Leases |
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Leases |
(9)Leases Effective January 1, 2019, we adopted the FASB ASU No. 2016-02 — “Leases” (Topic 842) using the effective date transition method. This approach provides a method for recording existing leases at adoption without restating comparative periods. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. In addition, we made an accounting policy election not to separate non-lease components from lease components for all existing classes of underlying assets with the exception of land and buildings. We also made an accounting policy election to not record right of use (“ROU”) assets and lease liabilities for leases with an initial term of twelve months or less on our consolidated balance sheet. Adoption of the new standard resulted in the recording of net operating lease ROU assets and lease liabilities of $65,922,000 and $70,512,000, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities reflected existing accrued and prepaid rent balances that were reclassified to the operating lease ROU asset at January 1, 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. We lease office space, distribution centers, land, vehicles and equipment. 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. The following table provides information about the financial statement classification of our lease balances reported within the consolidated balance sheets as of December 31, 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 year ended December 31, 2019 (in thousands):
Future minimum lease payments under non-cancelable leases as of December 31, 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 December 31, 2019:
The following table provides other information related to leases for the year ended December 31, 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 and $19,126,000 in 2018 and 2017, respectively, and is included in selling and administrative expenses in the accompanying consolidated statements of operations. 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):
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