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Leases

12 Months Ended

Dec. 31, 2019

Laureate conducts a significant portion of its operations at leased facilities. These facilities include our corporate headquarters, other office locations, and many of Laureate's higher education facilities. Laureate analyzes each lease agreement to determine whether it should be classified as a finance lease or an operating lease. As a result of adopting ASC Topic 842 on January 1, 2019, we recorded on our balance sheet significant asset and liability balances associated with the operating leases, as described further below.

Finance Leases

Our finance lease agreements are for property and equipment. The lease assets are included within buildings as well as furniture, equipment and software and the related lease liability is included within debt and finance leases on the consolidated balance sheet.

Operating Leases

Our operating lease agreements are primarily for real estate space and are included within operating lease ROU assets and operating lease liabilities on the 2019 consolidated balance sheet. The terms of our operating leases vary and generally contain renewal options. Certain of these operating leases provide for increasing rent over the term of the lease. Laureate also leases certain equipment under noncancellable operating leases, which are typically for terms of 60 months or less.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. As discussed in Note 2, Significant Accounting Policies, ROU assets and lease liabilities are recognized at the commencement date of the lease based on the estimated present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Many of our lessee agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. On occasion, Laureate has entered into sublease agreements for certain leased office space; however, the sublease income from these agreements is immaterial.

Supplemental balance sheet information related to leases was as follows:



Leases	Classification	December 31, 2019
Assets:
Operating	Operating lease right-of-use assets, net	$	861,878
Finance	Buildings, Furniture, equipment and software, net	54,084
Total leased assets		$	915,962

Liabilities:
Current
Operating	Current portion of operating leases	91,558
Finance	Current portion of long-term debt and finance leases	4,940
Non-current
Operating	Long-term operating leases, less current portion	792,358
Finance	Long-term debt and finance leases, less current portion	53,313
Total lease liabilities		$	942,169



Lease Term and Discount Rate	December 31, 2019
Weighted average remaining lease terms
Operating leases	9.3 years
Finance leases	11.6 years

Weighted average discount rate
Operating leases	9.50	%
Finance leases	8.40	%

The components of lease cost were as follows:



Lease Cost	Classification	For the year ended December 31, 2019
Operating lease cost	Direct costs	$	172,752
Finance lease cost
Amortization of leased assets	Direct costs	6,277
Interest on leased assets	Interest expense	3,971
Short-term lease costs	Direct costs	5,247
Variable lease costs	Direct costs	14,983
Sublease income	Revenues	(4,777		)
Total lease cost		$	198,453

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



Maturity of Lease Liability	Operating Leases			Finance Leases
Year 1	$	169,592		$	9,664
Year 2	159,404			9,628
Year 3	151,025			9,234
Year 4	140,569			8,183
Year 5	146,332			6,355
Thereafter	543,266			49,840
Total lease payments	$	1,310,188		$	92,904
Less: interest and inflation	(426,272		)	(34,651		)
Present value of lease liabilities	$	883,916		$	58,253

Supplemental cash flow information related to leases was as follows for the year ended December 31, 2019:



Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	182,838
Operating cash flows from finance leases	$	3,971
Financing cash flows from finance leases	$	4,506
Leased assets obtained for new finance lease liabilities	$	39,052
Leased assets obtained for new operating lease liabilities	$	16,684

As previously disclosed in our 2018 Form 10-K, prior to the adoption of ASC Topic 842, rent expense, net of sublease income, for all cancellable and noncancellable leases was $169,172 and $170,099 for the years ended December 31, 2018 and 2017, respectively. Future minimum lease payments at December 31, 2018, by year and in aggregate, under all noncancellable operating leases were as follows:



	Lease Payments
2019	$	151,795
2020	142,995
2021	135,426
2022	128,441
2023	119,955
Thereafter	482,220
Total	$	1,160,832

Leases