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Leases

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leases

Note 3. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, vehicles, and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. With respect to the Company's Toptracer operations, the Company also enters into non-cancellable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.

Sales-Type Leases

Leasing revenue attributed to sales-type leases was $8,954,000 and $24,124,000 for the three and nine months ended September 30, 2021, respectively, and are included in services revenues within the consolidated condensed statement of operations. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in thousands):

			Three Months Ended September 30,						Nine Months Ended September 30,
			2021						2021
Sales-type lease selling price(1)			$	7,529					$	21,113
Cost of underlying assets			(2,990)						(8,583)
Operating profit			$	4,539					$	12,530
Interest income			$	1,425					$	3,011

(1) Selling price is equal to the present value of lease payments over the non-cancellable term.

Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in thousands):

			Balance Sheet Location						September 30, 2021
Leasing receivables, net - short-term			Other current assets						$	12,016
Leasing receivables - long-term			Other assets						38,604
									$	50,620

Operating and Finance Leases

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatement on a few of its operating leases. The Company opted to apply FASB Staff Q&A-Topic 842 and Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Condensed Balance Sheet as of September 30, 2020, and rent abatements of $120,000 and $1,431,000, which were recorded as reductions in rent expense in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 the Company recorded rent deferments of $6,722,000 of which $670,000 was recorded in accrued expenses, and $6,052,000 was recorded in other long-term liabilities in the consolidated condensed balance sheets. There were no material rent abatements recorded for the three and nine months ended September 30, 2021.

Supplemental balance sheet information related to leases is as follows (in thousands):

			Balance Sheet Location						September 30, 2021						December 31, 2020
Operating Leases
ROU assets, net			Operating lease ROU assets, net						$	1,066,124					$	194,776
Lease liabilities, short-term			Operating lease liabilities, short-term						$	55,507					$	29,579
Lease liabilities, long-term			Operating lease liabilities, long-term						$	1,181,443					$	177,996
Finance Leases
ROU assets, net			Other assets						$	12,025					$	1,003
Lease liabilities, short-term			Accrued expenses						$	1,269					$	252
Lease liabilities, long-term			Long-term other						$	12,121					$	447

The components of lease expense are as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Operating lease costs			$	41,610					$	10,458					$	103,022					$	31,759
Financing lease costs:
Amortization of right-of-use assets			810						185						1,987						505
Interest on lease liabilities			130						9						176						31
Total financing lease costs			940						194						2,163						536
Variable lease costs			1,393						590						3,925						2,473
Total lease costs			$	43,943					$	11,242					$	109,110					$	34,768

Other information related to leases was as follows (in thousands):

						Nine Months Ended September 30,
Supplemental Cash Flows Information						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases						$	95,757					$	29,122
Operating cash outflows from finance leases						$	390					$	31
Financing cash outflows from finance leases						$	465					$	530
Lease liabilities arising from new ROU assets:
Operating leases						$	87,484					$	54,678
Finance leases						$	10,959					$	131

			September 30, 2021						December 31, 2020
Weighted average remaining lease term (years):
Operating leases			14.4						9.8
Finance leases			17.4						3.0
Weighted average discount rate:
Operating leases			8.2		%				5.3		%
Finance leases			5.3		%				3.9		%

Future minimum lease obligations as of September 30, 2021 were as follows (in thousands):

			Operating Leases						Finance Leases
Remainder of 2021			$	37,341					$	343
2022			151,948						1,585
2023			150,345						1,580
2024			147,680						1,179
2025			145,734						836
Thereafter			1,566,420						16,123
Total future lease payments			2,199,468						21,646
Less: imputed interest			962,518						8,256
Total			$	1,236,950					$	13,390

Lease payments exclude $800,820,000 related to 15 non-cancellable leases that have been signed as of September 30, 2021 but have not yet commenced. The Company's minimum capital commitment related to leases was approximately $83,000,000 as of September 30, 2021. As the Company is actively involved in the construction of these properties, the Company recorded $120,983,000 in construction costs within property, plant and equipment as of September 30, 2021. Additionally, as of September 30, 2021, the Company recorded $54,264,000 in construction advances from the landlord in connection with properties. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.

Financing Obligations (Deemed Landlord Financing Obligations)

During the nine months ended September 30, 2021, the Company accounted for five DLF obligations that did not meet the sale-leaseback criteria upon the completion of construction in accordance with ASC Topic 842. As of September 30, 2021, the Company was the accounting owner of a total of thirteen buildings under DLF obligations. As of September 30, 2021, the net book value included in property, plant and equipment on the consolidated condensed balance sheets related to these buildings totaled $375,139,000. Buildings capitalized in conjunction with DLF obligations are depreciated, less residual value, over 20 years or over their estimated useful life, whichever is shorter.

