Leases Leases

3 Months Ended

Mar. 31, 2019

LEASES

The Company leases real estate, office equipment, and dealership operating assets under long-term lease agreements, and subleases certain real estate to third parties. The Company’s real estate leases in the U.S., U.K., and Brazil generally have initial terms of 15 years, 20 years and five years, respectively.

The Company uses an implicit rate to determine the present value of its lease payments when that rate is readily determinable from a leasing agreement; and when such a rate is not readily determinable, the Company uses its incremental borrowing rate based on information available as of the measurement date. For leases effective on or after January 1, 2019, the Company determines if an arrangement is a lease at inception and recognizes ROU assets and lease liabilities at commencement date based on the present value of lease payments over the lease term. And for such leases effective on or after January 1, 2019, the aggregate present value of the Company’s lease payments may include options to purchase the leased property or lease terms with options to renew or terminate the lease, when it is reasonably certain that the Company will exercise such an option. The exercise of lease renewals, terminations, or purchase options is generally at the Company’s discretion. The Company’s leases may also include rental payments adjusted periodically for inflation. Payments based on a change in an index or rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. Subsequent to the recognition of its ROU assets and lease liabilities, the Company recognizes lease expense related to its operating lease payments on a straight-line basis over the lease term. None of the Company’s lease agreements contains material residual value guarantees or material restrictive covenants.

Effective January 1, 2019, operating leases are included in the Company’s Consolidated Balance Sheets as Operating lease assets, Current operating lease liabilities, and Operating lease liabilities, net of current portion. Finance leases are historically, and will continue to be, included within Property and equipment, net, Current maturities of long-term debt and short-term financing, and Long-term debt, net of current maturities in the Company’s Consolidated Balance Sheets.

The components of operating and finance leases included in the Company’s Consolidated Balance Sheet as of March 31, 2019 were as follows (in thousands):



Leases	Balance Sheet Classification	March 31, 2019
Assets:
Operating	Operating lease assets	$	214,776
Finance	Property and equipment, net	41,634
Total		$	256,410
Liabilities:
Current
Operating	Current operating lease liabilities	$	23,907
Finance	Current maturities of long-term debt and short-term financing	6,025
Noncurrent
Operating	Operating lease liabilities, net of current portion	204,331
Finance	Long-term debt, net of current maturities	41,314
Total		$	275,577

Maturities of the Company’s lease liabilities as of March 31, 2019 were as follows (in thousands):



	March 31, 2019
	Operating Leases			Finance Leases
2019 (excluding the three months ended March 31, 2019)	$	26,054		$	7,771
2020	37,710			7,765
2021	34,646			7,758
2022	30,893			5,378
2023	27,869			5,637
Thereafter	164,742			40,416
Total lease payments	321,914			74,725
Less: Interest	(93,676		)	(27,386		)
Present value of lease liabilities	$	228,238		$	47,339

As of March 31, 2019, the Company’s weighted-average remaining lease terms for its operating and finance leases were approximately 11.6 years and 12.3 years, respectively. The weighted-average discount rates used to determine the Company’s operating and finance lease liabilities were 5.6% and 9.4%, respectively as of March 31, 2019.

The components of lease expense included in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2019 are as follows (in thousands):



Lease Expense	Income Statement Classification	Three Months Ended March 31,
		2019
Operating ⁽¹⁾	Selling, general and administrative expenses	$	10,950
Finance:
Amortization of lease assets	Depreciation and amortization expense	1,123
Interest on lease liabilities	Other interest expense, net	972
Sublease income ⁽²⁾	Selling, general and administrative expenses	(320		)
Net lease expense		$	12,725

⁽¹⁾ Includes short-term lease and variable lease expenses, which are immaterial.

⁽²⁾ Excludes rental income from owned properties of $0.1 million for the three months ended March 31, 2019, which is included in Finance, insurance and other, net.

Supplemental cash flow information related to leases for the three months ended March 31, 2019 are as follows (in thousands):



Other Information	Three Months Ended March 31,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	11,664
Operating cash flows from finance leases	972
Financing cash flows from finance leases	969
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5,032

Leases