The Company adopted ASU 2016-02, Leases, at the beginning of the first quarter of 2019 using the modified retrospective approach applied to all leases as of the date of application. The Company elected the package of practical expedients for leases existing as of the effective date under which it did not reassess whether contracts contain leases under the new definition of a lease, the lease classification or whether previously capitalized initial direct costs would qualify for capitalization under ASU 2016-02. In addition, the Company did not elect the hindsight practical expedient for considering judgments and estimates relating to its existing leases such as determining the remaining lease term.

Description of Leases

The Company’s leases consist primarily of corporate offices, retail stores, distribution centers, showrooms, vehicles and office equipment. The Company leases assets in the normal course of business to meet its current and future needs while providing flexibility to its operations. The Company enters into contracts with third parties to lease specifically identified assets. Most of the Company’s leases have contractually specified renewal periods. Most retail store leases have early termination clauses that the Company can elect if stipulated sales amounts are not achieved. The Company determines the lease term for each lease based on the terms of each contract and factors in renewal and early termination options if such options are reasonably certain to be exercised.

Accounting for Leases

Under FASB ASC Topic 842, Leases, the Company has elected the practical expedient to account for lease components and nonlease components associated with individual leases as a single lease component for all of its leases. In addition, the Company has elected to account for multiple lease components as a single lease component. The Company’s leases may include variable lease costs such as payments based on changes to an index, payments based on a percentage of retail store sales, and maintenance, utilities, shared marketing or other service costs that are paid directly to the lessor under terms of the lease. The Company recognizes variable lease payments when the amounts are incurred and determinable. The Company has elected to account for leases less than one year as short-term leases and accordingly does not recognize a right-of-use asset or lease liability for these leases. The Company recognizes rent expense on a straight-line basis over the lease term.

The Company subleases certain portions of leased offices and distribution centers that exceed the Company’s current operational needs. Since the Company utilizes the majority of the leased space and retains the obligation to the lessor, the underlying leases continue to be accounted for as operating leases. Sublease income is recognized on a straight-line basis over the term of the sublease, and beginning in fiscal 2019, is recognized in Other income, net on the consolidated condensed statements of operations and comprehensive income.

The Company recognizes a lease liability in current and noncurrent liabilities equal to the present value of the fixed future lease payments using an incremental borrowing rate as of the commencement date of each lease. The incremental borrowing rate is based on interest rate that the Company would normally pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments. The weighted-average discount rate for operating leases as of March 30, 2019 is 5.1%. The Company also recognizes a right-of-use asset, which is equal to the lease liability as of March 30, 2019 adjusted for the remaining balance of accrued rent and unamortized lease incentives.

The following is a summary of the Company’s lease cost.



	Quarter Ended
(In millions)	March 30, 2019
Operating lease cost	$	8.0
Variable lease cost	3.5
Short-term lease cost	0.2
Sublease income	(1.0		)
Total lease cost	$	10.7

The weighted-average remaining lease term for operating leases as of March 30, 2019 is 10.7 years. Future undiscounted cash flows for operating leases for the fiscal periods subsequent to March 30, 2019 are as follows:



(In millions)	Operating Leases
Remainder of 2019	$	21.6
2020	29.0
2021	26.5
2022	23.9
2023	17.7
Thereafter	111.6
Total future payments	230.3
Less: imputed interest	54.4
Recognized lease liability	$	175.9

The Company made cash payments of $9.6 million for operating lease liabilities during the quarter ended March 30, 2019. During the quarter ended March 30, 2019, the Company entered into new leases that resulted in the noncash recognition of right-of-use assets and lease liabilities of $5.1 million. In addition, the Company entered into real estate leases which will commence subsequent to March 30, 2019 with future undiscounted rental payments of $6.9 million. The Company has a financing lease with future payments of $0.4 million and a remaining term of 2.8 years.