LEASES

The Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating lease agreements. Operating lease right-of-use (ROU) assets and lease liabilities are recognized based on the present value of lease payments over the lease term. The majority of the ROU asset and lease liability balances relate to the retail operations of The Americas Group.

Most leases include one or more options to renew. The exercise of lease renewal options is at the Company's discretion and is not reasonably certain at lease commencement. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties. Variable payments for equipment leases relate primarily to hours, miles, or other quantifiable usage factors which are not determinable at the time the lease agreement is entered into by the Company. The Company has made an accounting policy election by class of underlying asset to not apply the recognition requirements of ASC 842 to short-term leases. As a result, certain leases with a term of 12 months or less are not recorded on the balance sheet and expense is recognized on a straight-line basis over the lease term. Most leases do not contain an implicit discount rate. Therefore, the Company’s estimated incremental borrowing rate based on information available at the time of lease inception is used to discount lease payments to present value.

Additional lease information is summarized below:



(Thousands of dollars)
	Three Months Ended
	March 31, 2019

Operating lease cost	$	112,105
Short-term lease cost	10,103
Variable lease cost	17,334

Operating cash outflows from operating leases	106,692

Weighted average remaining lease term for operating leases	6.1 years

Weighted average discount rate for operating leases	4.0		%

The following table reconciles the undiscounted cash flows for each of the first five years and thereafter to the operating lease liabilities recognized on the balance sheet. The reconciliation excludes short-term leases that are not recorded on the balance sheet.



(Thousands of dollars)
	Operating Leases
Year Ending December 31,
2019 (excluding the three months ended March 31, 2019)	$	320,062
2020	393,077
2021	328,670
2022	265,871
2023	199,120
Thereafter	449,256
Total lease payments	1,956,056
Amount representing interest	(228,162		)
Present value of operating lease liabilities	$	1,727,894