Leases

12 Months Ended

Dec. 31, 2019

LEASES

Leasing Accounting Pronouncement Adoption

On January 1, 2019, the Company adopted ASU No. 2016-02 - Leases (Topic 842) applying the modified retrospective method and the option presented under ASU 2018-11 to transition only active leases as of January 1, 2019 with a cumulative effect adjustment as of that date. All comparative periods prior to January 1, 2019 retain the financial reporting and disclosure requirements of ASC 840. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. The package of three expedients includes: 1) the ability to carry forward the historical lease classification, 2) the elimination of the requirement to reassess whether existing or expired agreements contain leases, and 3) the elimination of the requirement to reassess initial direct costs. The Company also elected the practical expedient related to short-term leases without purchase options reasonably certain to exercise, allowing it to exclude leases with terms of less than twelve (12) months from capitalization for all asset classes. The Company did not elect the hindsight practical expedient when determining the lease terms. The adoption of the new standard resulted in the recording of ROU assets and lease liabilities of $128,890 and $153,676, respectively, as of January 1, 2019. The difference between the ROU assets and lease liabilities reflects the reclassification of historical deferred rent balances of approximately $22,881, and tenant improvement receivable of $355 as adjustments to the ROU asset balances, and an adjustment that increased accumulated deficit by $1,550 to recognize the impairment in ROU assets for asset groups previously identified as being impaired. The standard did not materially impact the Company’s consolidated net earnings and had no impact on cash flows. The new standard had no material impact on liquidity and had no impact on the Company’s debt-covenant compliance under its current debt agreements.

Leases

The Company has operating and finance leases for corporate and sales offices, and certain vehicles and equipment. The leases have remaining lease terms of one year to 14 years, some of which include options to extend for up to five years, and some of which include options to terminate the leases within one year. However, the Company in general is not reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options are not considered in the lease term or the ROU asset and lease liability balances. The Company’s lease population includes purchase options on equipment leases that are included in the lease payments when reasonably certain to be exercised. The Company’s lease population does not include any residual value guarantees. The Company’s lease population does not contain any material restrictive covenants.

The Company has leases with variable payments, most commonly in the form of Common Area Maintenance (“CAM”) and tax charges which are based on actual costs incurred. These variable payments were excluded from the ROU asset and lease liability balances since they are not fixed or in-substance fixed payments. Variable payments are expensed as incurred.

The components of lease expense were as follows:



	Year Ended
	December 31,
	2019
Operating lease cost	$	37,817
Short-term lease cost	1,379
Variable lease cost	3,149

Finance lease cost:
Amortization	224
Interest on lease liabilities	15
Total lease cost	$	42,584

Supplemental cash flow information related to leases was as follows:



	Year Ended
	December 31,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	37,684
Operating cash flows from finance leases	15
Financing cash flows from finance leases	217

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	41,776
Finance leases	159

Rent expense for the year ended December 31, 2019 consisted of $21,088 of amortization and impairment of ROU assets and $17,489 of lease expense for interest accretion on operating lease liabilities.

Supplemental balance sheet information related to leases was as follows:



	December 31,
	2019
Operating leases:
Operating lease right-of-use assets	$	149,578

Current operating lease liability	$	18,294
Non-current operating lease liability	156,963
Total operating lease liabilities	$	175,257

Finance leases:
Investments in real estate, net	$	88		⁽¹⁾

Property, plant and equipment, at cost	$	127
Accumulated amortization	(19		)
Property and equipment, net	$	108

Current portion of notes payable and long-term debt	$	86
Notes payable, long-term debt and other obligations, less current portion	108
Total finance lease liabilities	$	194

Weighted average remaining lease term in years:
Operating leases	8.46
Finance leases	3.01

Weighted average discount rate:
Operating leases	10.75		%
Finance leases	8.61		%


⁽¹⁾	Included in Investments in real estate, net on the consolidated balance sheet are finance lease equipment, at a cost of $762 and accumulated amortization of $674 as of December 31, 2019.

