Leases

12 Months Ended

Dec. 31, 2022

Leases

Leases

10. Leases

We lease certain facilities, vehicles and equipment primarily under noncancelable operating leases. The most significant portion of these noncancelable operating leases is for the facilities occupied by our corporate office and our operating locations. Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet. We do not separate lease components from their associated non-lease components pursuant to lease accounting guidance. We have certain leases with variable payments based on an index as well as some short-term leases on equipment and facilities. Variable lease expense and short-term lease expense were not material to our financial statements and aggregated to $19.1 million in 2022, $11.9 million in 2021 and $7.7 million in 2020. Lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The weighted average discount rate for our operating leases as of December 31, 2022 and 2021 was 4.3% and 4.0%, respectively. We recognize operating lease expense, including escalating lease payments and lease incentives, on a straight-line basis over the lease term. Operating lease expense for the years ended December 31, 2022, 2021 and 2020 was $46.0 million, $34.2 million and $28.2 million, respectively.

The lease terms generally range from three to ten years. Some leases include one or more options to renew, which may be exercised to extend the lease term. We include the exercise of lease renewal options in the lease term when it is reasonably certain that we will exercise the option and such exercise is at our sole discretion. The weighted average remaining lease term for our operating leases was 8.1 years at December 31, 2022 and 8.7 years at December 31, 2021.

A majority of the Company’s real property leases are with individuals or entities with whom we have no other business relationship. However, in certain instances the Company enters into real property leases with current or former employees. Rent paid to related parties for the years ended December 31, 2022, 2021 and 2020 was approximately $6.9 million, $4.9 million and $4.2 million, respectively.

If we decide to cancel or terminate a lease before the end of its term, we would typically owe the lessor the remaining lease payments under the term of the lease. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. On rare occasions, we rent or sublease certain real estate assets that we no longer use to third parties.

The following table summarizes the operating lease assets and liabilities included in the Consolidated Balance Sheet as follows (in thousands):

	December 31,
	2022		2021
Operating lease right-of-use assets	$	130,666	$	124,756
Operating lease liabilities:
Other current liabilities	$	21,151	$	19,050
Long-term operating lease liabilities		111,744		107,701
Total operating lease liabilities	$	132,895	$	126,751

The maturities of operating lease liabilities as of December 31, 2022 are as follows (in thousands):

Year ending December 31—
2023	$	26,275
2024		23,743
2025		22,471
2026		19,172
2027		14,914
Thereafter		51,638
Total Lease Payments		158,213
Less—Present Value Discount		(25,318)
Present Value of Operating Lease Liabilities	$	132,895

Supplemental information related to operating leases was as follows (in thousands):

	Year Ended December 31,
	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	26,740	$	22,232
Operating lease right-of-use assets obtained in exchange for lease liabilities	$	27,467	$	47,621

We signed two lease agreements in the fourth quarter of 2022 and one in the first quarter of 2023 that do not commence until 2023 that have combined minimum lease payments of $64 million over the period from 2023 through 2033.