Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Note 2. Leases

The Company’s management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The expected lease terms include options to extend or terminate the lease when it is reasonably certain the Company will exercise such options. Lease expense for operating leases with minimum lease payments is recognized on a straight-line basis over the expected lease term.

The Company’s lease arrangements have lease and non-lease components. For leases in which the Company is the lessee, the Company accounts for the lease components and non-lease components as a single lease component for all classes of underlying assets. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately, which is consistent with the Company’s historical accounting. Leases with an expected or initial term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.

The Company has operating and finance leases for various real estate and equipment. Certain of our lease agreements include rental payments based on a percentage of sales over specified contractual amounts, rental payments adjusted periodically for inflation and rental payments based on usage. The Company’s leases include options to extend the lease term one month to 60 years. Except for the GLPI Master Lease (see Note 10), the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Leases recorded on the balance sheet consist of the following (in thousands):

Leases	Classification on the Balance Sheet	March 31, 2019
Assets
Operating lease ROU assets	Other assets, net	$	282,363
Finance lease ROU assets	Property and equipment, net(1)	$	949,839
Liabilities
Current
Operating	Accrued other liabilities	$	20,232
Finance	Current portion of long-term debt	$	314
Noncurrent
Operating	Other long-term liabilities	$	266,898
Finance	Long-term financing obligation and debt	$	962,685

(1) Finance lease ROU assets are recorded net of accumulated depreciation of $8.1 million as of March 31, 2019.

Other information related to lease terms and discount rates are as follows:

	March 31, 2019
Weighted Average Remaining Lease Term
Operating leases		34.6 years
Finance leases		34.5 years
Weighted Average Discount Rate
Operating leases(1)		7.1%
Finance leases		10.2%

(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

The components of lease expense are as follows (in thousands):

	Three Months Ended
	March 31, 2019
Operating lease cost
Operating lease cost	$	7,456
Short-term and variable lease cost		1,975
Finance lease cost
Interest expense on lease liabilities		24,603
Amortization of ROU assets		2,511
Total lease cost	$	36,545

Supplemental cash flow information related to leases is as follows (in thousands):

	Three Months Ended
	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	7,840
Operating cash flows for finance leases	$	21,934

Maturities of lease liabilities are summarized as follows (in thousands):

	Operating Leases			Finance Leases
Year ending December 31,
2019 (excluding the three months ended March 31, 2019)	$	21,216		$	66,370
2020		24,331			89,227
2021		22,698			90,463
2022		21,754			91,745
2023		21,783			92,990
Thereafter		832,524			3,506,672
Total future minimum lease payments		944,306			3,937,467
Less: amount representing interest		(657,176	)		(3,394,568	)
Present value of future minimum lease payments		287,130			542,899
Less: current lease obligations		(20,232	)		(314	)
Plus: residual values - GLPI		—			420,100
Long-term lease obligations	$	266,898		$	962,685