LEASES

12 Months Ended

Dec. 31, 2021

LEASES

LEASES

7.     LEASES

The Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC Topic 842, “Leases” not to include short-term leases with a duration of 12 months or less on the balance sheet. As of December 31, 2021 and 2020, all leases were classified as operating leases. Building leases generally carry terms of 5 to 10 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 7 years depending on the class of vehicle. The exercise of renewal options is at the Company’s sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the

fixed payments associated with such renewal periods. We separate lease and non-lease components of contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

During the year ended December 31, 2021, the Company completed multiple sale-leaseback transactions where it sold 17 of its properties related to the Clark Pest Control acquisition for gross proceeds of $67.0 million and a pre-tax gain of $31.5 million, which is included in Other (income) expense, net on the income statement. These leases are classified as operating leases with terms of 7 to 15 years.

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.

		Year Ended December 31,
(in thousands, except Other Information)
Lease Classification	Financial Statement Classification	2021			2020
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	235		$	189
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		93,215			85,426
Total lease expense		$	93,450		$	85,615
Other Information:
Weighted-average remaining lease term - operating leases			5.5 years			3.8 years
Weighted-average discount rate - operating leases			3.63	%		3.93	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	92,032		$	84,673

Lease Commitments

Future minimum lease payments, including assumed exercise of renewal options at December 31, 2021 were as follows:

	Operating
(in thousands)
2022		82,959
2023		63,380
2024		39,426
2025		22,713
2026		14,882
Thereafter		54,024
Total Future Minimum Lease Payments		277,384
Less: Amount representing interest		29,624
Total future minimum lease payments, net of interest	$	247,760

Future commitments presented in the table above include lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option. Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $162.1 million for building leases and $115.3 million for vehicle leases. As of December 31, 2021, the Company had additional future obligations of $4.8 million for leases that had not yet commenced.