Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases

Note 3. Leases

Sales-Type Leases

With respect to the Company's Toptracer operations, the Company enters into non-cancelable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.

Leasing revenue attributed to sales-type leases was $34,116,000 for the year ended December 31, 2021 and are included in services revenues within the consolidated statement of operations. There were no revenues attributed to sales-type leases for the years ended December 31, 2020 and 2019. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in thousands):

	December 31, 2021
Sales-type lease selling price(1)	$	29,789
Cost of underlying assets	(11,862)
Operating profit	$	17,927
Interest income	$	4,327

____________

(1)     Selling price is equal to the present value of lease payments over the non-cancelable term.

Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in thousands):

	Balance Sheet Location	December 31, 2021
Leasing receivables, net - short-term	Other current assets	$	12,843
Leasing receivables - long-term	Other assets	44,080
		$	56,923

Operating and Finance Leases

As a lessee, the Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, 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. See Note 1 for the Company’s significant accounting polices related to its leasing activities

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatements on a few of its operating leases. The Company opted to not modify these leases in accordance with the FASB Staff Q&A: ASC Topic 842 and ASC Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet as of December 31, 2020, and rent abatements of $1,435,000 which were recorded as reductions in rent expense in the Consolidated Statements of Operations for the year ended December 31, 2020. As of December 31, 2021 the Company recorded rent deferments of $3,853,000 of which $3,224,000 was recorded in accrued expenses, and $629,000 was recorded in other long-term liabilities in the consolidated balance sheets. There were no material rent abatements recorded for the year ended December 31, 2021.

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

		December 31,
	Balance Sheet Location	2021		2020
Operating leases:
ROU assets, net	Operating lease right-of-use assets, net	$	1,384,501	$	194,776
Lease liabilities, short-term	Operating lease liabilities, short-term	$	72,326	$	29,579
Lease liabilities, long-term	Operating lease liabilities, long-term	$	1,385,364	$	177,996
Finance Leases:
ROU assets, net,	Other assets	$	129,500	$	1,003
Lease liabilities, short-term	Accounts payable and accrued expenses	$	1,838	$	252
Lease liabilities, long-term	Long-term other	$	132,461	$	447

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

	Year Ended December 31,
	2021		2020		2019
Operating lease costs	$	146,286	$	42,520	$	38,449
Financing lease costs:
Amortization of right-of-use assets	3,182		870		845
Interest on lease liabilities	4,542		47		83
Total financing lease costs	7,724		917		928
Variable lease costs	6,511		2,473		4,361
Total lease costs	$	160,521	$	45,910	$	43,738

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

	December 31,
Supplemental Cash Flows Information	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	123,637		$	39,774
Operating cash flows from finance leases	$	2,802		$	47
Operating cash flows from DLF leases	$	17,695		$	—
Financing cash flows from finance leases	$	830		$	792
Lease liabilities arising from new ROU assets:
Operating leases	$	19,625		$	65,547
Finance leases	$	52,742		$	139
Weighted average remaining lease term (years):
Operating leases	14.1			9.8
Finance leases	36.2			3.0
Weighted average discount rate:
Operating leases	5.3		%	5.3		%
Finance leases	5.3		%	3.9		%

Future minimum lease obligations as of December 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2022	$	138,725	$	15,035
2023	136,064		15,688
2024	133,406		15,429
2025	130,883		15,241
2026	125,796		15,575
Thereafter	1,230,228		629,948
Total future lease payments	1,895,102		706,916
Less: imputed interest	437,412		572,617
Total	$	1,457,690	$	134,299

Lease payments exclude $1,518,384,000 related to 14 non-cancelable leases that have been signed as of December 31, 2021 but have not yet commenced. The Company's minimum capital commitment related to leases, net of amounts reimbursed by third-party real estate financing partners, was approximately $66,000,000 as of December 31, 2021. As the Company is actively involved in the construction of these properties, the Company recorded $208,134,000 in construction costs within property, plant and equipment as of December 31, 2021. Additionally, as of December 31, 2021, the Company recorded $22,943,000 in construction advances from the landlord in connection with properties, which is included on the Company's consolidated balance sheet as of December 31, 2021. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.

