Leases

9 Months Ended

Nov. 02, 2019

Leases [Abstract]

Lessee, Operating Leases [Text Block]

Leases

We adopted the requirements of ASU No. 2016-02 as of February 3, 2019, utilizing the optional effective date transition method allowing the application of the new standard at the adoption date with comparative periods presented in accordance with ASC 840, Leases. At adoption, we made the following practical expedient policy elections:

• We applied the new standard using the package of practical expedients permitted under the transition guidance, which allowed us to not reassess:

◦Whether any expired or existing contracts are or contain leases;

◦ Lease classification for any expired or existing leases, which allowed us to carry forward the historical lease classifications; and

◦Indirect costs for any existing leases.

• We elected the practical expedient that allowed us to use hindsight in determining the lease term.

• We elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements.

• We elected the accounting policy to not recognize a right-of-use asset and operating lease liability for leases with an initial term of twelve months or less. The Company records lease expense for short term leases on a straight-line basis over the lease term in rentals on the condensed consolidated statements of operations.

• We elected the accounting policy to account for lease components (e.g. fixed rent payments) separately from non-lease components (e.g. common area maintenance costs).

The Company leases retail stores, office space and equipment under operating leases. The majority of these operating leases were impacted by the adoption of the new standard. At adoption, we recorded right-of-use operating lease assets and operating lease liabilities totaling $57.0 million and $56.2 million, respectively. As of November 2, 2019, right-of-use operating lease assets, which are recorded in operating lease assets in the condensed consolidated balance sheets, totaled $48.6 million, and operating lease liabilities, which are recorded in current portion of operating lease liabilities and operating lease liabilities, totaled $48.2 million. The impact of the adoption of the new standard was immaterial to our condensed consolidated statements of income, condensed consolidated statements of cash flows and condensed consolidated statements of stockholders' equity.

In determining our operating lease assets and operating lease liabilities, we applied an incremental borrowing rate to the minimum lease payments within each lease agreement. ASU No. 2016-02 requires the use of the rate implicit in the lease whenever that rate is readily determinable; furthermore, if the implicit rate is not readily determinable, a lessee may use its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate our specific incremental borrowing rates that align with applicable lease terms, we utilized a model consistent with the credit quality of our outstanding debt instruments.

Renewal options from two to 20 years exist on the majority of leased properties. The Company has sole discretion in exercising the lease renewal options. We do not recognize operating lease assets or operating lease liabilities for renewal periods unless it has been determined that we are reasonably certain of renewing the lease at inception. The depreciable life of operating lease assets and related leasehold improvements is limited by the expected lease term.

Contingent rentals on certain leases are based on a percentage of annual sales in excess of specified amounts. Other contingent rentals are based entirely on a percentage of sales. The Company's operating lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the Company's operating and finance leases:

(in thousands of dollars)	Classification - Condensed Consolidated Balance Sheets	November 2, 2019		February 2, 2019(a)		November 3, 2018(a)
Assets
Finance lease assets	Property and equipment, net (b)	$	776	$	1,093	$	1,213
Operating lease assets	Operating lease assets	48,600		—		—
Total leased assets		$	49,376	$	1,093	$	1,213
Liabilities
Current
Finance	Current portion of finance lease liabilities	$	1,148	$	1,214	$	1,187
Operating	Current portion of operating lease liabilities	15,250		—		—
Noncurrent
Finance	Finance lease liabilities	1,029		1,666		1,980
Operating	Operating lease liabilities	32,958		—		—
Total lease liabilities		$	50,385	$	2,880	$	3,167

^(a) The Company adopted and applied ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification and related amendments on February 3, 2019. The prior periods are presented under ASC 840, Leases.

^(b) Finance lease assets are recorded net of accumulated amortization of $13.8 million, $13.5 million and $22.4 million as of November 2, 2019, February 2, 2019 and November 3, 2018, respectively.

Lease Cost		Three Months Ended				Nine Months Ended
(in thousands of dollars)	Classification - Condensed Consolidated Statements of Operations	November 2, 2019		November 3, 2018		November 2, 2019		November 3, 2018
Operating lease cost (a)	Rentals	$	5,927	$	6,578	$	18,254	$	19,683
Finance lease cost
Amortization of leased assets	Depreciation and amortization	106		120		317		1,876
Interest on lease liabilities	Interest and debt expense, net	109		77		367		250
Net lease cost		$	6,142	$	6,775	$	18,938	$	21,809

^(a) Includes short term lease costs of $0.8 million and $2.5 million and variable lease costs of $0.3 million and $1.0 million for the three and nine months ended November 2, 2019, respectively.

Maturities of Lease Liabilities

(in thousands of dollars) Fiscal Year	Operating Leases			Finance Leases			Total
2019 (excluding the nine months ended November 2, 2019)	$	4,054		$	357		$	4,411
2020	16,822			1,428			18,250
2021	12,471			726			13,197
2022	6,127			—			6,127
2023	3,357			—			3,357
After 2023	15,017			—			15,017
Total minimum lease payments	57,848			2,511			60,359
Less amount representing interest	(9,640		)	(334		)	(9,974		)
Present value of lease liabilities	$	48,208		$	2,177		$	50,385

Lease Term and Discount Rate

	November 2, 2019
Weighted-average remaining lease term
Operating leases	5.4 years
Finance leases	1.9 years
Weighted-average discount rate
Operating leases	6.6	%
Finance leases	16.4	%

Other Information

(in thousands of dollars)	Nine Months Ended November 2, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	15,060
Operating cash flows from finance leases	367
Financing cash flows from finance leases	703
Lease assets obtained in exchange for new operating lease liabilities	$	4,601

The Company adopted ASU No. 2016-02 on February 3, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. The future minimum rental commitments as of February 2, 2019 for all non-cancelable leases for buildings and equipment were as follows:

(in thousands of dollars) Fiscal Year	Operating Leases		Finance Leases
2019	$	19,847	$	1,428
2020	15,423		1,077
2021	10,691		726
2022	4,896		—
2023	3,378		—
After 2023	14,532		—
Total minimum lease payments	$	68,767	3,231
Less amount representing interest			(351		)
Present value of net minimum lease payments (of which $1,214 is currently payable)			$	2,880