Leases (Notes)

6 Months Ended

Jun. 30, 2021

Leases of Lessee Disclosure [Text Block]

Leases

Company as Lessor

The Company is a lessor in certain transactions in which the Company provides monitoring and related services but retains ownership of the security system as the Company has identified a lease component associated with the right-of-use of the security system and a non-lease component associated with monitoring and related services. For transactions in which (i) the timing and pattern of transfer is the same for the lease and non-lease components and (ii) the lease component would be classified as an operating lease if accounted for separately, the Company applies the practical expedient to aggregate the lease and non-lease components and accounts for the combined transaction based upon its predominant characteristic, which is the non-lease component. As a result, the Company accounts for the combined component as a single performance obligation under the applicable revenue guidance, and the underlying assets are reflected within subscriber system assets, net, in the Condensed Consolidated Balance Sheets.

Certain of the Company’s transactions do not qualify for the practical expedient as the lease component represents a sales-type lease, and as such, the Company accounts for the lease and non-lease components separately. The Company’s sales-type leases are not material.

Company as Lessee

As part of normal operations, the Company leases real estate, vehicles, and equipment with various lease terms and maturities that extend out through 2030 from various counterparties. The Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease. Additionally, the Company’s right-of-use assets and lease liabilities include leases with an initial lease term of 12 months or less.

The Company’s right-of-use assets and lease liabilities primarily represent (a) lease payments that are fixed at the commencement of a lease and (b) variable lease payments that depend on an index or rate. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, periods in which termination options are reasonably certain of not being exercised, and periods in which renewal options are reasonably certain of being exercised. The discount rate for a lease is determined using the Company’s incremental borrowing rate that coincides with the lease term at the commencement of a lease. The incremental borrowing rate is estimated based on publicly available data for the Company’s debt instruments and other instruments with similar characteristics.

Lease payments that are not fixed or that are not dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs. Variable lease costs are recorded in the period in which the obligation is incurred and primarily relate to fuel, repair, and maintenance payments that vary based on the usage of leased vehicles.

The Company’s leases do not contain material residual value guarantees or restrictive covenants. The Company’s subleases are not material.

The following table presents operating and finance leases recognized in the Condensed Consolidated Balance Sheets:


Leases (in thousands)	Presentation	Classification	June 30, 2021		December 31, 2020
Assets:
Operating	Current	Prepaid expenses and other current assets	$	579	$	684
Operating	Non-current	Other assets	124,503		138,408
Finance	Non-current	Property and equipment, net(1)	58,120		54,414
Total right-of-use assets			$	183,202	$	193,506
Liabilities:
Operating	Current	Accrued expenses and other current liabilities	$	32,360	$	30,689
Finance	Current	Current maturities of long-term debt	31,674		26,955
Operating	Non-current	Other liabilities	101,883		115,694
Finance	Non-current	Long-term debt	32,109		34,373
Total lease liabilities			$	198,026	$	207,711

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(1)Finance right-of-use assets are recorded net of accumulated depreciation of approximately $78 million and $67 million as of June 30, 2021 and December 31, 2020, respectively.

The following table presents the components of total lease cost:


	Three Months Ended				Six Months Ended
Lease Cost (in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating lease cost	$	12,159	$	14,312	$	25,052	$	28,912
Finance lease cost
Amortization of right-of-use assets	6,867		6,117		13,178		12,194
Interest on lease liabilities	681		782		1,376		1,615
Variable lease costs	20,154		11,351		33,132		24,149
Total lease cost	$	39,861	$	32,562	$	72,738	$	66,870

The following table presents cash flow and supplemental information associated with the Company’s leases:


	Six Months Ended
Other information (in thousands)	June 30, 2021		June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	24,072	$	28,639
Operating cash flows from finance leases	$	1,376	$	1,615
Financing cash flows from finance leases	$	14,392	$	14,430

Right-of-use assets obtained in exchange for new:
Operating lease liabilities	$	7,861	$	24,621
Finance lease liabilities	$	17,353	$	7,084