Supplemental balance sheet information related to DLF obligations is as follows (in thousands):

			Balance Sheet Location						September 30, 2021
DLF obligation liabilities, short-term			Accrued expenses						$	580
DLF obligation liabilities, long-term			Deemed landlord financing, long-term						$	312,027

The components of DLF obligation expenses are as follows (in thousands):

			Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
Amortization of DLF obligations			$	1,804					$	3,507
Interest on DLF obligations			6,528						13,674
Total DLF contracts expenses			$	8,332					$	17,181

Principal payments on DLF obligations presented below are included in repayments of long-term debt in the accompanying consolidated condensed statement of cash flows for the nine months ended September 30, 2021.

Supplemental Cash Flows Information (in thousands)						Nine Months Ended September 30, 2021
Financing cash outflows from DLF obligations						$	14,039

			September 30, 2021
Weighted average remaining lease term (years)			19.25
Weighted average discount rate			8.8		%

Future minimum financing obligations related to DLF obligations as of September 30, 2021 were as follows (in thousands):

Remainder of 2021						$	6,742
2022						27,176
2023						27,044
2024						27,335
2025						27,728
Thereafter						486,354
Total future lease payments						602,379
Less: imputed interest						289,772
Total						$	312,607

Leases

Note 3. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, vehicles, and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. With respect to the Company's Toptracer operations, the Company also enters into non-cancellable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.

Sales-Type Leases

Leasing revenue attributed to sales-type leases was $8,954,000 and $24,124,000 for the three and nine months ended September 30, 2021, respectively, and are included in services revenues within the consolidated condensed statement of operations. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in thousands):

			Three Months Ended September 30,						Nine Months Ended September 30,
			2021						2021
Sales-type lease selling price(1)			$	7,529					$	21,113
Cost of underlying assets			(2,990)						(8,583)
Operating profit			$	4,539					$	12,530
Interest income			$	1,425					$	3,011

(1) Selling price is equal to the present value of lease payments over the non-cancellable term.

Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in thousands):

			Balance Sheet Location						September 30, 2021
Leasing receivables, net - short-term			Other current assets						$	12,016
Leasing receivables - long-term			Other assets						38,604
									$	50,620

Operating and Finance Leases

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatement on a few of its operating leases. The Company opted to apply FASB Staff Q&A-Topic 842 and Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Condensed Balance Sheet as of September 30, 2020, and rent abatements of $120,000 and $1,431,000, which were recorded as reductions in rent expense in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 the Company recorded rent deferments of $6,722,000 of which $670,000 was recorded in accrued expenses, and $6,052,000 was recorded in other long-term liabilities in the consolidated condensed balance sheets. There were no material rent abatements recorded for the three and nine months ended September 30, 2021.

Supplemental balance sheet information related to leases is as follows (in thousands):

			Balance Sheet Location						September 30, 2021						December 31, 2020
Operating Leases
ROU assets, net			Operating lease ROU assets, net						$	1,066,124					$	194,776
Lease liabilities, short-term			Operating lease liabilities, short-term						$	55,507					$	29,579
Lease liabilities, long-term			Operating lease liabilities, long-term						$	1,181,443					$	177,996
Finance Leases
ROU assets, net			Other assets						$	12,025					$	1,003
Lease liabilities, short-term			Accrued expenses						$	1,269					$	252
Lease liabilities, long-term			Long-term other						$	12,121					$	447

The components of lease expense are as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Operating lease costs			$	41,610					$	10,458					$	103,022					$	31,759
Financing lease costs:
Amortization of right-of-use assets			810						185						1,987						505
Interest on lease liabilities			130						9						176						31
Total financing lease costs			940						194						2,163						536
Variable lease costs			1,393						590						3,925						2,473
Total lease costs			$	43,943					$	11,242					$	109,110					$	34,768

Other information related to leases was as follows (in thousands):

						Nine Months Ended September 30,
Supplemental Cash Flows Information						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases						$	95,757					$	29,122
Operating cash outflows from finance leases						$	390					$	31
Financing cash outflows from finance leases						$	465					$	530
Lease liabilities arising from new ROU assets:
Operating leases						$	87,484					$	54,678
Finance leases						$	10,959					$	131

			September 30, 2021						December 31, 2020
Weighted average remaining lease term (years):
Operating leases			14.4						9.8
Finance leases			17.4						3.0
Weighted average discount rate:
Operating leases			8.2		%				5.3		%
Finance leases			5.3		%				3.9		%

Future minimum lease obligations as of September 30, 2021 were as follows (in thousands):

			Operating Leases						Finance Leases
Remainder of 2021			$	37,341					$	343
2022			151,948						1,585
2023			150,345						1,580
2024			147,680						1,179
2025			145,734						836
Thereafter			1,566,420						16,123
Total future lease payments			2,199,468						21,646
Less: imputed interest			962,518						8,256
Total			$	1,236,950					$	13,390

Lease payments exclude $800,820,000 related to 15 non-cancellable leases that have been signed as of September 30, 2021 but have not yet commenced. The Company's minimum capital commitment related to leases was approximately $83,000,000 as of September 30, 2021. As the Company is actively involved in the construction of these properties, the Company recorded $120,983,000 in construction costs within property, plant and equipment as of September 30, 2021. Additionally, as of September 30, 2021, the Company recorded $54,264,000 in construction advances from the landlord in connection with properties. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.

