Leases

6 Months Ended

Jun. 30, 2019

The Company leases office, warehouse and multi-recreational facilities under non-cancelable operating leases. Also, the Company has operating and finance leases for certain equipment. In addition to base rent, the facility leases generally provide for additional payments to cover common area maintenance charges incurred and to pass along increases in real estate taxes. Also, certain leases provide for additional rent based on revenue or operating results of the respective facilities. The Company accrues for any unpaid common area maintenance charges and real estate taxes on a club-by-club basis. Under the provisions of certain of these leases, the Company is required to maintain irrevocable letters of credit, which amounted to $4,018 as of June 30, 2019. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, current portion of operating lease liabilities, and long-term operating lease liabilities on its condensed consolidated balance sheet. Finance leases are recorded in fixed assets, net, current portion of long-term debt, and long-term debt on its condensed consolidated balance sheet.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The leases expire at various times through fiscal year 2038 and certain leases may be extended at the Company’s option. Escalation terms on these leases generally include fixed rent escalations, escalations based on an inflation index such as the consumer price index, and fair market value adjustments.

The Company, as landlord, subleases space to third party tenants under non-cancelable operating leases and licenses. In addition to base rent, certain leases provide for additional rent based on increases in real estate taxes, indexation, utilizes and defined amounts based on the operating results of the lessee. The sub-leases expire at various times through January 2023.

The balance sheet classification of lease assets and liabilities was as follows:



	Balance Sheet Classification	June 30, 2019
Assets
Operating lease assets, gross	Operating lease right-of-use assets, net	$	626,855
Accumulated amortization	Operating lease right-of-use assets, net	(35,181		)
Total operating lease assets	Operating lease right-of-use assets, net	591,674
Fixed assets, gross	Fixed assets, net	8,337
Accumulated depreciation	Fixed assets, net	(1,077		)
Total finance lease assets	Fixed assets, net	7,260
Total lease assets		$	598,934
Liabilities
Current
Operating leases	Current portion of operating lease liabilities	$	72,709
Finance leases	Current portion of long-term debt	1,805
Non-current
Operating leases	Long-term operating lease liabilities	562,063
Finance leases	Long-term debt	5,339
Total lease liabilities		$	641,916

The components of lease costs were as follows:



	Statement of Operations Classification	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease costs	Club operating	$	30,167		$	60,189
Amortization of lease assets	Depreciation and amortization	366			625
Interest on lease liabilities	Interest expense	104			158
Finance lease costs		470			783
Variable lease costs	Club operating	141			351
Sublease income	Fees and other revenue	(909		)	(1,775		)
Total lease costs		$	29,869		$	59,548

As of June 30, 2019, the maturities of our lease liabilities were as follows:



	Operating Leases			Finance Leases			Total
2019	$	59,720		$	1,208		$	60,928
2020	118,112			2,385			120,497
2021	110,358			2,364			112,722
2022	102,453			1,909			104,362
2023	93,683			545			94,228
2024 and thereafter	427,709			—			427,709
Total lease payments	912,035			8,411			920,446
Less: imputed interest	(277,263		)	(1,267		)	(278,530		)
Lease liabilities	$	634,772		$	7,144		$	641,916

As of December 31, 2018, future minimum rental payments by fiscal year under non-cancelable leases and future capital lease payments are shown in the chart below.



	Minimum Annual Rental
Year Ending December 31,
2019	$	110,215
2020	107,143
2021	96,768
2022	83,766
2023	70,892
2024 and thereafter	325,644
Total	$	794,428

The Company, as landlord, leases space to third party tenants under non-cancelable operating leases and licenses. In addition to base rent, certain leases provide for additional rent based on increases in real estate taxes, indexation, utilities and defined amounts based on the operating results of the lessee. The sub-leases expire at various times through January 2023. As of December 31, 2018, future minimum rentals receivable by fiscal year under non-cancelable leases are shown in the chart below.



	Minimum Annual Rental
Year Ending December 31,
2019	$	2,477
2020	1,658
2021	1,189
2022	485
2023	5
2024 and thereafter	—
Total	$	5,814

The weighted average remaining lease term and weighted average discount rate were as follows:



	June 30, 2019
Weighted average remaining lease term (years)
Operating leases	9.0 years
Finance leases	3.6 years
Weighted average discount rate
Operating leases	8.0	%
Finance leases	9.1	%

Supplemental cash flow information related to leases was as follows:



	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	59,531
Operating cash flows from finance leases	$	158
Financing cash flows from finance leases	$	610
Leased assets obtained in exchange for new operating lease liabilities	$	17,812
Leased assets obtained in exchange for new finance lease liabilities	$	3,937

Leases