Lease Obligations

6 Months Ended

Jun. 30, 2023

Lease Obligations

Lease Obligations

8. Lease Obligations

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost	$	29,376	$	28,081	$	58,581	$	56,577
Finance lease cost:
Amortization of finance lease assets		2,068		2,974		(745)		5,665
Interest on finance lease liabilities		1,540		1,152		2,939		2,139
Short-term lease cost		550		555		1,064		1,018
Variable lease cost		6,128		5,602		12,417		11,796
Sublease income		(675)		(306)		(1,332)		(699)
Net lease costs	$	38,987	$	38,058	$	72,924	$	76,496

As of June 30, 2023, December 31, 2022, and June 30, 2022, finance lease assets of $91.6 million, $88.1 million, and $94.1 million, respectively, were included in property and equipment, net in the accompanying condensed consolidated balance sheets.

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

	Six Months Ended June 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	58,227	$	57,181
Operating cash flows for finance leases		2,934		2,072
Financing cash flows for finance leases		2,847		3,042
Lease assets obtained in exchange for lease liabilities:
New, remeasured and terminated operating leases		18,872		(8,967)
New, remeasured and terminated finance leases		7,700		24,224

Sale-Leaseback Arrangement Recorded as Financing Transaction

On February 8, 2022, FRHP sold three properties for a total sale price of $28.0 million. Concurrent with the sale of these properties, the Company entered into three separate twenty-year lease agreements, whereby the Company will lease back the properties from the acquiring company. Under each lease agreement, FR has four consecutive options to extend the lease term for additional periods of five years for each option. This transaction is accounted for as a financing transaction. The Company recorded a liability for the amount received, will continue to depreciate the non-land portion of the assets, and has imputed an interest rate so that the net carrying amount of the financial liability and remaining non-land assets will be zero at the end of the

initial lease terms. The financial liability is included in other long-term liabilities in the condensed consolidated balance sheets.