Financing Obligations (Deemed Landlord Financing Obligations)

During the nine months ended September 30, 2021, the Company accounted for five DLF obligations that did not meet the sale-leaseback criteria upon the completion of construction in accordance with ASC Topic 842. As of September 30, 2021, the Company was the accounting owner of a total of thirteen buildings under DLF obligations. As of September 30, 2021, the net book value included in property, plant and equipment on the consolidated condensed balance sheets related to these buildings totaled $375,139,000. Buildings capitalized in conjunction with DLF obligations are depreciated, less residual value, over 20 years or over their estimated useful life, whichever is shorter.

Supplemental balance sheet information related to DLF obligations is as follows (in thousands):

			Balance Sheet Location						September 30, 2021
DLF obligation liabilities, short-term			Accrued expenses						$	580
DLF obligation liabilities, long-term			Deemed landlord financing, long-term						$	312,027

The components of DLF obligation expenses are as follows (in thousands):

			Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
Amortization of DLF obligations			$	1,804					$	3,507
Interest on DLF obligations			6,528						13,674
Total DLF contracts expenses			$	8,332					$	17,181

Principal payments on DLF obligations presented below are included in repayments of long-term debt in the accompanying consolidated condensed statement of cash flows for the nine months ended September 30, 2021.

Supplemental Cash Flows Information (in thousands)						Nine Months Ended September 30, 2021
Financing cash outflows from DLF obligations						$	14,039

			September 30, 2021
Weighted average remaining lease term (years)			19.25
Weighted average discount rate			8.8		%

Future minimum financing obligations related to DLF obligations as of September 30, 2021 were as follows (in thousands):

Remainder of 2021						$	6,742
2022						27,176
2023						27,044
2024						27,335
2025						27,728
Thereafter						486,354
Total future lease payments						602,379
Less: imputed interest						289,772
Total						$	312,607

Leases

Note 3. Leases

The Company leases office space, manufacturing plants, warehouses, distribution centers, Company-operated Topgolf venues, vehicles, and equipment, as well as retail and/or outlet locations related to the TravisMathew and Jack Wolfskin businesses and the apparel business in Japan. With respect to the Company's Toptracer operations, the Company also enters into non-cancellable license agreements that provide software and hardware to driving ranges and hospitality and entertainment venues, which are classified as sales-type leases.

Sales-Type Leases

Leasing revenue attributed to sales-type leases was $8,954,000 and $24,124,000 for the three and nine months ended September 30, 2021, respectively, and are included in services revenues within the consolidated condensed statement of operations. Leasing revenue attributed to sales-type leases consists of the selling price and interest income as follows (in thousands):

			Three Months Ended September 30,						Nine Months Ended September 30,
			2021						2021
Sales-type lease selling price(1)			$	7,529					$	21,113
Cost of underlying assets			(2,990)						(8,583)
Operating profit			$	4,539					$	12,530
Interest income			$	1,425					$	3,011

(1) Selling price is equal to the present value of lease payments over the non-cancellable term.

Leasing receivables related to the Company’s net investment in sales-type leases are as follows (in thousands):

			Balance Sheet Location						September 30, 2021
Leasing receivables, net - short-term			Other current assets						$	12,016
Leasing receivables - long-term			Other assets						38,604
									$	50,620

Operating and Finance Leases

In response to the COVID-19 pandemic, the Company received certain rent concessions in the form of deferments and abatement on a few of its operating leases. The Company opted to apply FASB Staff Q&A-Topic 842 and Topic 840: "Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic" issued in April 2020, and account for these concessions as if they were made under the enforceable rights included in the original agreement. Rent deferments were recorded as a payable and paid at a later negotiated date. Rent abatements were recognized as reductions in rent expense over the periods covered by the abatement period. The Company received rent deferments of $687,000, which were recorded in accounts payable and accrued expenses in the Consolidated Condensed Balance Sheet as of September 30, 2020, and rent abatements of $120,000 and $1,431,000, which were recorded as reductions in rent expense in the Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 the Company recorded rent deferments of $6,722,000 of which $670,000 was recorded in accrued expenses, and $6,052,000 was recorded in other long-term liabilities in the consolidated condensed balance sheets. There were no material rent abatements recorded for the three and nine months ended September 30, 2021.

