Leases

6 Months Ended

Jun. 30, 2020

Lease Commitments

Lease Commitments

(12)        Leases

Capital Leases

The Company has acquired patient medical equipment and supplies, and office equipment through multiple capital leases. The capital lease obligations represent the present value of minimum lease payments under the respective agreement, payable monthly at various interest rates. Interest expense related to capital leases was less than $0.1 million for each of the three and six months ended June 30, 2020, and was less than $0.1 million for each of the three and six months ended June 30, 2019. As of June 30, 2020, future annual minimum payments required under lease obligations are as follows (in thousands):

Twelve months ending June 30,
2021	$	22,246
2022		714
Total		22,960
Less amount representing interest		(128)
		22,832
Current portion		(22,198)
Long-term portion	$	634

At June 30, 2020 and December 31, 2019, equipment under capital leases consisted of patient equipment with a cost basis of $42.1 million and $39.1 million, respectively, and accumulated depreciation of approximately $12.6 million

and $11.7 million, respectively. Depreciation expense for equipment purchased under capital leases is primarily included in cost of net revenue in the accompanying consolidated statements of operations.

Operating Leases

The Company leases its office facilities and office equipment under noncancelable lease agreements which expire at various dates through March 2033. Some of these lease agreements include an option to renew at the end of the term. The Company also leases certain patient medical equipment with such leases set to expire at various dates through November 2021. The Company also leases certain office facilities on a month to month basis. In some instances, the Company is also required to pay its pro rata share of real estate taxes and utility costs in connection with the premises. Some of the leases contain fixed annual increases of minimum rent. Accordingly, the Company recognizes rent expense on a straight-line basis and records the difference between the recognized rent expense and the amount payable under the lease as deferred rent. The deferred rent recorded in accounts payable and accrued expenses on the accompanying consolidated balance sheets at June 30, 2020 and December 31, 2019 was $1.3 million and $1.1 million, respectively. The Company recorded rent expense of $3.8 million and $2.3 million for the three months ended June 30, 2020 and 2019, respectively, and $7.3 million and $4.7 million for the six months ended June 30, 2020 and 2019, respectively. These amounts are primarily included in cost of net revenue in the accompanying consolidated statements of operations.

The minimum annual lease commitments under noncancelable leases with initial or remaining terms in excess of one year as of June 30, 2020 are as follows (in thousands):

Twelve months ending June 30,
2021	$	15,489
2022		11,711
2023		10,147
2024		8,874
2025		6,548
Thereafter		17,053
Total minimum payments required (a)	$	69,822

(a) Minimum payments have not been reduced by minimum sublease rentals of $2.4 million due in the future under noncancelable subleases.