LEASES

12 Months Ended

Mar. 31, 2020

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). We adopted the standard effective April 1, 2019, using the modified retrospective approach applied as of the beginning of the period of adoption. The Company elected to utilize transition guidance within the new standard that permits us to (i) continue to report under ASC 840 guidance for comparative periods consistent with previously issued financial statements; and (ii) carryforward our prior conclusions about lease identification, classification, and initial direct costs. The most significant impact of this adoption relates to the recognition of right-of-use ("ROU") assets and liabilities for all leases classified operating leases when the Company is the lessee in the arrangement. Currently, the Company does not have any lessor arrangements; therefore, adoption of the standard did not impact our accounting.

We assess whether an arrangement is or contains a lease at the inception of the agreement. ROU assets represent our right to use underlying assets for the lease term and lease liabilities represent our obligation to make lease payments arising from leases. ROU assets and lease liabilities are recognized at the commencement date based on the present value of future lease payments over the lease terms utilizing the discount rate implicit in the leases. If the discount rate implicit in the leases is not readily determinable, the present value of future lease payments is calculated utilizing the Company’s incremental borrowing rate, which approximates the interest that the Company would have to pay on a secured loan. The Company elected to utilize a portfolio approach and applies the rates to a portfolio of leases with similar terms and economic environments. The terms of our leases used to determine the ROU asset and lease liability account for options to extend when it is reasonably certain that we will exercise those options, if applicable. ROU assets and lease liabilities are subject to adjustment in the event of modification to lease terms, changes in probability that an option to extend or terminate a lease would be exercised and other factors. In addition, ROU assets are periodically reviewed for impairment.

Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.

The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.

On adoption, the Company recognized the present value of its existing minimum lease payments as a $136.9 million ROU asset and a $152.3 million lease liability. The difference between the ROU asset and the lease liability on adoption primarily arises from previously recorded deferred rent, which was effectively reclassified to the ROU asset on adoption. As a result, there was no impact to retained earnings in the Consolidated Balance Sheets.

Lessee Arrangements

Operating Leases

We lease real estate and equipment used in operations from third parties. As of March 31, 2020, the remaining term of our operating leases ranged from 1 to 17 years with various automatic extensions.

The following table outlines the maturity of our existing operating lease liabilities on a fiscal year-end basis as of March 31, 2020.



(In thousands)	Operating Leases
2021	$	28,887
2022	25,701
2023	21,286
2024	16,051
2025	17,111
Thereafter	75,794
Total	184,830
Less: present value discount	(30,612		)
Operating lease liabilities	$	154,218

As of March 31, 2020, the Company entered into one additional office space operating lease that has not yet commenced, for approximately $23 million. This operating lease will commence in the fiscal year 2021 with a lease term of 16 years.

Lease costs



(In thousands)	March 31, 2020
Operating lease expense	$	28,489
Variable lease expense ⁽¹⁾	16,027
Short-term lease expense	370
Less: Sublease income	(193		)
Total lease costs	$	44,693


⁽¹⁾	^{Primarily consists of payments for property taxes, common area maintenance and usage based operating costs.}

Weighted-average details



	March 31, 2020
Weighted-average remaining lease term (years)	9
Weighted-average discount rate	4	%

Supplemental cash flow information related to leases:



(In thousands)	March 31, 2020
Operating cash flows:
Cash paid for amounts included in the measurement of operating lease liabilities	$	25,558

Non-cash activity:
Operating lease right-of-use assets obtained in exchange of operating lease liabilities	$	13,714
Change in Operating lease right-of-use assets due to remeasurement	5,883