Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
9 Months Ended
Sep. 30, 2020
Leases  
Leases

8. LEASES

We have operating leases for our installation branch locations, distribution centers, our Branch Support Center in Daytona Beach, Florida, vehicles and certain equipment. In addition, we lease certain operating facilities from certain related parties, primarily former owners (and in some cases, current management personnel) of companies acquired.  These related party leases are immaterial to our unaudited condensed consolidated statements of operations.

We recognize a ROU asset and a lease liability at the lease commencement date.  Our leases may include options to extend or terminate the lease, which will be reflected in the calculation of the lease liability and corresponding ROU asset when it is reasonably certain that we will exercise that option. In addition, certain vehicle lease agreements have residual value guarantees at the end of the lease term which require us to return the asset with a specified percentage of the original or other calculated value.  We do not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less.  We recognize the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term.

The components of lease expense were as follows and are primarily included in cost of sales on the accompanying unaudited condensed consolidated statements of operations, in thousands:

    

Three Months Ended September 30, 

Nine Months Ended September 30, 

2020

2019

2020

2019

Operating lease cost (a)

$

11,475

$

12,393

$

35,842

$

38,597

Short-term lease cost

3,209

3,381

9,086

9,391

Sublease income

(42)

(153)

(153)

(461)

Net lease cost

$

14,642

$

15,621

$

44,775

$

47,527

(a) Includes variable cost components of $1,316 and $1,434 in the three months ended September 30, 2020 and 2019, respectively, and $4,090 and $4,201 of variable cost components in the nine months ended September 30, 2020 and 2019, respectively.

Future minimum lease payments under non-cancellable operating leases as of September 30, 2020 were as follows, in thousands:

Payments due by Period

    

2020

$

10,234

2021

32,978

2022

22,083

2023

12,429

2024

7,135

2025 & Thereafter

7,189

Total future minimum lease payments

92,048

Less: imputed interest

(6,629)

Lease liability at September 30, 2020

$

85,419

As of September 30, 2020, the weighted average remaining lease term was 3.5 years and the related lease liability was calculated using a weighted average discount rate of 3.9%. The lease liability is initially measured as the present value of the unpaid lease payments as of the lease commencement date. The lease liability is discounted based on our IBR at the time of initial adoption of ASU 2016-02 for all existing leases or upon a modification to the lease term and at the time of lease commencement for all future leases.

The amount below is included in the cash flows provided by (used in) operating activities section on the accompanying unaudited condensed consolidated statements of cash flows, in thousands:

    

Nine Months Ended September 30, 

2020

2019

Cash paid for amounts included in the measurement of lease liabilities

$

(31,862)

$

(33,914)