	47,424

Supplemental cash flow information related to leases for the year ended December 31 is as follows:

(In thousands)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	40,403
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	31,888

Future minimum lease payments for operating leases accounted for under ASC 840 “Leases,” with remaining non-cancelable terms in excess of one year were as follows at December 31, 2018:

(In thousands)	Operating Leases
2019	$	29,912
2020		28,123
2021		25,923
2022		20,484
2023		14,740
Subsequent to 2024		48,941
Total minimum lease payments	$	168,123

For leases accounted for under ASC 840, step rent and other lease concessions (free rent periods) are taken into account in computing lease expense on a straight-line basis. Landlord allowances for capital improvements have not been significant but are recorded as a reduction of expense over the term of the lease. Net rental expense applicable to operating leases consisted of the following for the years ended December 31:

(In thousands)	2018			2017
Property
Minimum	$	27,124		$	27,543
Additional rentals based on sales		22			21
Sublease income		(130	)		(90	)
		27,016			27,474
Equipment		3,029			3,084
	$	30,045		$	30,558