Lease Arrangements

12 Months Ended

Dec. 31, 2013

Lease Arrangements

Lease Arrangements

12.          Lease Arrangements

We lease certain residential and operating facilities, office space and equipment under operating leases which expire at various dates. Rent expense for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011, was approximately $71.2 million, $68.6 million and $74.2 million, respectively.  Facility rent, defined as land and building lease expense less amortization of any deferred gain on applicable lease transactions for the periods ended December 31, 2013, December 31, 2012 and December 31, 2011 was approximately $68.4 million, $65.9 million and $64.8 million, respectively. We also lease certain land and buildings and vehicles used in operations under capital leases. These leases expire at various dates through 2022 (including renewal options) and generally require us to pay property taxes, insurance and maintenance costs.

The Company (lessee) has leased its vehicles through a master lease agreement with PHH Vehicle Management Services Corporation (PHH) since 1993.  The lease term per vehicle is a minimum of 12 months and thereafter the minimum term may be continued at the lessee’s election for successive monthly renewal periods until the vehicle is returned to PHH.  This master lease was initially accounted for as an operating lease.  Our lease term per vehicle has gradually increased over the years to a current term of at least 60 months.  A review of this activity was performed during 2012, at which time we determined that we had been incorrectly classifying these leases as operating leases and that capital lease treatment was appropriate due to the increase in the lease term per vehicle.  During 2012, we recorded an out-of-period adjustment relating to capital lease accounting which decreased pre-tax income by approximately $0.7 million ($0.4 million after tax) and increased net property and equipment and capital lease obligations by $16.5 million and $17.3 million, respectively, to correct the accounting treatment for our leased vehicles.  The impact to the cash flow statement was an increase to cash flows from operations and a decrease to financing activities of $5.9 million due to increased depreciation and payments on capital lease obligations.  We evaluated the total out-of-period adjustment in relation to the 2012 periods, as well as the prior periods being presented and concluded that the adjustment was not material to any prior consolidated quarterly and annual financial statement periods.

Future minimum lease payments under capital leases, together with the minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2013, are as follows:

	Capital		Operating
Year Ending December 31:	Leases		Leases
2014	$	7,664	$	66,445
2015	6,066		53,934
2016	4,696		36,717
2017	3,026		24,296
2018	1,329		15,060
Thereafter	71		12,840
Total minimum lease payments	22,852		$	209,292
Less amounts representing interest	2,612
Present value of minimum lease payments	20,240
Less current maturities	6,516
Total long-term obligations under capital leases	$	13,724

Assets capitalized under capital leases as reflected in the accompanying consolidated balance sheets were $31.0 million of vehicles, $1.2 million of buildings, $0.3 million of equipment and $0.3 million of software as of December 31, 2013.  Assets capitalized under capital leases as reflected in the accompanying consolidated balance sheets were $23.0 million of vehicles, $1.2 million of buildings, $0.5 million of equipment and $0.3 million of software as of December 31, 2012.  The accumulated depreciation related to assets under capital leases was $13.0 million and $7.6 million as of December 31, 2013 and 2012, respectively.