LEASES

9 Months Ended

Sep. 30, 2022

LEASES

LEASES

NOTE 7.LEASES

The Company leases certain buildings, vehicles, and equipment. The Company elected the practical expedient approach permitted under Accounting Standards Codification Topic 842 “Leases”, not to include short-term leases with a duration of 12 months or less on the balance sheet. As of September 30, 2022, and December 31, 2021, all leases were classified as operating leases. Building leases generally carry terms of 5 to 15 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 7 years depending on the class of vehicle. The exercise of renewal options is at the Company’s sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the fixed payments associated with such renewal periods. We separate lease and non-lease components of contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

During the nine months ended September 30, 2021, the Company completed multiple sale-leaseback transactions where it sold 17 of its properties related to the Clark Pest Control acquisition for gross proceeds of $67.0 million and a pre-tax gain of $31.5 million, which is included as Other income, net on the income statement. These leases are classified as operating leases with terms of 7 to 15 years.

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.

		Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except Other Information)
Lease Classification	Financial Statement Classification	2022		2021		2022			2021
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	46	$	51	$	108		$	176
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		24,419		23,472		72,057			69,497
Total lease expense		$	24,465	$	23,523	$	72,165		$	69,673
Other Information:
Weighted-average remaining lease term - operating leases							5.2 years			5.5 years
Weighted-average discount rate - operating leases							3.41	%		3.69	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases						$	71,240		$	68,614

Lease Commitments

Future minimum lease payments, including assumed exercise of renewal options as of September 30, 2022 were as follows:

	Operating
(in thousands)
2022 (excluding the nine months ended September 30, 2022)	$	24,234
2023		86,079
2024		62,772
2025		44,160
2026		26,286
2027		14,764
Thereafter		48,050
Total Future Minimum Lease Payments		306,345
Less: Amount representing interest		32,169
Total future minimum lease payments, net of interest	$	274,176

Future commitments presented in the table above include lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option. Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $163.5 million for building leases and $142.8 million for vehicle leases. As of September 30, 2022, the Company had additional future obligations of $15.6 million for leases that had not yet commenced.