Leases

Effective

February 3, 2019,

the Company adopted the FASB guidance on leases (“Topic

842”

), which requires leases with durations greater than

twelve

months to be recognized on the balance sheet. The Company adopted Topic

842

using the modified retrospective transition approach, which includes a number of optional practical expedients that entities

may

elect to apply. Prior year financial statements were

not

recast under Topic

842,

and therefore those amounts are

not

disclosed. The Company has elected certain practical expedients, including the package of practical expedients to

not

reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs as well as an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The Company also elected the optional transition method that gives companies the option to use the effective date as the date of initial application on transition, and as a result, the Company will

not

adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. The Company has elected to make the accounting policy election for short-term leases. Consequently, short-term leases will be recorded as an expense on a straight-line basis over the lease term. The Company did

not

elect the hindsight practical expedient.

The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than

months, the Company records the related asset and obligation at the present value of lease payments over the term. Most retail store leases have a

five

ten

-year base period and include renewal options to extend the lease term beyond the initial base period. The renewal options are

not

included in the measurement of the right of use assets and right of use liabilities unless the Company is reasonably certain to exercise the optional renewal periods Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company

may

operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do

not

contain any material residual value guarantees or material restrictive covenants.

The Company's leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property. These incentives reduce our right-of-use asset related to the lease and are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of the Company's leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the store’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses.

For leases entered into or reassessed after the adoption of the new standard, the Company has elected the practical expedient allowed by the standard to account for all fixed consideration in a lease as a single lease component. Therefore, the lease payments used to measure the lease liability for these leases include fixed minimum rentals along with fixed operating costs such as common area maintenance and utilities.

Most of the Company’s leases do

not

provide a readily available implicit rate. Therefore, the Company estimates the incremental borrowing discount rate based on information available at lease commencement. The discount rates used were indicative of a synthetic credit rating based on quantitative and qualitative analysis and adjusted

one

notch higher to estimate a secured credit rating. For non-U.S. locations, a risk-free rate yield based on the currency of the lease was used to estimate the incremental borrowing rate.

Upon adoption and transition, the Company recognized a cumulative-effect charge of

$7.4

million net of tax to the opening balance of retained earnings which represents impairment charges to the right-of-use assets associated with stores whose fixed assets have been previously impaired or had indicators of impairment, and whose right-of-use-assets were determined to be above fair market value.

Lease position as of

February 3, 2019

The table below presents the lease-related assets and liabilities recorded on the balance sheet.

		February 3,
(in thousands)	Classification on the Balance Sheet	2019
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	151,513

Liabilities
Current - Operating	Operating lease liability short term		34,672
Noncurrent - Operating	Operating lease liability long term		141,519
Total lease liabilities		$	176,191

The table below presents certain information related to the lease costs for operating leases for the

thirteen

weeks ended

May 4, 2019.

	Thirteen weeks ended
(in thousands)	May 4, 2019

Operating lease costs	$	10,416
Variable lease costs		621
Short term lease costs		387
Total Operating Lease costs	$	11,424

Other information

The table below presents supplemental cash flow information related to leases for the

thirteen

weeks ended

May 4, 2019.

	Thirteen weeks ended
(in thousands)	May 4, 2019
Cash paid for operating lease liabilities
Operating cash flows for operating leases	$	11,199

As of

May

2019,

the weighted-average remaining operating lease term was

6.4

years and the weighted-average discount rate was

5.9

% for operating leases recognized on our Condensed Consolidated Statement of Operations.

Undiscounted cash flows

The table below reconciles the undiscounted cash flows for each of the

first

five

years and total of the remaining years to the finance lease operating liabilities and operating lease liabilities recorded on the balance sheet.

(in thousands)	Operating Leases
2019	$	30,645
2020		34,700
2021		31,461
2022		29,308
2023		24,974
Thereafter		50,903
Total minimum lease payments		201,991
Less: amount of lease payments representing interest		(33,767	)
Present value of future minimum lease payments		168,224
Less: current obligations under leases		(30,558	)
Long-term lease obligations	$	137,666

As of

May 4, 2019,

the Company has additional executed leases that have

not

yet commenced of

$6.1

million. These leases will commence in

2019

with lease terms of approximately

ten

years.

In accordance with Accounting Standards Codification ("ASC")

840,

Leases, the aggregate minimum non-cancelable annual lease payments under operating leases in effect on

February

2019

were as follows:

2019	$	41,800
2020		35,192
2021		31,940
2022		29,265
2023		24,961
Subsequent to 2023		49,782
Total	$	212,940