In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which changed how companies account for leases. On February 2, 2019, the Company adopted the guidance using the comparatives under 840 option approach which waives the requirement to apply ASC 842 in the comparative periods presented within the financial statements in the year of adoption. Lands’ End elected the practical expedient package, which among other practical expedients, includes the option to retain the historical classification of leases entered into prior to February 2, 2019. The Company also elected the practical expedient to combine lease and non-lease components.

The Company is a lessee under various lease agreements for its Company Operated store operations and computer equipment. The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement (date in which the Company takes possession of the asset). At lease commencement the Company also measures and recognizes a right-of-use asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. The lease term is defined as the noncancelable portion of the lease term plus any periods covered by an option to extend the lease, if it is reasonably certain that the option will be exercised. For the purposes of recognizing right-of-use assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient of not recognizing a right-of-use asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The Company’s leases are classified as operating leases, which are included in the Operating lease right-of-use asset, Lease liability – current and Lease liability – long-term on the Company's Consolidated Balance Sheets.

Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments, over the lease term, as of the commencement date. Minimum lease payments include the fixed lease component of the agreement as well as any variable rate payments that depend on an index, initially measured using

the index at the lease commencement date. Lease terms may include options to renew. If it is determined the lease will not be renewed, the right-of-use asset and lease liability for that lease will be adjusted to reflect the updated lease term. The Company does not have any leases with residual value guarantees or restrictions or covenants imposed by the lease.

Due to the absence of an implicit rate in the Company’s lease contracts, the Company estimates its incremental borrowing rate for each lease based on the lease term, lease currency and the Company’s credit spread. The yield curve selected at the lease commencement date represents one notch above the Company’s unsecured credit rating, and therefore is considered a close proxy for the incremental borrowing rate the Company would incur for secured debt.

Lease expense is recognized on a straight-line basis over the lease term and is included in Selling and administrative expense in the Consolidated Statements of Operations. Variable lease payments that do not depend on a rate or index and short-term rentals (leases with terms less than 12 months) are expensed as incurred.

At the time of implementation in Fiscal 2019, the Company determined certain Operating lease right-of-use assets were impaired and recorded a $1.7 million adjustment to beginning retained earnings related to these impairments, net of tax.

The Company is a lessee under various lease agreements for its Company Operated store operations and computer equipment. All leases are classified as operating leases. The Company’s leases have remaining terms of less than one year to ten years and contain various renewal options. The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. Options to extend are reviewed within two years of option date.

(in thousands)	Fiscal 2021		Fiscal 2020
Operating lease expense	$	8,273	$	8,516
Variable lease expense		2,312		2,303
Ending balance	$	10,585	$	10,819

Supplemental balance sheet information related to operating leases are as follows:

(in thousands)	Fiscal 2021			Fiscal 2020
Operating lease right-of-use asset	$	31,492		$	35,475
Lease liability – current		5,617			5,183
Lease liability – long-term		32,731			37,811
Weighted average remaining lease term in years		6.80		7.56
Weighted average discount rate		6.55	%		6.44	%

(in thousands)	Fiscal 2021		Fiscal 2020
Operating cash outflows from operating leases	$	10,509	$	8,710
Operating lease right-of-use-assets obtained in exchange for lease liabilities		1,409		3,406

Maturities of operating lease liabilities as of January 28, 2022 are as follows:

(in thousands)
2022	$	9,240
2023		7,435
2024		6,445
2025		5,837
2026		5,006
Thereafter		14,100
Total operating lease payments	$	48,063
Less imputed interest		9,715
Present value of lease liabilities	$	38,348

In Fiscal 2022, the Company commenced, for accounting purposes, a lease to relocate an existing Company Operated store. The agreement provides for escalating monthly rental payments totaling approximately $5.3 million over the initial lease term of approximately 11 years.