Leases Leases

6 Months Ended

Jun. 30, 2019

Leases of Lessee Disclosure [Text Block]

Leases

The majority of the Company’s facilities are leased under non-cancellable operating leases ranging in terms from five years to fifteen years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal. These renewal options are included in the Company’s determination of the right-of-use assets and related lease liabilities when renewal is considered reasonably certain at the commencement date. Certain of the Company’s leases are subject to periodic consumer price index increases or contain fixed escalation clauses. The Company also leases certain facilities and equipment under finance leases. The Company has elected the practical expedient to not separate lease components from non-lease components related to its real estate financing and operating leases.

Financing and operating right-of-use assets are recognized based on the net present value of lease payments over the lease term at the commencement date. Since most of the Company's leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

As of June 30, 2019 and December 31, 2018, assets recorded under finance leases were $246,261 and $367,164, respectively, and accumulated amortization associated with finance leases was $15,525 and $131,971, respectively, included in property and equipment, net, on the Company's consolidated balance sheet.

In certain markets, the Company acquires and develops dialysis centers. Upon completion, the Company sells the center to a third party and leases the space back with the intent of operating the center on a long term basis. Both the sale and leaseback terms are generally market terms. The lease terms are consistent with the Company's other operating leases with the majority of the leases under non-cancellable operating leases ranging in terms from five years to fifteen years and which contain renewal options of five years to ten years at the fair rental value at the time of renewal.

The Company adopted Topic 842, Leases beginning on January 1, 2019 through a modified retrospective approach for leases existing at the adoption date with a cumulative effect adjustment. Consequently, financial information was not updated for dates and periods before January 1, 2019.

The components of lease expense were as follows:



Lease cost	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost⁽¹⁾:
Fixed lease expense	$	130,946	$	259,056
Variable lease expense	29,907		58,478
Financing lease cost:
Amortization of leased assets	5,703		11,529
Interest on lease liabilities	3,715		7,490
Net lease cost	$	170,271	$	336,553


(1)	Includes short-term lease expense and sublease income, which are immaterial.

Other information related to leases was as follows:



Lease term and discount rate	June 30, 2019
Weighted average remaining lease term (years):
Operating leases	9.1
Finance leases	10.6
Weighted average discount rate:
Operating leases	4.2	%
Finance leases	5.4	%



Other information	Six months ended June 30, 2019
Gain on sale leaseback, net	$	10,336
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	309,115
Operating cash flows from finance leases	$	10,585
Financing cash flows from finance leases	$	16,910
Net operating lease assets obtained in exchange for new or modified operating lease liabilities	$	195,771

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:



	Operating leases			Finance leases
2019 (remainder of the year)	$	259,928		$	16,493
2020	490,779			37,805
2021	463,495			33,317
2022	426,182			33,599
2023	380,070			33,709
2024	326,541			33,723
Thereafter	1,375,473			175,202
Total future minimum lease payments	$	3,722,468		$	363,848
Less portion representing interest	(660,594		)	(86,268		)
Present value of lease liabilities	$	3,061,874		$	277,580

Future minimum lease payments under non-cancellable leases as of December 31, 2018 were as follows:



	Operating leases		Capital leases
2019	$	483,488	$	36,754
2020	462,154		41,044
2021	432,950		34,026
2022	395,462		33,690
2023	349,649		33,845
Thereafter	1,589,949		194,611
	$	3,713,652	373,970
Less portion representing interest			(91,233		)
Total capital lease obligations, including current portion			$	282,737