LEASES

6 Months Ended

Jun. 30, 2021

Leases

LEASES

NOTE 9. LEASES

The Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC 842 not to include short-term leases with a duration of 12 months or less on the balance sheet. As of June 30, 2021, and December 31, 2020, 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 six months ended June 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 gain of $31.5 million. 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.

(in thousands, except Other Information)
		Three Months Ended June 30,				Six Months Ended June 30,
Lease Classification	Financial Statement Classification	2021		2020		2021		2020
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	60	$	57	$	125	$	133
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		22,634		21,307		46,025		42,024
Total lease expense		$	22,694	$	21,364	$	46,150	$	42,157
Other Information
Weighted-average remaining lease term – operating leases							5.59 years		3.78 years
Weighted-average discount rate – operating leases							3.75%		3.93%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases						$	45,498	$	41,599

Lease Commitments

Future minimum lease payments, including assumed exercise of renewal options as of June 30, 2021 were as follows:

(in thousands)
2021 (excluding the six months ended June 30, 2021)	$	44,958
2022		76,537
2023		56,663
2024		33,021
2025		18,425
2026		12,612
Thereafter		51,645
Total Future Minimum Lease Payments		293,861
Less: Amount representing interest		(33,453	)
Total future minimum lease payments, net of interest	$	260,408

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 $163.1 million for building leases and $130.7 million for vehicle leases. As of June 30, 2021, the Company had additional future obligations of $6.8 million for leases that had not yet commenced.