10. Leases

The Company adopted ASC 842 on January 1, 2019. Because the Company adopted ASC 842 using the transition method that allowed the Company to initially apply ASC 842 as of January 1, 2019 and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, prior year financial statements were not recast under the new standard and, therefore, those prior year amounts are not presented below.

The Company has commitments under operating leases for retail stores, corporate offices, administrative offices and showrooms expiring on various dates through January 2030. The Company leases certain equipment under finance lease agreements expiring on various dates through January 2022. As of September 30, 2019, the Company’s finance leases were not material to the condensed consolidated balance sheets, condensed consolidated statements of operations or statement of cash flows.

Lease agreements for office and showroom facilities expire on various dates through December 2028, and are generally non-cancelable. Initial lease terms for retail store leases generally range from three to ten years with an option to extend or renew the leases for 1 to 10 years. In most instances, at the commencement of the lease, the Company has determined that it is not reasonably certain to exercise either of these options; accordingly, these options are generally not considered in determining the initial lease term.

Some of these leases require the Company to make periodic payments for property taxes, utilities and common area operating expenses. Most of the retail store leases are “net” leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Certain retail store leases provide for rents based upon the minimum annual rental amount and a percentage of annual sales volume when specific sales volumes are exceeded. Some leases include lease incentives, rent abatements and fixed rent escalations, which are amortized and recorded over the initial lease term on a straight-line basis from the possession date.

The components of lease cost for the three and nine months ended September 30, 2019 are as follows (in thousands):


	Three months ended		Nine months ended
	September 30, 2019		September 30, 2019
Lease cost
Operating lease cost	$	12,250	$	32,802
Short-term lease cost		934		5,174
Variable lease cost (1)		3,565		9,908
Total lease cost	$	16,749	$	47,884

(1)

Variable components of the lease payments such as utilities, taxes and insurance, parking and maintenance costs.

Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods of free rent.

Amounts reported in the condensed consolidated balance sheet as of September 30, 2019 are as follows (in thousands):


	As of September 30, 2019
Operating Leases:
Operating lease right-of-use assets	$	206,096
Operating lease liabilities	$	186,680
Current portion of operating lease liabilities		28,059
Total operating lease liabilities	$	214,739

Weighted-average remaining lease term
Operating leases		7.33	Years

Weighted-average discount rate
Operating leases		8.12	%

Cash flow information related to operating leases for the three and nine months ended September 30, 2019 are as follows (in thousands):

Future minimum lease payments under non-cancellable leases as of the period ended September 30, 2019 are as follows (in thousands):


2019 (excluding the nine months ended September 30, 2019)	$	11,359
2020		43,716
2021		39,954
2022		36,394
2023		32,429
Thereafter		124,601
Total undiscounted lease payments		288,453
Less: imputed interest		(73,714)
Total lease liabilities	$	214,739

As of September 30, 2019, the Company has additional operating leases, primarily for buildings, that have not yet commenced of $16.8 million. These operating leases will commence in fiscal years 2019 and 2020 with lease terms of 1 year to 10 years.

As of December 31, 2018, for the period prior to adoption of ASC 842, the future minimum rental payments under non-cancelable operating leases with lease terms in excess of one year were as follows (in thousands):


2019	$	44,295
2020		39,771
2021		37,722
2022		35,554
2023		31,110
Thereafter		125,863
Total	$	314,315

Rent expense was $14.2 million for the year ended December 31, 2018.

Three months ended

Nine months ended

September 30, 2019

September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases