Right-of-Use ("ROU") Assets and Lease Liabilities

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Right-of-Use (ROU) Assets and Lease Liabilities

Right-of-Use ("ROU") Assets and Lease Liabilities

The Company leases the majority of its branch locations and office space and also leases vehicles and equipment for use in its operations. At inception, the Company determines whether an agreement represents a lease and, at commencement, evaluates each lease agreement to determine whether the lease is an operating or finance lease.

These leases do not have significant rent escalations, holidays, concessions, leasehold improvement incentives, or other build-out clauses. The Company elected to adopt the practical expedient to account for both lease and non-lease components as a single lease component.

Certain leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's discretion. The Company regularly evaluates the renewal options and, when the options are reasonably certain of being exercised, they are included in the lease term.

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for leased facilities and vehicles and equipment, which are paid based on actual costs incurred.

Generally, leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company uses a portfolio approach for determining the incremental borrowing rate based on the applicable lease terms and the current economic environment.

The following table summarizes the Company's operating and finance leases by country as of June 30, 2019 (in thousands):

	June 30, 2019
	United States			Canada			Total
Operating leases:
Real estate ROU assets, gross	$	100,769		$	16,539		$	117,308
Accumulated amortization	(11,307		)	(1,592		)	(12,899		)
Real estate ROU assets, net	$	89,462		$	14,947		$	104,409
Real estate lease liability	$	88,239		$	14,882		$	103,121
Vehicle and equipment ROU assets, gross	$	10,922		$	695		$	11,617
Accumulated amortization	(1,259		)	(114		)	(1,373		)
Vehicle and equipment ROU assets, net	$	9,663		$	581		$	10,244
Vehicle and equipment lease liability	$	9,614		$	577		$	10,191
Total ROU assets, net	$	99,125		$	15,528		$	114,653
Total operating lease liability	$	97,853		$	15,459		$	113,312
Finance leases included in property and equipment, net:
Vehicle and equipment ROU assets, gross	$	6,369		$	2,909		$	9,278
Accumulated depreciation	(988		)	(441		)	(1,429		)
Total vehicle and equipment ROU assets, net	$	5,381		$	2,468		$	7,849
Total vehicle and equipment lease liability	$	5,824		$	2,898		$	8,722

The components of lease cost for the three and six months ended June 30, 2019, are as follows (in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		Income Statement Classification
Operating leases:
Lease cost	$	8,082	$	16,134	Selling, general and administrative expenses
Variable lease cost	1,272		2,325		Selling, general and administrative expenses
Operating lease cost	9,354		18,459
Finance leases:
Amortization of ROU assets	761		1,429		Depreciation and amortization
Interest on lease liabilities	117		241		Interest expense
Finance lease cost	878		1,670
Total lease cost	$	10,232	$	20,129

Supplemental cash flow information for leases for the six months ended June 30, 2019, is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	13,345
Financing cash flows from finance leases	$	1,319
Right-of-use-assets obtained in exchange for lease obligations:
Finance leases	$	203
Operating leases	$	126,565

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of June 30, 2019, are as follows:

	Operating Leases	Finance Leases
Weighted average remaining lease term (years)	5.42	3.69
Weighted average discount rate	4.6%	5.2%

The following table reconciles the undiscounted future lease payments for operating and finance leases to operating and finance lease liabilities recorded on the balance sheet at June 30, 2019 (in thousands):

	Operating Leases			Finance Leases			Total
2019 (excluding the six months ended June 30, 2019)	$	15,542		$	1,554		$	17,096
2020	28,992			2,913			31,905
2021	26,518			2,450			28,968
2022	20,568			1,501			22,069
2023	14,705			982			15,687
2024 and thereafter	21,785			155			21,940
Total lease payments	$	128,110		$	9,555		$	137,665
Less amount representing interest	(14,798		)	(833		)	(15,631		)
Total	$	113,312		$	8,722		$	122,034
Current portion of lease liabilities	$	25,730		$	2,677		$	28,407
Long-term portion of lease liabilities	$	87,582		$	6,045		$	93,627

The Company's future minimum operating lease commitments, as of December 31, 2018, under ASC Topic 840, the predecessor to Topic 842, were as follows:

Years Ending December 31,	Total
2019	$	29,289
2020	26,202
2021	23,796
2022	18,120
2023	12,647
Thereafter	19,856
	$	129,910

Right-of-Use (ROU) Assets and Lease Liabilities

Right-of-Use ("ROU") Assets and Lease Liabilities

The Company leases the majority of its branch locations and office space and also leases vehicles and equipment for use in its operations. At inception, the Company determines whether an agreement represents a lease and, at commencement, evaluates each lease agreement to determine whether the lease is an operating or finance lease.

