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Note 8 - Leases

6 Months Ended

Jun. 30, 2019

NOTE 8 – LEASES

General

On December 31, 2018, the Company adopted the new lease standard using the transition methodology allowed by the standard to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative prior year periods presented in these financial statements continue to be in accordance with previous GAAP. We have operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. Our leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. Our lease terms may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.

We record a right-of-use asset and lease liability for operating and finance leases once a contract that contains a lease is executed. The right-of-use asset is measured as the present value of the lease obligation. The discount rate used to calculate the present value of the lease liability was the Company’s incremental borrowing rate for the applicable geographical region.

As of June 30, 2019, there are no significant right-of-use assets and lease obligations from leases that have not commenced as of the end of the second quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheet related to our leases as of June 30, 2019:

	June 30, 2019
	(In thousands)
Balance Sheet Location	Operating Leases		Finance Leases

Operating lease right-of-use assets	$	114,494

Current portion of operating lease liabilities	$	16,293
Operating lease liabilities		97,776
Total operating lease liabilities	$	114,069

Property and equipment			$	3,893

Accrued expenses			$	1,122
Other long-term liabilities				1,096
Total finance lease liabilities			$	2,218

Lease Costs

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	278	$	424
Interest on lease liabilities		11		19
Operating lease cost		5,930		11,601
Short-term lease cost		408		1,146
Variable lease cost		613		758
Total lease cost	$	7,240	$	13,948

Other supplemental information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	11	$	19
Operating cash flows from operating leases		5,395		10,505
Financing cash flows from finance leases		271		517
Right-of-use assets obtained in exchange for new finance lease liabilities		551		551
Right-of-use assets obtained in exchange for new operating lease liabilities		4,069		6,536

	June 30, 2019

Weighted-average remaining lease term – finance leases (in years)		2.30
Weighted-average remaining lease term – operating leases (in years)		10.86
Weighted-average discount rate – finance leases		1.98	%
Weighted-average discount rate – operating leases		5.83	%

Maturity Analysis

Maturity analysis of lease payments under non-cancellable leases were as follows:

Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2019 (excluding the six months ended June 30, 2019)	$	11,410		$	588
2020		20,723			1,104
2021		16,559			397
2022		13,397			110
2023		11,408			64
Thereafter		85,905			14
Total future minimum lease payments (undiscounted)		159,402			2,277
Less: Present value discount		(45,333	)		(59	)
Total lease liability	$	114,069		$	2,218

At December 30, 2018, aggregate minimum rent commitments under operating leases with initial or remaining terms of one year or more consisted of the following:

Fiscal Year	Amount
	(In thousands)
2019	$	26,113
2020		22,066
2021		16,453
2022		8,692
2023		5,186
Thereafter		15,237
Total minimum rent commitments	$	93,747

Practical Expedients and Policy Elections

The Company elected the package of practical expedients permitted under the transition guidance of the new lease standard, which, among other things, allows us to carry forward the historical lease classification and not reassess any initial direct costs for existing leases. In addition, we elected the hindsight practical expedient to determine the lease term, which allows us to use hindsight when considering the impact of options to extend or terminate a lease as well as the option to purchase the underlying asset. We also made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and will account for the lease payments as a single component.

We made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated condensed balance sheet. These leases primarily represent month-to-month operating leases for vehicles and office equipment where we were reasonably certain that we would not elect an option to extend the lease.