Leases

9 Months Ended

Sep. 30, 2021

The Company enters into operating leases domestically and internationally to lease certain warehouse space, office facilities, space for its brand and factory house stores, and certain equipment under non-cancelable operating leases. The leases expire at various dates through 2035, excluding extensions at the Company's option, and include provisions for rental adjustments.

The Company accounts for a contract as a lease when it has the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its right-of-use ("ROU") assets and lease liabilities at the lease commencement date and thereafter if modified. ROU assets represent the Company’s right to control the underlying assets under lease, over the contractual term. ROU assets and lease liabilities are recognized on the unaudited condensed consolidated balance sheets based on the present value of future minimum lease payments to be made over the lease term. ROU assets and lease liabilities are established on the Company's unaudited condensed consolidated balance sheets for leases with an expected term greater than one year. Short-term lease payments were not material for the three and nine months ended September 30, 2021 and 2020.

As the rate implicit in a lease is not readily determinable, the Company uses its secured incremental borrowing rate to determine the present value of the lease payments. The Company calculates the incremental borrowing rate based on the current market yield curve and adjusts for foreign currency impacts for international leases.

Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not included in the measurement of the lease liability. These variable lease payments are recognized in the unaudited condensed consolidated statements of operations in the period in which the obligation for those payments is incurred. Variable lease payments primarily consist of payments dependent on sales in brand and factory house stores. The Company has elected to combine lease and non-lease components in the determination of lease costs for its leases. The lease liability includes lease payments related to options to extend or renew the lease term only if the Company is reasonably certain to exercise those options.

As a result of the impacts of COVID-19, the Company sought concessions during Fiscal 2020 from landlords for certain leases of brand and factory house stores in the form of rent deferrals or rent waivers. Consistent with

updated guidance from the FASB in April 2020, the Company elected to account for treating these concessions as though the enforceable rights and obligations to the deferrals existed in the respective contracts at lease inception and will not account for the concessions as lease modifications, unless the concession results in a substantial change in the Company's obligations.

The Company's rent deferrals had no impact to rent expense during the three and nine months ended September 30, 2021 and 2020, and amounts deferred and payable in future periods have been included in short term lease liability on the Company's unaudited condensed consolidated balance sheet as of September 30, 2021. The Company's rent waivers, which were recorded as a reduction of rent expense, were approximately $2.2 million and $5.1 million for the three and nine months ended September 30, 2021, respectively, and $1.0 million and $3.4 million for the three and nine months ended September 30, 2020, respectively.

Lease Costs and Other Information

The Company recognizes lease expense on a straight-line basis over the lease term.

The following table illustrates operating and variable lease costs, included in selling, general and administrative expenses within the Company's unaudited condensed consolidated statement of operations, for the periods indicated:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2021		2020		2021		2020
Operating lease costs	$	35,630	$	36,882	$	106,973	$	108,614
Variable lease costs	$	4,650	$	2,879	$	12,025	$	5,447

There are no residual value guarantees that exist, and there are no restrictions or covenants imposed by leases. The Company rents or subleases excess office facilities and warehouse space to third parties. Sublease income is not material. The weighted average remaining lease term and discount rate for the periods indicated below were as follows:


	September 30, 2021		December 31, 2020		September 30, 2020
Weighted average remaining lease term (in years)	8.84		9.12		9.24
Weighted average discount rate	3.73	%	3.83	%	3.82	%

Supplemental Cash Flow Information

The following table presents supplemental information relating to cash flow arising from lease transactions:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases	$	44,161	$	37,810	$	135,035	$	113,784
Leased assets obtained in exchange for new operating lease liabilities	$	5,348	$	11,018	$	18,396	$	393,850

Maturity of Lease Liabilities

The following table presents the future minimum lease payments under our operating lease liabilities as of September 30, 2021:


(In thousands)
Fiscal year ending December 31,
2021 (three months ended)	$	49,090
2022	164,404
2023	144,415
2024	124,609
2025	95,162
2026 and thereafter	453,252
Total lease payments	$	1,030,932
Less: Interest	160,289
Total present value of lease liabilities	$	870,643

As of September 30, 2021, the Company has additional operating lease obligations that have not yet commenced of approximately $12.2 million, which are not reflected in the table above.