The Company has leases for retail studios, showrooms, manufacturing facilities, warehouses and vehicles, which expire at various dates through 2042. Certain lease agreements include contingent rental payments based on per unit usage over a contractual amount and others include rental payments adjusted periodically for inflationary indexes.

For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of use ("ROU") assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. Leases, and any leasehold improvements, are depreciated over the expected lease term. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Variable lease costs associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease costs are presented as operating expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income in the same line item as the expense arising from fixed lease payments for operating leases.

Additionally, certain leases include renewal or termination options, which can be exercised at the Company’s discretion. Lease terms include the noncancelable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at contract inception. Arrangements that are leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets, and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. If leased assets have leasehold improvements, the depreciable life of those leasehold improvements are limited by the expected lease term.

As none of the Company’s leases provide an implicit discount rate, the Company uses an estimated incremental borrowing rate at the lease commencement date in determining the present value of the lease payments. Relevant information used in determining the Company’s incremental borrowing rate includes the duration of the lease, location of the lease, and the Company’s credit risk relative to risk-free market rates.


	Year Ended		Year Ended
(In millions)	May 29, 2021		May 30, 2020
Operating lease costs	$	50.3	$	51.3
Short-term lease costs	3.2		2.6
Variable lease costs*	8.3		8.2
Total	$	61.8	$	62.1

*Not included in the table above for the year ended May 29, 2021 are variable lease costs of approximately $84.5 million for raw material purchases under certain supply arrangements that the Company has determined to meet the definition of a lease.

During the fourth quarter of fiscal 2020, the Company determined it was more likely than not that the fair value of certain right of use assets were below their carrying values and assessed these assets for impairment. As result of this assessment the Company recorded an impairment of $19.3 million in the Consolidated Statements of Comprehensive income.

At May 29, 2021, the Company has no financing leases. The undiscounted annual future minimum lease payments related to the Company's right-of-use assets are summarized by fiscal year in the following table:


(In millions)
2022	$	42.3
2023	42.4
2024	39.1
2025	36.3
2026	28.6
Thereafter	72.1
Total lease payments*	260.8
Less interest	25.2
Present value of lease liabilities	$	235.6

*Lease payments exclude $20.9 million of legally binding minimum lease payments for leases signed but not yet commenced, primarily related to a new DWR corporate office in Stamford, CT expected to be occupied in fiscal 2022.

The long-term portion of the lease liabilities included in the amounts above is $196.9 million and the remainder of the lease liabilities are included in Other accrued liabilities in the Condensed Consolidated Balance Sheets.

As of May 29, 2021 and May 30, 2020, the weighted average remaining lease term for all operating leases was 7 years. The weighted average discount rate for operating leases as of May 29, 2021 and May 30, 2021 was 2.8%, and 3.1%, respectively.