LEASES

The Company has operating leases for substantially all of its educational facilities, corporate offices and other facilities used in conducting its business, as well as certain equipment. The Company determines if an arrangement is a lease at inception.

Operating leases are included in lease right-of-use (“ROU”) assets, current portion of lease liabilities, and lease liabilities on the Company’s Condensed Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. ROU assets also include any initial direct costs, prepaid lease payments and lease incentives received, when applicable. As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on December 31, 2018 for operating leases that commenced prior to that date.

The Company’s lease terms may include options to extend or terminate the lease by one to ten years or more when it is reasonably certain that the option will be exercised. Leases with a term of twelve months or less are not recorded on the balance sheet; however, lease expense for these leases is recognized on a straight-line basis. The Company has elected the practical expedient to not separate lease components from nonlease components. As such, lease expense includes these nonlease components, when applicable. Fixed lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized when incurred. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. In some instances, the Company subleases its leased real estate facilities to third parties. The Company does not have significant financing leases.

The components of lease expense were as follows:



(in thousands)	Three Months Ended March 31, 2019
Operating lease cost	$	25,010
Short-term and month-to-month lease cost	4,813
Variable lease cost	4,356
Sublease income	(4,652		)
Total net lease cost	$	29,527

In connection with the sale of the KHE Campuses business, the Company is the guarantor of several leases for which it has established ROU assets and lease liabilities (see Note 15). Any lease cost or sublease income related to these leases is recorded in other non-operating income. The total net lease cost related to these leases was $0.3 million for the three months ended March 31, 2019.

Supplemental information related to leases was as follows:



(in thousands)	Three Months Ended March 31, 2019
Cash Flow Information:
Operating cash flows from operating leases (payments)	$	25,840
Right-of-use assets obtained in exchange for new operating lease liabilities (noncash)	30,410

	As of March 31, 2019
Balance Sheet Information:
Lease right-of-use assets	$	382,050

Current lease liabilities	$	82,429
Noncurrent lease liabilities	337,648
Total lease liabilities	$	420,077

Weighted average remaining lease term (years)	6.8
Weighted average discount rate	3.9		%

Maturities of lease liabilities were as follows:



(in thousands)	March 31, 2019
2019	$	73,800
2020	89,643
2021	72,055
2022	57,865
2023	49,787
Thereafter	137,671
Total payments	480,821
Less: Imputed interest	(60,744		)
Total	$	420,077

As of March 31, 2019, the Company has entered into operating leases, including educational and other facilities, that have not yet commenced that have minimum lease payments of $27.4 million. These operating leases will commence in fiscal years 2019 and 2020 with lease terms of 2 to 20 years.

Disclosure related to periods prior to the adoption of new lease accounting guidance

At December 31, 2018, future minimum rental payments under noncancelable operating leases approximate the following:



(in thousands)	December 31, 2018
2019	$	101,009
2020	84,945
2021	72,031
2022	53,709
2023	47,091
Thereafter	115,948
	$	474,733

Minimum payments have not been reduced by minimum sublease rentals of $66.0 million due in the future under noncancelable subleases.