As of December 31, 2019, maturities of lease liabilities were as follows:



	Operating Leases			Finance Leases
Year Ending December 31:
2020	$	36,611		$	98
2021	35,453			44
2022	32,943			39
2023	30,866			31
2024	25,415			8
Thereafter	117,040			—
Total lease payments	278,328			220
Less imputed interest	(103,071		)	(26		)
Total	$	175,257		$	194

Under ASC 840, Leases, future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows:



	Lease Commitments		Sublease Rentals		Net
Year Ending December 31:
2020	$	35,973	$	69	$	35,904
2021	29,917		—		29,917
2022	27,592		—		27,592
2023	25,185		—		25,185
2024	23,589		—		23,589
Thereafter	104,126		—		104,126
Total	$	246,382	$	69	$	246,313

The Company has one lease for office space wherein the lessor is an affiliate of a significant shareholder of the Company. This lease represents $1,288 of the ROU asset balances and $1,351 of lease liability balances as of December 31, 2019. The rent expense for this lease was approximately $458 for the year ended December 31, 2019.

As of December 31, 2019, the Company did not have any operating leases for office space or equipment that have not yet commenced.

The Company’s rental expense for the years ended December 31, 2019, 2018 and 2017 was $38,577, $38,893 and $34,858, respectively.

Leases

LEASES

Leasing Accounting Pronouncement Adoption

Leases

The components of lease expense were as follows:



	Year Ended
	December 31,
	2019
Operating lease cost	$	37,817
Short-term lease cost	1,379
Variable lease cost	3,149

Finance lease cost:
Amortization	224
Interest on lease liabilities	15
Total lease cost	$	42,584

Supplemental cash flow information related to leases was as follows:



	Year Ended
	December 31,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	37,684
Operating cash flows from finance leases	15
Financing cash flows from finance leases	217

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	41,776
Finance leases	159

Rent expense for the year ended December 31, 2019 consisted of $21,088 of amortization and impairment of ROU assets and $17,489 of lease expense for interest accretion on operating lease liabilities.

Supplemental balance sheet information related to leases was as follows:



	December 31,
	2019
Operating leases:
Operating lease right-of-use assets	$	149,578

Current operating lease liability	$	18,294
Non-current operating lease liability	156,963
Total operating lease liabilities	$	175,257

Finance leases:
Investments in real estate, net	$	88		⁽¹⁾

Property, plant and equipment, at cost	$	127
Accumulated amortization	(19		)
Property and equipment, net	$	108

Current portion of notes payable and long-term debt	$	86
Notes payable, long-term debt and other obligations, less current portion	108
Total finance lease liabilities	$	194

Weighted average remaining lease term in years:
Operating leases	8.46
Finance leases	3.01

Weighted average discount rate:
Operating leases	10.75		%
Finance leases	8.61		%


⁽¹⁾	Included in Investments in real estate, net on the consolidated balance sheet are finance lease equipment, at a cost of $762 and accumulated amortization of $674 as of December 31, 2019.

As of December 31, 2019, maturities of lease liabilities were as follows:



	Operating Leases			Finance Leases
Year Ending December 31:
2020	$	36,611		$	98
2021	35,453			44
2022	32,943			39
2023	30,866			31
2024	25,415			8
Thereafter	117,040			—
Total lease payments	278,328			220
Less imputed interest	(103,071		)	(26		)
Total	$	175,257		$	194

Under ASC 840, Leases, future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows:



	Lease Commitments		Sublease Rentals		Net
Year Ending December 31:
2020	$	35,973	$	69	$	35,904
2021	29,917		—		29,917
2022	27,592		—		27,592
2023	25,185		—		25,185
2024	23,589		—		23,589
Thereafter	104,126		—		104,126
Total	$	246,382	$	69	$	246,313

As of December 31, 2019, the Company did not have any operating leases for office space or equipment that have not yet commenced.

The Company’s rental expense for the years ended December 31, 2019, 2018 and 2017 was $38,577, $38,893 and $34,858, respectively.