Financing Obligations (Deemed Landlord Financing Obligations)

During 2021, the Company accounted for 29 DLF obligations, each of which represented a failed sale following the application of sale-leaseback criteria within ASC Topic 842, “Leases”. As of December 31, 2021, the Company was the accounting owner of a total of 15 buildings under DLF obligations of which the net book value included in property, plant and equipment on the consolidated balance sheet related to these buildings totaled $521,361,000. DLF obligations included in property, plant and equipment are offset by total DLF obligation liabilities of $461,537,000 on the Company's consolidated balance sheet as of December 31, 2021. Buildings capitalized in conjunction with DLF obligations are depreciated, less residual value, over 40 years or over their estimated useful life, whichever is shorter.

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

	Balance Sheet Location	December 31, 2021
DLF obligation liabilities, short-term	Accrued expenses	$	903
DLF obligation liabilities, long-term	Deemed landlord financing, long-term	$	460,634

The components of DLF obligation expenses are as follows (in thousands):

	Income Statement Location	December 31, 2021
Amortization of DLF obligations	Amortization expense	$	5,707
Interest on DLF obligations	Interest expense, net	28,039
Total DLF contracts expenses		$	33,746

Payments on DLF obligations represent payments related to interest accretion for the year ended December 31, 2021.

Supplemental Cash Flows Information (dollars in thousands)	December 31, 2021
Operating cash outflows from DLF obligations	$	17,695
Weighted average remaining term (years)	39.0
Weighted average discount rate	9.2		%

Future minimum financing obligations related to DLF obligations as of December 31, 2021 were as follows (in thousands):

2022	$	33,337
2023	36,403
2024	37,585
2025	37,961
2026	38,930
Thereafter	1,916,536
Total future payments	2,100,752
Less: imputed interest	1,639,215
Total	$	461,537

Leases

Note 3. Leases

Sales-Type Leases

With respect to the Company's Toptracer operations, the Company enters into non-cancelable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.

Leasing revenue attributed to sales-type leases was $34,116,000 for the year ended December 31, 2021 and are included in services revenues within the consolidated statement of operations. There were no revenues attributed to sales-type leases for the years ended December 31, 2020 and 2019. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in thousands):

	December 31, 2021
Sales-type lease selling price(1)	$	29,789
Cost of underlying assets	(11,862)
Operating profit	$	17,927
Interest income	$	4,327

____________

(1)     Selling price is equal to the present value of lease payments over the non-cancelable term.

Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in thousands):

	Balance Sheet Location	December 31, 2021
Leasing receivables, net - short-term	Other current assets	$	12,843
Leasing receivables - long-term	Other assets	44,080
		$	56,923

Operating and Finance Leases

As a lessee, the Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, 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. See Note 1 for the Company’s significant accounting polices related to its leasing activities

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatements on a few of its operating leases. The Company opted to not modify these leases in accordance with the FASB Staff Q&A: ASC Topic 842 and ASC Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Balance Sheet as of December 31, 2020, and rent abatements of $1,435,000 which were recorded as reductions in rent expense in the Consolidated Statements of Operations for the year ended December 31, 2020. As of December 31, 2021 the Company recorded rent deferments of $3,853,000 of which $3,224,000 was recorded in accrued expenses, and $629,000 was recorded in other long-term liabilities in the consolidated balance sheets. There were no material rent abatements recorded for the year ended December 31, 2021.