Supplemental balance sheet information related to leases is as follows (in thousands):

			Balance Sheet Location						September 30, 2021						December 31, 2020
Operating Leases
ROU assets, net			Operating lease ROU assets, net						$	1,066,124					$	194,776
Lease liabilities, short-term			Operating lease liabilities, short-term						$	55,507					$	29,579
Lease liabilities, long-term			Operating lease liabilities, long-term						$	1,181,443					$	177,996
Finance Leases
ROU assets, net			Other assets						$	12,025					$	1,003
Lease liabilities, short-term			Accrued expenses						$	1,269					$	252
Lease liabilities, long-term			Long-term other						$	12,121					$	447

The components of lease expense are as follows (in thousands):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Operating lease costs			$	41,610					$	10,458					$	103,022					$	31,759
Financing lease costs:
Amortization of right-of-use assets			810						185						1,987						505
Interest on lease liabilities			130						9						176						31
Total financing lease costs			940						194						2,163						536
Variable lease costs			1,393						590						3,925						2,473
Total lease costs			$	43,943					$	11,242					$	109,110					$	34,768

Other information related to leases was as follows (in thousands):

						Nine Months Ended September 30,
Supplemental Cash Flows Information						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases						$	95,757					$	29,122
Operating cash outflows from finance leases						$	390					$	31
Financing cash outflows from finance leases						$	465					$	530
Lease liabilities arising from new ROU assets:
Operating leases						$	87,484					$	54,678
Finance leases						$	10,959					$	131

			September 30, 2021						December 31, 2020
Weighted average remaining lease term (years):
Operating leases			14.4						9.8
Finance leases			17.4						3.0
Weighted average discount rate:
Operating leases			8.2		%				5.3		%
Finance leases			5.3		%				3.9		%

Future minimum lease obligations as of September 30, 2021 were as follows (in thousands):

			Operating Leases						Finance Leases
Remainder of 2021			$	37,341					$	343
2022			151,948						1,585
2023			150,345						1,580
2024			147,680						1,179
2025			145,734						836
Thereafter			1,566,420						16,123
Total future lease payments			2,199,468						21,646
Less: imputed interest			962,518						8,256
Total			$	1,236,950					$	13,390

Lease payments exclude $800,820,000 related to 15 non-cancellable leases that have been signed as of September 30, 2021 but have not yet commenced. The Company's minimum capital commitment related to leases was approximately $83,000,000 as of September 30, 2021. As the Company is actively involved in the construction of these properties, the Company recorded $120,983,000 in construction costs within property, plant and equipment as of September 30, 2021. Additionally, as of September 30, 2021, the Company recorded $54,264,000 in construction advances from the landlord in connection with properties. The Company will determine the lease classification for properties currently under construction at the end of the construction period. The initial base term upon the commencement of these leases is generally 20 years.

Financing Obligations (Deemed Landlord Financing Obligations)

During the nine months ended September 30, 2021, the Company accounted for five DLF obligations that did not meet the sale-leaseback criteria upon the completion of construction in accordance with ASC Topic 842. As of September 30, 2021, the Company was the accounting owner of a total of thirteen buildings under DLF obligations. As of September 30, 2021, the net book value included in property, plant and equipment on the consolidated condensed balance sheets related to these buildings totaled $375,139,000. Buildings capitalized in conjunction with DLF obligations are depreciated, less residual value, over 20 years or over their estimated useful life, whichever is shorter.

Supplemental balance sheet information related to DLF obligations is as follows (in thousands):

			Balance Sheet Location						September 30, 2021
DLF obligation liabilities, short-term			Accrued expenses						$	580
DLF obligation liabilities, long-term			Deemed landlord financing, long-term						$	312,027

The components of DLF obligation expenses are as follows (in thousands):

			Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
Amortization of DLF obligations			$	1,804					$	3,507
Interest on DLF obligations			6,528						13,674
Total DLF contracts expenses			$	8,332					$	17,181

Principal payments on DLF obligations presented below are included in repayments of long-term debt in the accompanying consolidated condensed statement of cash flows for the nine months ended September 30, 2021.

Supplemental Cash Flows Information (in thousands)						Nine Months Ended September 30, 2021
Financing cash outflows from DLF obligations						$	14,039

			September 30, 2021
Weighted average remaining lease term (years)			19.25
Weighted average discount rate			8.8		%

Future minimum financing obligations related to DLF obligations as of September 30, 2021 were as follows (in thousands):

Remainder of 2021						$	6,742
2022						27,176
2023						27,044
2024						27,335
2025						27,728
Thereafter						486,354
Total future lease payments						602,379
Less: imputed interest						289,772
Total						$	312,607

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The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
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The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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The entire disclosure of lessor's direct financing leases.

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-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 30
-URI http://asc.fasb.org/subtopic&trid=77888252

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