Leases |
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Leases |
We lease office space, distribution centers, land, vehicles and equipment. Lease agreements with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Certain of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Significant Leases Accounting Policy
We determine if a contract or arrangement is, or contains, a lease at inception. Balances related to operating leases are included in other assets, other current liabilities, and other liabilities in our consolidated balance sheet. Balances related to financing leases are included in property and equipment, current portion of long-term debt, and long-term debt in our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset includes any prepaid lease payments and additional direct costs and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of September 30, 2019 and January 1, 2019 (in thousands):
The following table provides information about the financial statement classification of our lease expenses reported within the consolidated statement of operations for the three and nine months ended September 30, 2019 (in thousands):
Future minimum lease payments under non-cancelable leases as of September 30, 2019 are as follows (in thousands):
Operating lease payments include $13.4 million related to options to extend lease terms that are reasonably certain of being exercised.
The following table provides information about the remaining lease terms and discount rates applied as of September 30, 2019:
The following table provides other information related to leases for the nine months ended September 30, 2019 (in thousands):
Operating Leases pre-Topic 842 adoption:
We have non-cancelable operating leases with third parties, primarily for administrative and distribution center space and computer equipment. Our facilities leases generally provide for periodic rent increases and many contain escalation clauses and renewal options. We recognize rent expense on a straight-line basis over the lease term. Rental expense for these third-party operating leases was $20,114,000, $19,126,000 and $14,444,000 in 2018, 2017 and 2016, respectively, and is included in selling and administrative expenses.
Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2018 are as follows (in thousands):
Amounts in the table above exclude approximately $1.6 million in 2019 in non-cancellable rental income. |