Lease Obligations

12 Months Ended

Dec. 31, 2020

Lease Obligations

Leases Obligations

10. Lease Obligations

The Company leases property and equipment throughout the United States primarily under finance and operating leases. For leases with initial lease terms at commencement that are greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company aggregates non-

lease components with the related lease components when evaluating the accounting treatment for property, equipment, and billboard leases.

Many of the Company’s lease agreements include fixed rental payments. Certain of its lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on a change in an index or a rate, rather than a specified index or rate, are not considered in the determination of lease payments for purposes of measuring the related lease liability. While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are typically treated as variable lease payments and recognized in the period in which the obligation for those payments are incurred. Common area maintenance, property tax, and insurance associated with triple net leases, as well as payments based on revenue generated at certain leased locations, are included in variable lease costs, but are not included in the measurement of the lease liability.

Most of the Company’s real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. If it is reasonably certain that the Company will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of the operating lease assets and operating lease liabilities. The depreciable life of assets and leasehold improvements are limited to the shorter of the lease term or useful life if there is a transfer of title or purchase option reasonably certain of exercise.

The Company cannot readily determine the rate implicit in its leases. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement. The Company estimates its incremental borrowing rate using a yield curve based on the credit rating of its collateralized debt and maturities that are commensurate with the lease term at the applicable commencement or remeasurement date.

The Company leases most of the properties for its retail locations through 254 operating leases. The Company also leases billboards and certain of its equipment primarily through operating leases. The related operating lease assets for these operating leases are included in operating lease assets. The Company has three properties classified as finance leases.

The following presents components of lease assets and lease liabilities, and the associated financial statement line items ($ in thousands):

		Year Ended December 31,
Lease Assets and Liabilities	Financial Statement Line Items	2020		2019
Operating lease assets	Operating lease assets	$	769,487	$	807,537
Finance lease assets	Property and equipment, net		29,756		—
Total lease assets, net		$	799,243	$	807,537
Operating lease liabilities - current	Current portion of operating lease liabilities	$	62,405	$	58,613
Finance lease liabilities - current	Current portion of long-term debt		2,240		—
Operating lease liabilities - non-current	Operating lease liabilities, net of current portion		804,555		843,312
Finance lease liabilities - non-current	Long-term debt, net of current portion		27,742		—
Total lease liabilities		$	896,942	$	901,925

The following presents certain information related to the costs for leases (in thousands):

	Year Ended December 31,
	2020		2019
Operating lease cost	$	121,238	$	122,431
Finance lease cost:
Amortization of finance lease assets		2,701		—
Interest on finance lease liabilities		1,248		—
Short-term lease cost		1,699		3,177
Variable lease cost		23,385		23,763
Sublease income		(1,876)		(1,380)
Net lease costs	$	148,395	$	147,991

The following presents supplemental cash flow information related to leases (in thousands):

	Year Ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	121,708	$	122,073
Operating cash flows for finance leases		1,061		—
Financing cash flows for finance leases		2,355		—
Lease assets obtained in exchange for lease liabilities:
New, remeasured, and terminated operating leases	$	25,296	$	98,282
New finance leases		31,895		—

The following presents other information related to leases:

	December 31, 2020
Weighted average remaining lease term:
Operating leases	12.4	years
Financing leases	16.0	years
Weighted average discount rate:
Operating leases	7.1	%
Financing leases	6.0	%

The following reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the lease liabilities on the balance sheet as of December 31, 2020 (in thousands):

	Operating		Finance
	Leases		Leases
2021	$	120,376	$	3,977
2022		117,783		4,011
2023		115,532		2,777
2024		110,853		2,494
2025		103,471		2,376
Thereafter		765,838		33,776
Total lease payments		1,333,853		49,411
Less: Imputed interest		(466,893)		(19,429)
Total lease obligations		866,960		29,982
Less: current portion		(62,405)		(2,240)
Noncurrent lease obligations	$	804,555	$	27,742