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

		December 31,
	Balance Sheet Location	2021		2020
Operating leases:
ROU assets, net	Operating lease right-of-use assets, net	$	1,384,501	$	194,776
Lease liabilities, short-term	Operating lease liabilities, short-term	$	72,326	$	29,579
Lease liabilities, long-term	Operating lease liabilities, long-term	$	1,385,364	$	177,996
Finance Leases:
ROU assets, net,	Other assets	$	129,500	$	1,003
Lease liabilities, short-term	Accounts payable and accrued expenses	$	1,838	$	252
Lease liabilities, long-term	Long-term other	$	132,461	$	447

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

	Year Ended December 31,
	2021		2020		2019
Operating lease costs	$	146,286	$	42,520	$	38,449
Financing lease costs:
Amortization of right-of-use assets	3,182		870		845
Interest on lease liabilities	4,542		47		83
Total financing lease costs	7,724		917		928
Variable lease costs	6,511		2,473		4,361
Total lease costs	$	160,521	$	45,910	$	43,738

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

	December 31,
Supplemental Cash Flows Information	2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	123,637		$	39,774
Operating cash flows from finance leases	$	2,802		$	47
Operating cash flows from DLF leases	$	17,695		$	—
Financing cash flows from finance leases	$	830		$	792
Lease liabilities arising from new ROU assets:
Operating leases	$	19,625		$	65,547
Finance leases	$	52,742		$	139
Weighted average remaining lease term (years):
Operating leases	14.1			9.8
Finance leases	36.2			3.0
Weighted average discount rate:
Operating leases	5.3		%	5.3		%
Finance leases	5.3		%	3.9		%

Future minimum lease obligations as of December 31, 2021 were as follows (in thousands):

	Operating Leases		Finance Leases
2022	$	138,725	$	15,035
2023	136,064		15,688
2024	133,406		15,429
2025	130,883		15,241
2026	125,796		15,575
Thereafter	1,230,228		629,948
Total future lease payments	1,895,102		706,916
Less: imputed interest	437,412		572,617
Total	$	1,457,690	$	134,299

Lease payments exclude $1,518,384,000 related to 14 non-cancelable leases that have been signed as of December 31, 2021 but have not yet commenced. The Company's minimum capital commitment related to leases, net of amounts reimbursed by third-party real estate financing partners, was approximately $66,000,000 as of December 31, 2021. As the Company is actively involved in the construction of these properties, the Company recorded $208,134,000 in construction costs within property, plant and equipment as of December 31, 2021. Additionally, as of December 31, 2021, the Company recorded $22,943,000 in construction advances from the landlord in connection with properties, which is included on the Company's consolidated balance sheet as of December 31, 2021. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.

Financing Obligations (Deemed Landlord Financing Obligations)

During 2021, the Company accounted for 29 DLF obligations, each of which represented a failed sale following the application of sale-leaseback criteria within ASC Topic 842, “Leases”. As of December 31, 2021, the Company was the accounting owner of a total of 15 buildings under DLF obligations of which the net book value included in property, plant and equipment on the consolidated balance sheet related to these buildings totaled $521,361,000. DLF obligations included in property, plant and equipment are offset by total DLF obligation liabilities of $461,537,000 on the Company's consolidated balance sheet as of December 31, 2021. Buildings capitalized in conjunction with DLF obligations are depreciated, less residual value, over 40 years or over their estimated useful life, whichever is shorter.

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

	Balance Sheet Location	December 31, 2021
DLF obligation liabilities, short-term	Accrued expenses	$	903
DLF obligation liabilities, long-term	Deemed landlord financing, long-term	$	460,634

The components of DLF obligation expenses are as follows (in thousands):

	Income Statement Location	December 31, 2021
Amortization of DLF obligations	Amortization expense	$	5,707
Interest on DLF obligations	Interest expense, net	28,039
Total DLF contracts expenses		$	33,746

Payments on DLF obligations represent payments related to interest accretion for the year ended December 31, 2021.

Supplemental Cash Flows Information (dollars in thousands)	December 31, 2021
Operating cash outflows from DLF obligations	$	17,695
Weighted average remaining term (years)	39.0
Weighted average discount rate	9.2		%

Future minimum financing obligations related to DLF obligations as of December 31, 2021 were as follows (in thousands):

2022	$	33,337
2023	36,403
2024	37,585
2025	37,961
2026	38,930
Thereafter	1,916,536
Total future payments	2,100,752
Less: imputed interest	1,639,215
Total	$	461,537