These leases do not have significant rent escalations, holidays, concessions, leasehold improvement incentives, or other build-out clauses. The Company elected to adopt the practical expedient to account for both lease and non-lease components as a single lease component.

Certain leases include one or more options to renew. The exercise of lease renewal options is typically at the Company's discretion. The Company regularly evaluates the renewal options and, when the options are reasonably certain of being exercised, they are included in the lease term.

Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for leased facilities and vehicles and equipment, which are paid based on actual costs incurred.

Generally, leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments. The Company uses a portfolio approach for determining the incremental borrowing rate based on the applicable lease terms and the current economic environment.

The following table summarizes the Company's operating and finance leases by country as of June 30, 2019 (in thousands):

	June 30, 2019
	United States			Canada			Total
Operating leases:
Real estate ROU assets, gross	$	100,769		$	16,539		$	117,308
Accumulated amortization	(11,307		)	(1,592		)	(12,899		)
Real estate ROU assets, net	$	89,462		$	14,947		$	104,409
Real estate lease liability	$	88,239		$	14,882		$	103,121
Vehicle and equipment ROU assets, gross	$	10,922		$	695		$	11,617
Accumulated amortization	(1,259		)	(114		)	(1,373		)
Vehicle and equipment ROU assets, net	$	9,663		$	581		$	10,244
Vehicle and equipment lease liability	$	9,614		$	577		$	10,191
Total ROU assets, net	$	99,125		$	15,528		$	114,653
Total operating lease liability	$	97,853		$	15,459		$	113,312
Finance leases included in property and equipment, net:
Vehicle and equipment ROU assets, gross	$	6,369		$	2,909		$	9,278
Accumulated depreciation	(988		)	(441		)	(1,429		)
Total vehicle and equipment ROU assets, net	$	5,381		$	2,468		$	7,849
Total vehicle and equipment lease liability	$	5,824		$	2,898		$	8,722

The components of lease cost for the three and six months ended June 30, 2019, are as follows (in thousands):

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		Income Statement Classification
Operating leases:
Lease cost	$	8,082	$	16,134	Selling, general and administrative expenses
Variable lease cost	1,272		2,325		Selling, general and administrative expenses
Operating lease cost	9,354		18,459
Finance leases:
Amortization of ROU assets	761		1,429		Depreciation and amortization
Interest on lease liabilities	117		241		Interest expense
Finance lease cost	878		1,670
Total lease cost	$	10,232	$	20,129

Supplemental cash flow information for leases for the six months ended June 30, 2019, is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	13,345
Financing cash flows from finance leases	$	1,319
Right-of-use-assets obtained in exchange for lease obligations:
Finance leases	$	203
Operating leases	$	126,565

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases as of June 30, 2019, are as follows:

	Operating Leases	Finance Leases
Weighted average remaining lease term (years)	5.42	3.69
Weighted average discount rate	4.6%	5.2%

The following table reconciles the undiscounted future lease payments for operating and finance leases to operating and finance lease liabilities recorded on the balance sheet at June 30, 2019 (in thousands):

	Operating Leases			Finance Leases			Total
2019 (excluding the six months ended June 30, 2019)	$	15,542		$	1,554		$	17,096
2020	28,992			2,913			31,905
2021	26,518			2,450			28,968
2022	20,568			1,501			22,069
2023	14,705			982			15,687
2024 and thereafter	21,785			155			21,940
Total lease payments	$	128,110		$	9,555		$	137,665
Less amount representing interest	(14,798		)	(833		)	(15,631		)
Total	$	113,312		$	8,722		$	122,034
Current portion of lease liabilities	$	25,730		$	2,677		$	28,407
Long-term portion of lease liabilities	$	87,582		$	6,045		$	93,627

The Company's future minimum operating lease commitments, as of December 31, 2018, under ASC Topic 840, the predecessor to Topic 842, were as follows:

Years Ending December 31,	Total
2019	$	29,289
2020	26,202
2021	23,796
2022	18,120
2023	12,647
Thereafter	19,856
	$	129,910