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Note 10 - Leases | 6 Months Ended
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Jun. 30, 2019
Notes to Financial Statements |
Leases of Lessee and Lessor Disclosure [Text Block] | 10 – Leases In February 2016, the Financial Accounting Standards Board issued ASU No. 2016-02, “Leases (“Topic 842”),” which was intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than twelve months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A lease is classified as a finance lease if any of the following conditions exist on the date of lease commencement:
| ● | The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
| ● | The lease provides the lessee an option to purchase the underlying asset, and that option is reasonably certain to be exercised.
| ● | The lease term is for the major part of the remaining economic life of the underlying asset.
| ● | The present value of the lease payments equals or exceeds substantially all of the fair value of the underlying asset.
| ● | The underlying asset is of such a specialized nature that only the lessee can use it without major modifications.
| ● | The lessor expects to have no alternative use for the leased asset at the end of the lease.
The Company adopted Topic 842 on January 1, 2019. The Company applied a modified retrospective transition approach for all leases existing at, or entered into after, January 1, 2019. The Consolidated Financial Statements for the three and six months ended June 30, 2019 are presented under the new standard, while the comparative three and six months periods ended June 30, 2018 are not adjusted and continue to be reported in accordance with the Company’s historical accounting policy. The Company applied the practical expedients permitted within Topic 842, which among other things, allows it to retain its existing assessment of whether an arrangement is, or contains, a lease and whether such lease is classified as an operating or finance lease. The Company made an accounting policy election that keeps leases with an initial term of twelve months or less off of the balance sheet and results in recognizing those lease payments in the Consolidated Statements of Income and Comprehensive Income on a straight-line basis over the lease term. The Company leases commercial vehicles and real estate under finance and operating leases. The Company determines whether an arrangement is a lease at its inception. For leases with terms greater than twelve months, the Company records the related asset and obligation at the present value of lease payments over the term. Many of the Company’s leases include renewal options and/or termination options that are factored into its determination of lease payments when appropriate. The Company has elected not to account for lease and nonlease components as a single combined lease component as lessee. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement. Le ase of Vehicles as Lessee The Company leases commercial vehicles as the lessee under finance leases and operating leases. The lease terms vary from 1 month to 10 years. Commercial vehicle finance leases continue to be reported on the Consolidated Balance Sheet, while operating leases were added to the Consolidated Balance Sheet in 2019 with the adoption of Topic 842. These vehicles are then subleased or rented by the Company to customers under various agreements. The Company received sublease income under non-cancelable subleases of $5.7 million for the three months ended June 30, 2019, and $11.8 million for the six months ended June 30, 2019. The Company usually guarantees the residual value of vehicles under operating lease and finance lease arrangements. At June 30, 2019, the Company guaranteed commercial vehicle residual values of approximately $40.4 million under operating lease and finance lease arrangements. Lease of Facilities as Lessee The Company’s facility leases are classified as operating leases and primarily reflect its use of dealership facilities and office space. The lease terms vary from 1 year to 88 years, some of which include options to extend the lease term, and some of which include options to terminate the lease within 1 year. The Company considers these options in determining the lease term used to establish its right-of-use assets and lease liabilities. Components of lease cost are as follows (in thousands):
|  |  |  | Three Months Ended |  |  | Six Months Ended |
Component |  | Classification |  | June 30, 2019 |  |  | June 30, 2019 |
Operating lease cost |  | SG&A expense |  | $ | 3,300 |  |  | $ | 6,578 |
