Leases

9 Months Ended

Sep. 30, 2019

Note 2. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers and vehicles and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. Certain real estate leases include one or more options to renew, with renewal terms that can extend the lease term for up to eight years. The exercise of lease renewal options are at the Company's sole discretion. Certain leases also include options to purchase the leased property. When deemed reasonably certain of exercise, the renewal and purchase options are included in the determination of the lease term and lease payment obligation, respectively. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Right-of-use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the rate implicit in the lease contract in determining the present value of lease payments. If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For vehicle leases, the Company accounts for the lease and non-lease components as a single lease component. In addition, select lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

Supplemental balance sheet information related to leases is as follows (in thousands):



	Balance Sheet Location	September 30, 2019
Operating leases
ROU assets, net	Operating lease ROU assets, net	$	154,351
Lease liabilities, short-term	Operating lease liabilities, short-term	$	25,112
Lease liabilities, long-term	Operating lease liabilities, long-term	$	133,189

Finance Leases
ROU assets, net,	Other assets	$	1,384
Lease liabilities, short-term	Accounts payable and accrued expenses	$	618
Lease liabilities, long-term	Long-term other	$	588

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



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease costs		$	8,758		$	28,357
Financing lease costs:
Amortization of right-of-use assets		180			657
Interest on lease liabilities		14			69
Total financing lease costs		194			726
Variable lease costs		1,091			3,277
Total lease costs		$	10,043		$	32,360

Other information related to leases was as follows (in thousands):



Supplemental Cash Flows Information	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	29,783
Operating cash flows from finance leases	$	69
Financing cash flows from finance leases	$	583

Lease liabilities arising from new ROU assets:
Operating leases	$	8,819
Finance leases	$	172

Weighted average remaining lease term (years):
Operating leases	9.6
Finance leases	2.9

Weighted average discount rate:
Operating leases	5.7		%
Finance leases	4.2		%

Future minimum lease obligations as of September 30, 2019 were as follows (in thousands):



	Operating Leases		Finance Leases
Remainder of 2019	$	9,355	$	126
2020	31,683		610
2021	26,163		228
2022	22,152		188
2023	20,336		83
Thereafter	98,108		38
Total future lease payments	207,797		1,273
Less: imputed interest	49,496		67
Total	$	158,301	$	1,206

Leases

Note 2. Leases

Supplemental balance sheet information related to leases is as follows (in thousands):



	Balance Sheet Location	September 30, 2019
Operating leases
ROU assets, net	Operating lease ROU assets, net	$	154,351
Lease liabilities, short-term	Operating lease liabilities, short-term	$	25,112
Lease liabilities, long-term	Operating lease liabilities, long-term	$	133,189

Finance Leases
ROU assets, net,	Other assets	$	1,384
Lease liabilities, short-term	Accounts payable and accrued expenses	$	618
Lease liabilities, long-term	Long-term other	$	588

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



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease costs		$	8,758		$	28,357
Financing lease costs:
Amortization of right-of-use assets		180			657
Interest on lease liabilities		14			69
Total financing lease costs		194			726
Variable lease costs		1,091			3,277
Total lease costs		$	10,043		$	32,360

Other information related to leases was as follows (in thousands):



Supplemental Cash Flows Information	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	29,783
Operating cash flows from finance leases	$	69
Financing cash flows from finance leases	$	583

Lease liabilities arising from new ROU assets:
Operating leases	$	8,819
Finance leases	$	172

Weighted average remaining lease term (years):
Operating leases	9.6
Finance leases	2.9

Weighted average discount rate:
Operating leases	5.7		%
Finance leases	4.2		%

Future minimum lease obligations as of September 30, 2019 were as follows (in thousands):



	Operating Leases		Finance Leases
Remainder of 2019	$	9,355	$	126
2020	31,683		610
2021	26,163		228
2022	22,152		188
2023	20,336		83
Thereafter	98,108		38
Total future lease payments	207,797		1,273
Less: imputed interest	49,496		67
Total	$	158,301	$	1,206