Leases

6 Months Ended

Jun. 30, 2023

We have operating leases for retail stores, offices, warehouses, and certain equipment. Our leases have remaining lease terms of 1 year to 12 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.

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 portions 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 in the period incurred.

As of June 30, 2023, there were no leases for additional retail locations which had not yet commenced.

Lease expense is charged to selling, general and administrative expenses. Components of lease expense were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	12,310	$	11,973	$	24,098	$	23,712
Variable lease cost	978		1,783		2,674		3,478
Total lease expense	$	13,288	$	13,756	$	26,772	$	27,190

In May 2023, we purchased our Florida distribution center for approximately $28.0 million and entered into an early termination agreement of a lease on a retail location in exchange for approximately $3.0 million. This purchase and lease modification decreased our right of use assets and lease liabilities approximately $16.0 million.

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


	Six Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	21,519	$	21,533
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	29,334	$	15,763