Leases

3 Months Ended

Mar. 31, 2019

Lessee

The Company determines if an arrangement is a lease and classification as operating or financing at lease inception. Operating leases are included in operating lease ROU assets, accrued expenses and other current liabilities, and operating lease liabilities on our consolidated balance sheets. The Company does not have any leases classified as financing.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Operating lease ROU assets are further offset by any prepaid rent, lease incentives and initial direct costs incurred. When a lease agreement does not provide an implicit rate, the Company utilizes its incremental borrowing rate based on the information available at commencement date in determining the present value of future minimum lease payments.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments include certain index-based changes in rent, certain nonlease components (such as maintenance and other services provided by the lessor), and other charges included in the lease. Variable lease payments are excluded from future minimum lease payments and expensed as incurred.

The Company elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made a policy election to not account for leases with an initial term of 12 months or less on the balance sheet. These short-term leases are expensed on a straight-line basis over the lease term.

The Company has operating leases primarily for office space, buildings, and equipment. Our leases have remaining lease terms of one month to five years, some of which may include options to extend leases for up to fifteen years and some which may include options to terminate the leases within one year.

The Company's lease costs were as follows:



	Three Months Ended March 31, 2019
	(in thousands)

Operating lease cost	$	2,570
Sublease income	(72		)
Total lease cost	$	2,498

Leases recorded on the consolidated balance sheet consist of the following:



	March 31, 2019
	(in thousands)
Assets:
Operating lease right-of-use assets	$	27,997
Liabilities:
Current operating lease liabilities	10,980
Long-term operating lease liabilities	27,470
Total lease liabilities	$	38,450

Other information related to the Company's lease arrangements is as follows:



	Three Months Ended March 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,302
ROU assets obtained in exchange for lease liabilities in non-cash transactions:
Operating lease assets obtained in exchange for operating lease liabilities	$	1,160
Weighted-average remaining lease term	3.74 years
Weighted-average discount rate⁽¹⁾	3.74		%

⁽¹⁾Discount rates used for existing operating leases upon adoption of Topic 842 were established based on remaining lease term as of January 1, 2019.

Maturities of lease liabilities are as follows:



	As of March 31, 2019
	(in thousands)
2019 (remaining 9 months)	$	9,344
2020	10,671
2021	9,070
2022	8,818
2023	3,316
Thereafter	2
Total minimum lease payments	$	41,221
Less imputed interest	2,771
Present value of minimum lease payments	$	38,450

During the three months ended March 31, 2019, the Company entered into a sale and leaseback transaction in which we sold an office building for a gain of $2.0 million within the Marketing and reservation system line item on the consolidated statements of income and entered into a lease with the option to terminate after 2019. This lease is included in the tables above.

The Company adopted Topic 842 on January 1, 2019 using the optional transition method to present comparative periods prior to adoption date in accordance with Topic 840, including disclosure. The following table discloses future minimum lease payments in accordance with Topic 840:



	As of December 31, 2018
	(in thousands)
2019 (net of minimum sublease rentals of $124)	$	12,509
2020	10,638
2021	9,258
2022	8,866
2023	3,514
Thereafter	—
Total	$	44,785

Lessor

The Company leases an office building to a third-party tenant. This lease has a remaining lease term of less than two years. Lease income comprises fixed lease payments of $0.3 million for the three months ended March 31, 2019. The lease does not contain an option to purchase the underlying asset. The Company elected to not separate lease and nonlease components.

Related Party

The Company and family members of the Company's largest shareholder entered into an agreement that allows those family members to lease the Company aircraft from time to time for their personal use. The agreements provide for lease payments that contribute towards the fixed costs associated with the aircraft as well as reimbursement of the Company’s variable costs associated with operation of the aircraft, in compliance with, and to the extent authorized by, applicable regulatory requirements. The terms of the lease agreements are consistent with the terms of lease agreements that the Company has entered into with unrelated third parties for use of the aircraft. During the three months ended March 31, 2019, the Company received $12 thousand pursuant to this arrangement.

In December 2013, the Company's board of directors approved an arrangement with an entity controlled by the family members of the Company's largest shareholder to sublease approximately 2,200 square feet of office space located in Chevy Chase, Maryland. The lease has a month to month term, with a 90 day notice period, and annual lease payments totaling approximately $90 thousand. In May 2016, the sublease was amended for the expansion of the office space, with annual lease payments totaling approximately $146 thousand. During the three months ended March 31, 2019, the Company received approximately $36 thousand in rent payments associated with this lease.

Leases