NOTE H – Leases

We have operating leases for offices, warehouses, and certain equipment. Our leases have remaining lease terms of 1 year to 14 years, some of which include options to extend the leases for up to 20 years. We determine if an arrangement is or contains a lease at lease inception. Our leases do not have any residual value guarantees or any restrictions or covenants imposed by leases. We have lease agreements for real estate with lease and non-lease components, which are accounted for separately.

The table below presents the operating lease assets and liabilities recognized on the condensed consolidated balance sheets as of June 30, 2019 (in thousands):

	June 30, 2019
Operating Lease Assets:
Right-of use lease assets	$	187,178
Operating Lease Liabilities:
Current lease liabilities		28,768
Non-current lease liabilities		158,782
Total operating lease liabilities	$	187,550

Our leases generally do not provide an implicit rate, and therefore we used our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. We used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

The weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are:

	June 30, 2019
Weighted Average Remaining Lease Term
Operating leases	7.5 years
Weighted Average Discount Rate
Operating leases	6.71%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheets as of June 30, 2019 (in thousands):

	Operating Leases
July 1, 2019 thru December 31, 2019		20,205
2020		39,095
2021		36,696
2022		31,300
2023		24,749
Thereafter		89,818
Total undiscounted future minimum lease payments		241,863
Less: difference between undiscounted lease payments and discounted operating lease liabilities		(54,313	)
Total operating lease liabilities		187,550

Certain of our lease agreements for retail stores include variable lease payments, generally based on sales volume. The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. Certain of our equipment lease agreements include variable lease costs, generally based on usage of the underlying asset (mileage, fuel, etc.). The variable portion of payments are not included in the initial measurement of the right-of-use asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.

Components of lease expense were as follows (in thousands):

	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	$	10,465	$	20,693
Short-term lease cost		30		40
Variable lease cost		1,281		2,812
Total lease expense	$	11,776	$	23,545

During the first quarter of 2019, we entered into a non-cancellable lease for real property that had not commenced as of June 30, 2019. The initial terms are approximately 10 years, with options to extend for up to an additional 20 years. Upon lease commencement, the right-of-use asset and lease liability will be determined and recorded.

Supplemental cash flow information related to leases is as follows (in thousands):

	Six months ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	20,085
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	22,519