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

12 Months Ended

Dec. 31, 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.

Rent expense was $37.3 million and $33.4 million for the years ended December 31, 2019 and 2018, respectively.

The following table summarizes the Company's operating and finance leases by country as of December 31, 2019 (in thousands):

	December 31, 2019
	United States			Canada			Total
Operating leases:
Real estate ROU assets, gross	$	114,202		$	16,544		$	130,746
Accumulated amortization	(21,337		)	(3,406		)	(24,743		)
Real estate ROU assets, net	$	92,865		$	13,138		$	106,003
Real estate lease liability	$	92,319		$	13,240		$	105,559
Vehicle and equipment ROU assets, gross	$	14,665		$	2,751		$	17,416
Accumulated amortization	(2,592		)	(265		)	(2,857		)
Vehicle and equipment ROU assets, net	$	12,073		$	2,486		$	14,559
Vehicle and equipment lease liability	$	12,037		$	2,472		$	14,509
Total ROU assets, net	$	104,938		$	15,624		$	120,562
Total operating lease liability	$	104,356		$	15,712		$	120,068
Finance leases included in property and equipment, net:
Vehicle and equipment ROU assets, gross	$	6,341		$	2,863		$	9,204
Accumulated depreciation	(1,892		)	(670		)	(2,562		)
Total vehicle and equipment ROU assets, net	$	4,449		$	2,193		$	6,642
Total vehicle and equipment lease liability	$	4,777		$	2,607		$	7,384

The components of lease cost for the year ended December 31, 2019, are as follows (in thousands):

	Year Ended December 31, 2019		Income Statement Classification
Operating leases:
Lease cost	$	33,024	Selling, general and administrative expenses
Variable lease cost	4,243		Selling, general and administrative expenses
Operating lease cost	37,267
Finance leases:
Amortization of ROU assets	2,650		Depreciation and amortization
Interest on lease liabilities	445		Interest expense
Finance lease cost	3,095
Total lease cost	$	40,362

Supplemental cash flow information for leases for the year ended December 31, 2019 is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	26,940
Financing cash flows from finance leases	$	2,674
Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	203
Operating leases	$	146,839

The weighted average remaining lease term and weighted average discount rate for operating and finance leases as of December 31, 2019, are as follows:

	Operating Leases	Finance Leases
Weighted average remaining lease term (years)	5.32	3.26
Weighted average discount rate	4.4%	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 as of December 31, 2019 (in thousands):

	Operating Leases			Finance Leases			Total
2020	$	32,257		$	2,908		$	35,165
2021	29,816			2,445			32,261
2022	24,429			1,496			25,925
2023	18,704			976			19,680
2024	11,882			95			11,977
2025 and thereafter	17,730			87			17,817
Total lease payments	134,818			8,007			142,825
Less amount representing interest	(14,750		)	(623		)	(15,373		)
Total	$	120,068		$	7,384		$	127,452
Current portion of lease liabilities	$	27,689		$	2,618		$	30,307
Long-term portion of lease liabilities	$	92,379		$	4,766		$	97,145

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.

Rent expense was $37.3 million and $33.4 million for the years ended December 31, 2019 and 2018, respectively.

The following table summarizes the Company's operating and finance leases by country as of December 31, 2019 (in thousands):

	December 31, 2019
	United States			Canada			Total
Operating leases:
Real estate ROU assets, gross	$	114,202		$	16,544		$	130,746
Accumulated amortization	(21,337		)	(3,406		)	(24,743		)
Real estate ROU assets, net	$	92,865		$	13,138		$	106,003
Real estate lease liability	$	92,319		$	13,240		$	105,559
Vehicle and equipment ROU assets, gross	$	14,665		$	2,751		$	17,416
Accumulated amortization	(2,592		)	(265		)	(2,857		)
Vehicle and equipment ROU assets, net	$	12,073		$	2,486		$	14,559
Vehicle and equipment lease liability	$	12,037		$	2,472		$	14,509
Total ROU assets, net	$	104,938		$	15,624		$	120,562
Total operating lease liability	$	104,356		$	15,712		$	120,068
Finance leases included in property and equipment, net:
Vehicle and equipment ROU assets, gross	$	6,341		$	2,863		$	9,204
Accumulated depreciation	(1,892		)	(670		)	(2,562		)
Total vehicle and equipment ROU assets, net	$	4,449		$	2,193		$	6,642
Total vehicle and equipment lease liability	$	4,777		$	2,607		$	7,384

The components of lease cost for the year ended December 31, 2019, are as follows (in thousands):

	Year Ended December 31, 2019		Income Statement Classification
Operating leases:
Lease cost	$	33,024	Selling, general and administrative expenses
Variable lease cost	4,243		Selling, general and administrative expenses
Operating lease cost	37,267
Finance leases:
Amortization of ROU assets	2,650		Depreciation and amortization
Interest on lease liabilities	445		Interest expense
Finance lease cost	3,095
Total lease cost	$	40,362

Supplemental cash flow information for leases for the year ended December 31, 2019 is as follows (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	26,940
Financing cash flows from finance leases	$	2,674
Right-of-use assets obtained in exchange for lease obligations:
Finance leases	$	203
Operating leases	$	146,839

The weighted average remaining lease term and weighted average discount rate for operating and finance leases as of December 31, 2019, are as follows:

	Operating Leases	Finance Leases
Weighted average remaining lease term (years)	5.32	3.26
Weighted average discount rate	4.4%	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 as of December 31, 2019 (in thousands):

	Operating Leases			Finance Leases			Total
2020	$	32,257		$	2,908		$	35,165
2021	29,816			2,445			32,261
2022	24,429			1,496			25,925
2023	18,704			976			19,680
2024	11,882			95			11,977
2025 and thereafter	17,730			87			17,817
Total lease payments	134,818			8,007			142,825
Less amount representing interest	(14,750		)	(623		)	(15,373		)
Total	$	120,068		$	7,384		$	127,452
Current portion of lease liabilities	$	27,689		$	2,618		$	30,307
Long-term portion of lease liabilities	$	92,379		$	4,766		$	97,145

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