Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Note 3. 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 the Company’s 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 11), 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	December 31, 2019
ASSETS
Operating lease ROU assets	Right-of-use assets	$	188,219
Finance lease ROU assets	Property and equipment, net(1)	$	936,547
LIABILITIES
Current:
Operating	Short-term lease obligation	$	19,991
Finance	Current portion of long-term debt	$	68
Noncurrent:
Operating	Long-term lease obligation	$	176,932
Finance	Long-term financing obligation to GLPI and debt	$	970,662

(1) Finance lease ROU assets are recorded net of accumulated depreciation of $20.9 million as of December 31, 2019.

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

	December 31, 2019
Weighted Average Remaining Lease Term
Operating leases		34.0 years
Finance leases		33.75 years
Weighted Average Discount Rate
Operating leases(1)		7.2%
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):

			Year Ended
	Classification on the Income Statement		December 31, 209
Operating lease expense:
Operating lease expense	Operating expenses	$		20,436
Short-term and variable lease expense	Operating expenses			42,159
Finance lease expense:
Interest expense on lease liabilities	Interest expense, net			98,690
Amortization of ROU assets	Depreciation and amortization expense			16,795
Total lease expense		$		178,080

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

	Year Ended December 31, 2019
	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	24,372
Operating cash flows for finance leases	$	88,006

In addition to the payments made for operating leases noted above, the Company paid $42.2 million in short term and variable leases.

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

	Operating Leases			Finance Leases
Year ending December 31,
2020	$	19,991		$	89,287
2021		18,935			90,471
2022		17,814			91,729
2023		17,635			92,990
2024		15,470			94,315
Thereafter		561,602			3,412,357
Total future minimum lease payments		651,447			3,871,149
Less: amount representing interest		(454,524	)		(3,320,519	)
Present value of future minimum lease payments		196,923			550,630
Less: current lease obligations		(19,991	)		(68	)
Plus: residual values - GLPI		—			420,100
Long-term lease obligations	$	176,932		$	970,662