Note 9 - Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

9. Leases

We lease certain property, land and equipment, the majority of which comprise property related leases to provide office space where we operate our business. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Our property related leases typically have terms of between 3 and 5 years, with the exception of the lease governing the Company’s headquarters, and are classified as operating leases. These leases do not contain any residual value guarantees or restrictive covenants and no variable lease payments, except for common area maintenance and real estate taxes. Many of our property related leases give us the option to extend the lease term for a period of time, generally consistent with the initial lease term. These options are excluded from our calculation of the right-of-use asset and lease liability until such time as we determine it is reasonably certain that the option will be exercised.

The property related lease for the Company’s headquarters in Denver, Colorado is 10 years in length with an expiration date of October 31, 2026 and contains a 10 year option to extend the term of the lease through 2036. This option has been excluded from our calculation of the right-of-use asset and lease liability as it is not currently considered reasonably certain that the option will be exercised.

Operating lease expense is included as a component of selling, general and administrative expenses and expenses in the homebuilding and financial services sections of our consolidated statements of operations and comprehensive income, respectively. Components of operating lease expense were as follows:

	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
	(Dollars in thousands)
Operating lease cost 1	$	1,990		$	3,970
Less: Sublease income (Note 20)		(38	)		(75	)
Net lease cost	$	1,952		$	3,895

¹ Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,792	$	3,563
Leased assets obtained in exchange for new operating lease liabilities	$	553	$	2,030

Supplemental cash flow information related to non-cash transactions also includes the recognition of operating lease right-of-use assets of $33.5 million and operating lease liabilities of $34.3 million upon adoption of ASC 842.

Weighted-average remaining lease term and discount rate for operating leases were as follows:

	June 30, 2019
Weighted-average remaining lease term (in years)		6.6
Weighted-average discount rate		5.5	%

Maturities of operating lease liabilities were as follows:

	Year Ended
	December 31,
	(Dollars in thousands)
2019 (excluding the six months ended June 30, 2019)	$	3,017
2020		6,438
2021		6,191
2022		5,881
2023		5,281
Thereafter		13,162
Total operating lease payments	$	39,970
Less: Interest		6,630
Present value of operating lease liabilities 1	$	33,340

¹ Financial services operating lease liabilities of $1.1 million are included as a component of accrued liabilities in the financial services  section of our consolidated balance sheet at June 30, 2019.