Finance lease cost – amortization of right-of-use assets |  | Depreciation and amortization |  |  | 3,541 |  |  |  | 6,862 |
Finance lease cost – interest on lease liabilities |  | Interest expense |  |  | 764 |  |  |  | 1,476 |
Short-term lease cost |  | SG&A expense |  |  | 200 |  |  |  | 534 |
Supplemental cash flow information and non-cash activity related to operating and finance leases are as follows (in thousands):
|  | Six Months Ended |
|  | June 30, 2019 |
Operating cash flow information: |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 8,054 |
Financing cash flow information: |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 4,358 |
Non-cash activity: |  |  |  |
Operating lease right-of-use assets obtained in exchange for lease obligations |  | $ | 51,590 |
Weighted-average remaining lease term and discount rate for operating and finance leases are as follows:
|  | June 30, 2019 |
Weighted-average remaining lease term (in months) |  |  | 69 |
Weighted-average discount rate |  |  | 4.5 | %
Maturities of lease liabilities by fiscal year for finance leases and operating leases are as follows (in thousands):
|  | Finance Leases |  |  | Operating Leases |
2019 (a) |  | $ | 12,843 |  |  | $ | 6,107 |
2020 |  |  | 21,198 |  |  |  | 11,138 |
2021 |  |  | 16,726 |  |  |  | 8,990 |
2022 |  |  | 12,882 |  |  |  | 7,825 |
2023 |  |  | 7,320 |  |  |  | 6,479 |
2024 and beyond |  |  | 10,166 |  |  |  | 27,067 |
Total lease payments |  | $ | 81,135 |  |  | $ | 67,606 |
Less: Imputed interest |  |  | (7,452 | ) |  |  | (15,814 | )
Present value of lease liabilities |  | $ | 73,683 |  |  | $ | 51,792 |
(a) Excluding the six months ended June 30, 2019 Lease of Vehicles as Lessor The Company leases vehicles that the Company owns to customers primarily over periods of 1 to 10 years. The Company applied the practical expedient permitted within Topic 842 that allows it not to separate lease and nonlease components. Nonlease components typically consist of maintenance and licensing for the commercial vehicle. Some leases contain an option for the lessee to purchase the commercial vehicle. The Company’s policy is to depreciate its lease and rental fleet using a straight line method over each customer’s contractual lease term. The lease unit is depreciated to a residual value that approximates fair value at the expiration of the lease term. This policy results in the Company realizing reasonable gross margins while the unit is in service and a corresponding gain or loss on sale when the unit is sold at the end of the lease term. Sales-type leases are recognized by the Company as lease receivables. The lessee obtains control of the underlying asset and the Company recognizes sales revenue upon lease commencement. The receivable for sales-type leases at June 30, 2019 in the amount of $5.5 million is reflected in Other Assets on the Consolidated Balance Sheet. Minimum rental payments to be received for non-cancelable leases and subleases in effect as of June 30, 2019, are as follows (in thousands):
2019 (a) |  | $ | 64,533 |
2020 |  |  | 112,427 |
2021 |  |  | 84,798 |
2022 |  |  | 60,519 |
2023 |  |  | 39,590 |
Thereafter |  |  | 30,824 |
Total |  | $ | 392,691 |
(a) Excluding the six months ended June 30, 2019 Rental income during the three and six months ended June 30, 2019, and June 30, 2018, consisted of the following (in thousands):
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, 2019 |  |  | June 30, 2018 |  |  | June 30, 2019 |  |  | June 30, 2018 |
Minimum rental payments |  | $ | 54,149 |  |  | $ | 51,512 |  |  | $ | 106,570 |  |  | $ | 102,414 |
Nonlease payments |  |  | 7,620 |  |  |  | 7,753 |  |  |  | 14,878 |  |  |  | 14,718 |
Total |  | $ | 61,769 |  |  | $ | 59,265 |  |  | $ | 121,448 |  |  | $ | 117,132 |
As of December 31, 2018, minimum lease payments under non-cancelable finance leases and operating leases by period were expected to be as follows (in thousands):
|  | Finance Leases |  |  | Operating Leases |
2019 |  | $ | 22,033 |  |  | $ | 12,295 |
2020 |  |  | 19,113 |  |  |  | 10,466 |
2021 |  |  | 14,894 |  |  |  | 8,190 |
2022 |  |  | 11,062 |  |  |  | 7,078 |
2023 |  |  | 5,095 |  |  |  | 5,196 |
Thereafter |  |  | 2,963 |  |  |  | 22,463 |
Total lease payments |  | $ | 75,160 |  |  | $ | 65,688 |
Less: Imputed interest |  |  | (6,046 | ) |  |  |  |
Present value of lease liabilities |  | $ | 69,114 |  |  |  |  |

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- Definition The entire disclosure for lessee and lessor entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing. + References No definition available. + Details
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