Leases

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

8. Leases

Lessor

We have determined that revenues derived by providing self-moving equipment rentals, self-storage rentals and certain other revenues, including U-Box rentals, are within the scope of the accounting guidance contained in Topic 842. Our self-moving equipment rental related revenues have been accounted for under the revenue accounting standard Topic 606, until the adoption of Topic 842.

For the periods after April 1, 2019, we combined all lease and non-lease components of lease contracts for which the timing and pattern of transfer are the same and the lease component meets the classification of an operating lease, and account for them in accordance with Topic 842. The revenue streams accounted for in accordance with Topic 842 are recognized evenly over the period of rental. Please see Note 15, Revenue Recognition, to the Notes to Condensed Consolidated Financial Statements.

Lessee

We determine if an arrangement is a lease at inception. Operating leases, which are comprised primarily of storage rental locations, are included in Right-of-Use (“ROU“) assets - operating and operating lease liability in our balance sheet dated June 30, 2019. Finance leases, which are comprised primarily of rental equipment leases, are included in ROU assets - financing, net, and notes, loans and finance/capital leases payable, net in our balance sheet dated June 30, 2019.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected remaining lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease, which are included in the calculation of ROU assets when it is reasonably certain that we will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Additionally, for certain leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities as the leases are similar in nature and have nearly identical contract provisions.

Adoption of this standard resulted in most of our operating lease commitments being recognized as operating lease liabilities and ROU assets, which increased total assets and total liabilities by approximately $105.4 million related to property operating leases. In addition, we reclassified a net amount $948.2 million related to vehicle financing leases from property, plant, and equipment, net to ROU assets financing, net.

The standard also changed the manner by which we account for our equipment sale/leaseback transactions.  Based on our assessment, the lease transactions are classified as financing leases, and therefore the transactions do not qualify as a sale.  Pursuant to the guidance, new sale leaseback transactions that fail to qualify as a sale will be accounted for as a financial liability.  Please see Note 4, Borrowings, of the Notes to Condendsed Consolidated Finanical Statements for additional information.

The following table shows the components of our right-of-use assets:

		As of June 30, 2019
		(Unaudited)
		(In thousands)
		Finance		Operating		Total
Buildings and improvements	$	0	$	110,096	$	110,096
Furniture and equipment		36,304		0		36,304
Rental trailers and other rental equipment		129,826		0		129,826
Rental trucks		1,813,633		0		1,813,633
Right-of-use assets, gross		1,979,763		110,096		2,089,859
Less: Accumulated depreciation		(714,740)		(4,712)		(719,452)
Right-of-use assets, net	$	1,265,023	$	105,384	$	1,370,407

	Finance		Operating
Weighted average remaining lease term (years)	5 Years		15 Years
Weighted average discount rate	3.4	%	4.5	%

For the quarter ended June 30, 2019, cash paid for leases included in our operating and financing cash flow activities were $6.0 million and $94.4 million, respectively.

The components of lease costs were as follows:

		Three Months Ended
		June 30, 2019
		(Unaudited)
		(In thousands)
Operating lease costs	$	7,172
Finance lease cost:
Amortization of right-of-use assets	$	50,208
Interest on lease liabilities		8,745
Total finance lease cost	$	58,953

Maturities of lease liabilities were as follows:

		Finance leases		Operating leases
		(Unaudited)
Year ending June 30,		(In thousands)
2020	$	275,558	$	22,936
2021		196,972		19,879
2022		156,144		18,467
2023		124,371		17,740
2024		93,732		17,118
Thereafter		101,429		66,634
Total lease payments		948,206		162,774
Less: imputed interest		0		(57,766)
Present value of lease liabilities	$	948,206	$	105,008