Leases

9 Months Ended

Jun. 30, 2020

NOTE 5: LEASES

Effective October 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). The Company's lease portfolio consists primarily of operating leases for pawn locations and corporate offices. Those leases have initial terms ranging from three to ten years and typically allows for renewals in increments of three to five-years. The Company generally accounts for the initial lease term of our pawn locations as up to ten years, including renewal options. Our primary corporate office is leased through March 2029 with escalating rent payments annually and includes two five-year extension options at the end of the initial lease term. Our pawn location lease agreements generally include rent escalations throughout the initial lease term, with certain future rental payments contingent on increases in the consumer price index, included in variable lease expense. The Company elected to utilize the transition guidance accounting policy elections available, including to not account for lease and non-lease components separately. Lease components generally include rent, taxes and insurance, while non-lease components generally include common area or other maintenance.

The Company determines if an arrangement is or contains a lease at inception.

The weighted-average remaining lease term for operating leases as of June 30, 2020 was 5.58 years. As our leases generally do not include an implicit rate, we compute our incremental borrowing rate based on information available at the lease commencement date applying the portfolio approach to groups of leases with similar characteristics. The Company used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption to initially measure our lease liability. The weighted average incremental borrowing rate used to measure the lease liability as of June 30, 2020 was 8.25%.

The details of the Company's right-of-use asset and lease liability recognized upon adoption of ASC 842, computed based on the consumer price index and foreign currency exchange rate as applicable then in effect and excluding executory costs on October 1, 2019 are as follows (in thousands):



Right-of-use asset	$	246,028
Straight-line rent accrual	(8,479		)
	$	237,549

Lease liability, current	$	45,272
Lease liability, non-current	200,756
	$	246,028

Lease expense is recognized on a straight-line basis over the lease term with variable lease expense recognized in the period in which the costs are incurred. The components of lease expense included in "Operations" and "Administrative" expense, based on the underlying lease use, in our condensed consolidated statements of operations for the three and nine months ended June 30, 2020 are as follows (in thousands):



	Three Months Ended June 30,		Nine Months Ended June 30,
	2020		2020

Operating lease expense	$	15,624	$	47,603
Variable lease expense	3,025		8,925
	$	18,649	$	56,528

As of June 30, 2020, maturities of lease liabilities by fiscal year were as follows (in thousands):



Three months ending September 30, 2020	$	19,161
Fiscal 2021	59,546
Fiscal 2022	50,481
Fiscal 2023	40,609
Fiscal 2024	31,154
Thereafter	70,094
	$	271,045
Less: Portion representing interest	(54,489		)
	$	216,556
Less: Current portion	48,840
Total long term lease liability	$	167,716

Prior to the adoption of ASC 842, future minimum undiscounted lease payments due under non-cancelable leases as of September 30, 2019 for each subsequent fiscal year were as follows (in thousands):



2020	$	69,291
2021	60,588
2022	46,720
2023	32,062
2024	19,969
Thereafter	39,256
	$	267,886

We present changes in the lease right-of-use asset and lease liabilities gross in the Company's condensed consolidated statements of cash flows. The supplemental cash flow information relating to our operating leases for the nine months ended

June 30, 2020 is as follows (in thousands):



Lease right-of-use assets obtained in exchange for operating lease liabilities subsequent to adoption of Topic 842	$	10,136