Leases

6 Months Ended

Jun. 30, 2019

Leases

Leases

9. LEASES:

The Company is a lessee of a 65.3 acre site in Osceola County, Florida on which Gaylord Palms is located, building or land leases for Ole Red Gatlinburg, Ole Red Orlando and Ole Red Tishomingo, various warehouse, general office and other equipment leases. The Gaylord Palms land lease has a term through 2074, which may be extended through January 2101, at the Company’s discretion. The leases for Ole Red locations range from five to ten years, with renewal options ranging from one to forty years, at the Company’s discretion. Extension options are not included in the Company’s calculation of its right-of-use assets and lease liabilities.

The terms of the Gaylord Palms lease include variable lease payments based upon net revenues at Gaylord Palms and certain other of the Company’s leases include rental payments adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the discount rate implicit in the Company’s operating leases is not readily determinable, the Company applied judgments related to the determination of the discount rates used to calculate the lease liability as required by Accounting Standards Codification Topic 842, “Leases”. The Company calculated its incremental borrowing rates by utilizing judgments and estimates regarding the Company’s secured borrowing rates, market credit rating, comparable bond yield curve, and adjustments to market yield curves to determine a securitized rate.

The Company’s lease costs for the three months and six months ended June 30, 2019 are as follows (in thousands):

	Three Months Ended		Six Months Ended
Operating lease cost	$	3,229	$	6,575
Finance lease cost:
Amortization of right-of-use assets		36		77
Interest on lease liabilities		14		31
Net lease cost	$	3,279	$	6,683

Lease expense for operating leases for the three months and six months ended June 30, 2018 was $3.4 million and $6.6 million, respectively.

Future minimum lease payments under non-cancelable leases at June 30, 2019 are as follows (in thousands):

	Operating		Finance
	Leases		Leases
Year 1	$	5,862	$	244
Year 2		6,029		244
Year 3		5,758		229
Year 4		5,746		218
Year 5		5,838		118
Years thereafter		577,002		606
Total future minimum lease payments		606,235		1,659
Less amount representing interest		(501,517)		(322)
Total present value of minimum payments	$	104,718	$	1,337

The remaining lease term and discount rate for the Company’s leases are as follows:

Weighted-average remaining lease term:
Operating leases	51.3	years
Finance leases	10.6	years
Weighted-average discount rate:
Operating leases	6.8	%
Finance leases	4.0	%