Note 15 - Leases and Lease Guarantees

12 Months Ended

Nov. 26, 2022

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

15. Leases and Lease Guarantees

Leases

Effective as of the beginning of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. See “Leases” under Note 2 for a discussion of our accounting policies and elections under Topic 842 as well as the impact of the adoption upon our financial statements.

Supplemental balance sheet information related to our leases as of November 26, 2022 and November 27, 2021 is as follows:

	November 26, 2022		November 27, 2021
Operating leases:
Right of use assets	$	99,472	$	95,955
Lease liabilties, short-term		18,819		20,235
Lease liabilties, long-term		97,477		94,845
Finance leases:
Right of use assets (1)	$	623	$	832
Lease liabilties, short-term (2)		282		254
Lease liabilties, long-term (3)		360		588

(1) Included in property & equipment, net in our consolidated balance sheet.

(2) Included in other current liabilites and accrued expenses in our consolidated balance sheet.

(3) Included in other long-term liabilites and accrued expenses in our consolidated balance sheet.

Our right-of-use assets under operating leases by segment as of November 26, 2022 and November 27, 2021 are as follows:

	November 26, 2022		November 27, 2021
Wholesale	$	8,183	$	9,842
Retail		91,289		86,113
Total right of use assets	$	99,472	$	95,955

The components of our lease cost for 2022, 2021 and 2020 were as follows:

	2022			2021			2020
Lease cost:
Operating lease cost	$	24,399		$	24,367		$	24,946
Financing lease cost:
Amortization of right-of-use assets		279			95			-
Interest on lease liabilities		35			15			-
Short-term lease cost		674			387			545
Variable lease cost (net of abatements received)		447			277			(605	)
Sublease income		(1,444	)		(1,292	)		(1,557	)
Total lease cost	$	24,390		$	23,849		$	23,329

Supplemental lease disclosures as of November 26, 2022, November 27, 2021 and November 28, 2020 and for the fiscal years then ended are as follows:

	Operating			Financing
For the year ended November 28, 2020:
Cash paid for amounts included in the measurements of lease liabilities	$	27,011		$	-
Lease liabilities arising from new right-of-use assets		8,541			-
For the year ended November 27, 2021:
Cash paid for amounts included in the measurements of lease liabilities		26,842			103
Lease liabilities arising from new right-of-use assets		15,678			927
For the year ended November 26, 2022:
Cash paid for amounts included in the measurements of lease liabilities		26,913			302
Lease liabilities arising from new right-of-use assets		23,171			73
As of November 28, 2020:
Weighted average remaining lease terms (years)		6.4			-
Weighted average discount rates		5.00	%		-
As of November 27, 2021:
Weighted average remaining lease terms (years)		6.3			3.2
Weighted average discount rates		5.07	%		4.63	%
As of November 26, 2022:
Weighted average remaining lease terms (years)		6.2			2.3
Weighted average discount rates		5.53	%		4.68	%

Future payments under our leases and the present value of the obligations as of November 26, 2022 are as follows:

	Operating Leases		Financing Leases
Fiscal 2023	$	24,670	$	319
Fiscal 2024		24,458		256
Fiscal 2025		23,172		94
Fiscal 2026		20,506		5
Fiscal 2027		16,222		2
Thereafter		28,839		-
Total lease payments		137,867		676
Less: interest		21,571		34
Total lease obligations	$	116,296	$	642

As of November 26, 2022, we had a commitment to lease 9,597 square feet of retail space located at Post Oak Plaza in Houston, Texas. This space will be used for the relocation of a former retail store in the Houston market that was sold in 2022 (see Note 14). The initial term of the lease is ten years and calls for average monthly rents of $36. The lease has three successive five-year renewal options. We expect to occupy the premises during the first quarter of fiscal 2023 and open the store in the third quarter. We also have commitments to lease 61,182 square feet of retail warehouse space near Dallas, Texas and Columbus, Ohio. These leases each have a five-year terms with combined average monthly rents of $41. We expect to occupy these spaces during the first quarter of 2023.

We sublease a small number of our leased locations to certain of our licensees for operation as BHF network stores. The terms of these leases generally match those of the lease we have with the lessor. In addition, we sublease space in certain closed store locations that are still under lease. Minimum future lease payments due to us under these subleases are as follows:

Fiscal 2023	$	1,289
Fiscal 2024		879
Fiscal 2025		599
Fiscal 2026		156
Fiscal 2027		-
Thereafter		-
Total minimum future rental income	$	2,923

During fiscal 2020, we negotiated with a number of our landlords to obtain relief in the form of rent deferrals or abatements of rent as a result of the effects of COVID-19 on our business. The remaining balance of deferred rent at November 26, 2022 and November 27, 2021 was not material. In accordance with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we elected to account for any lease concessions resulting directly from COVID-19 as if the enforceable rights and obligations for the concessions existed in the respective contracts at lease inception and as such we will not account for any concession as a lease modification. Guidance from the FASB Staff Q&A provided methods to account for rent deferrals which include the option to treat the lease as if no changes to the lease contract were made or to treat deferred payments as variable lease payments. The FASB Staff Q&A allows entities to select the most practical approach and does not require the same approach be applied consistently to all leases. As a result, we accounted for the deferrals as if no changes to the lease contract were made and will continue to recognize lease expense, on a straight-line basis, during the deferral period. For any abatements received, we accounted for those as variable rent in the period in which the abatement is granted. For the year ended November 28, 2020, we were granted abatements against rent totaling $775.

Guarantees

As part of the strategy for our store program, we have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to five years. We were contingently liable under licensee lease obligation guarantees in the amount of $1,880 and $1,845 at November 26, 2022 and November 27, 2021, respectively.

In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer, liquidating the collateral, and pursuing payment under the personal guarantees of the independent dealer. The proceeds of the above options are estimated to cover the maximum amount of our future payments under the guarantee obligations, net of reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at November 26, 2022 and November 27, 2021, were not material.