XML 64 R14.htm IDEA: XBRL DOCUMENT

Leases and Other Commitments

6 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Leases

The Company primarily leases retail stores, showrooms, offices, and distribution facilities under operating lease contracts. Some of the Company's operating leases contain extension options of anywhere from one to 15 years. Historically, the Company has not entered into finance leases and its lease agreements generally do not contain residual value guarantees, options to purchase underlying assets, or material restrictive covenants.

Operating lease assets and liabilities. The Company determines if an arrangement contains a lease at inception of a contract. The Company recognizes operating lease assets and lease liabilities in the condensed consolidated balance sheets on the lease commencement date, based on the present value of the outstanding lease payments over the reasonably certain lease term. The lease term includes the non-cancelable period at the lease commencement date, plus any additional periods covered by the Company's options to extend (or not to terminate) the lease that are reasonably certain to be exercised, or an option to extend (or not to terminate) a lease that is controlled by the lessor.

Operating lease assets are initially measured at cost, which comprises the initial amount of the associated lease liabilities, adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred, less any lease incentives, such as tenant allowances.

Operating lease assets are subsequently measured throughout the lease term at the carrying amount of the associated lease liabilities, plus initial direct costs, plus or minus any prepaid or accrued lease payments, less the unamortized balance of lease incentives received. Rent expense for operating lease payments is recognized on a straight-line basis over the lease term in SG&A expenses in the condensed consolidated statements of comprehensive income. Lease payments recognized in the operating lease liability are (1) fixed payments, including in-substance fixed payments, owed over the lease term, as well as fixed rate increases and (2) exclude any lease prepayments as of the period presented.

Operating lease assets and liabilities are presented separately in the condensed consolidated balance sheets. The current portion of operating lease liabilities is presented within current liabilities, while the long-term portion is presented separately as long-term operating lease liabilities.

Certain leases require additional payments based on (1) actual or forecasted sales volume (either monthly or annually), (2) reimbursement for real estate taxes (tax), (3) common area maintenance (CAM), and (4) insurance (collectively, variable lease payments). Variable lease payments are generally excluded from operating lease assets and liabilities and are recognized in rent expense and recorded as a component of SG&A expenses in the condensed consolidated statements of comprehensive income. Some leases are dependent upon forecasted annual sales volume, and lease payments are recognized on a straight-line basis as rent expense over each annual period when the achievement of the related sales target is reasonably likely to occur. Other variable lease payments, such as tax, CAM and insurance, are recognized in rent expense as incurred. Some leases contain one fixed lease payment that include variable lease payments, which are considered non-lease components. The Company has elected to account for these instances as a single lease component and the total of these fixed payments is used to measure the operating lease assets and lease liabilities.

The Company has elected not to recognize operating lease assets and lease liabilities for short-term leases, which are defined as those operating leases with a term of 12 months or less. Instead, lease payments for short-term leases are recognized on a straight-line basis over the lease term in rent expense and recorded as a component of SG&A expenses in the condensed consolidated statements of comprehensive income.

Discount Rate. The Company discounts its unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily determined, its IBR. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial direct costs. Therefore, the Company generally derives a discount rate at the lease commencement date by utilizing its IBR, which is based on what the Company would have to pay on a collateralized basis to borrow an amount equal to its lease payments under similar terms. Because the Company does not currently borrow on a collateralized basis under its revolving credit facilities, it uses the interest rate it pays on its noncollateralized borrowings under its Primary Credit Facility as an input for deriving an appropriate IBR, adjusted for the amount of the lease payments, the lease term, and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.

Remeasurements. The Company monitors for events that require a change in estimates for its operating lease assets and liabilities, such as modifications to the terms of the contract, including the lease term. When a change in estimates results in the remeasurement of the operating lease liability, a corresponding adjustment is made to the carrying amount of the operating lease asset.

Reassessments may include impairments of operating lease assets as determined under the requirements of ASC Subtopic 360-10, Property, Plant, and Equipment – Overall (ASC 360). Any impairment charges incurred under the requirements of ASC 360 are allocated to the long-lived assets in the defined asset group, which include the operating lease asset unless doing so would reduce the carrying amount of the operating lease asset to an amount less than zero. Impairment charges are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. After impairment, the operating lease asset is remeasured and amortized on a straight-line basis over the remaining lease term, with no impact to the operating lease liability.

Rent Expense. The components of rent expense for operating leases recorded in the condensed consolidated statements of comprehensive income were as follows:



	Three Months Ended September 30, 2019		Six Months Ended September 30, 2019
Operating	$	14,455	$	28,702
Variable	6,135		11,589
Short-term	718		1,260
Total	$	21,308	$	41,551

The components of rent expense for operating leases recorded in the condensed consolidated statements of comprehensive income under legacy US GAAP were as follows:



	Three Months Ended September 30, 2018		Six Months Ended September 30, 2018
Minimum rentals	$	15,350	$	30,150
Contingent rentals	1,733		2,938
Total	$	17,083	$	33,088

Operating Lease Liabilities. Maturities of undiscounted operating lease liabilities remaining as of September 30, 2019 under the new lease standard, with a reconciliation to the present value of operating lease liabilities recorded in the condensed consolidated balance sheets, were as follows:



Years Ending March 31,	Amount
2020	$	25,908
2021	51,849
2022	43,816
2023	38,797
2024	33,990
Thereafter	84,744
Total undiscounted future lease payments	279,104
Less: Imputed interest	(28,582		)
Total	$	250,522

Operating lease liabilities recorded in the condensed consolidated balance sheets exclude $38,977 of legally binding undiscounted minimum lease payments due pursuant to a lease signed but not yet commenced for a new flagship store location that will replace an existing flagship store during the fiscal year ending March 31, 2021.

Future minimum commitments under operating lease contracts as of March 31, 2019 under legacy US GAAP were as follows:



Years Ending March 31,	Amount
2020	$	53,015
2021	47,803
2022	40,629
2023	35,915
2024	31,329
Thereafter	81,746
Total	$	290,437

Supplemental Disclosure. Key estimates and judgments related to operating lease assets and liabilities that are outstanding and presented in the condensed consolidated balance sheets are as follows:



	September 30, 2019
Weighted-average remaining lease term in years	6.4
Weighted-average discount rate	3.3	%

Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases is as follows:



	Three Months Ended September 30, 2019			Six Months Ended September 30, 2019
Non-cash operating activities
Operating lease assets obtained in exchange for lease liabilities*	$	11,715		$	28,137
Reductions to operating lease assets resulting from reductions to lease liabilities*	(2,120		)	(4,669		)

*Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.

Other Commitments

During the six months ended September 30, 2019, there were no material changes outside the ordinary course of business to the obligations reported in the 2019 Annual Report with respect to (1) purchase obligations for product; (2) purchase obligations for commodities; (3) future capital expenditures, commitments under service contracts, or contractual requirements to pay promotional expenses; and (4) legal proceedings.

Leases and Other Commitments