Leases

3 Months Ended

Dec. 31, 2020

As of December 31, 2020, we leased 9 of our 12 campuses and our corporate headquarters under non-cancelable operating leases, some of which contain escalation clauses and requirements to pay other fees associated with the leases. The facility leases have original lease terms ranging from 8 to 20 years and expire at various dates through 2031. In addition, the leases commonly include lease incentives in the form of rent abatements and tenant improvement allowances. We sublease certain portions of unused building space to third parties, which as of December 31, 2020, resulted in minimal income. All of the leases, other than those that may qualify for the short-term scope exception of 12 months or less, are recorded on our condensed consolidated balance sheets.

Some of the facility leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. There are no early termination with penalties, residual value guarantees, restrictions or covenants imposed by our facility leases.

The components of lease expense are included in “Educational services and facilities” and “Selling, general and administrative” on the condensed consolidated statement of operations, with the exception of interest on lease liabilities, which is included in “Interest expense.” The components of lease expense during the three months ended December 31, 2020 and 2019 were as follows:


	Three Months Ended December 31,
Lease Expense	2020		2019
Operating lease expense(1)	$	6,132	$	7,521
Finance lease expense:
Amortization of leased assets	32		—
Interest on lease liabilities	2		—
Variable lease expense	907		999
Sublease income	(123)		(351)
Total net lease expense	$	6,950	$	8,169

(1) Excludes the expense for short-term leases not accounted for under ASC 842, which was not significant for the three months ended December 31, 2020 and 2019.

Supplemental balance sheet, cash flow and other information related to our leases was as follows:


Leases	Classification	December 31, 2020		September 30, 2020
Assets:
Operating lease assets	Right-of-use assets for operating leases	$	140,296	$	144,663
Finance lease assets	Property and equipment, net(1)	225		257
Total leased assets		$	140,521	$	144,920

Liabilities:
Current
Operating lease liabilities	Operating lease liability, current portion	$	20,357	$	23,666
Finance lease liabilities	Other current liabilities	130		129
Noncurrent
Operating lease liabilities	Operating lease liability	132,175		134,089
Finance lease liabilities	Other liabilities	98		131
Total lease liabilities		$	152,760	$	158,015

(1) Finance lease assets are recorded net of accumulated amortization of $0.1 million as of December 31, 2020 and September 30, 2020, respectively.


	Three Months Ended December 31,
Supplemental Disclosure of Cash Flow Information and Other Information	2020		2019
Non-cash activity related to lease liabilities:
Lease assets obtained in exchange for new operating lease liabilities (1)	$	78	$	148,790
Leases assets obtained in exchange for new finance lease liabilities	—		—

(1) Includes the impact of the opening balance adjustment for the adoption of ASC 842 as of October 1, 2019 for the three months ended December 31, 2019.


Lease Term and Discount Rate	December 31, 2020		December 31, 2019
Weighted-average remaining lease term (in years):
Operating leases	10.49		8.62
Finance leases	1.81		0.00

Weighted average discount rate:
Operating leases	4.52	%	4.14	%
Finance leases	3.08	%	—	%

Maturities of lease liabilities were as follows:


	As of December 31, 2020
Years ending September 30,	Operating Leases		Finance Leases
Remainder of 2021	$	18,614	$	101
2022	24,042		110
2023	16,984		23
2024	16,675		—
2025	16,860		—
2026 and thereafter	95,757		—
Total lease payments	188,932		234
Less: interest	(36,400)		(6)
Present value of lease liabilities	152,532		228
Less: current lease liabilities	(20,357)		(130)
Long-term lease liabilities	$	132,175	$	98

Related Party Transactions for Leases

Rent expense includes rent paid to related parties, which was approximately $0.5 million for the three months ended December 31, 2020 and 2019, respectively. Since 1991, two of our properties comprising our Orlando, Florida location have been leased from entities controlled by John C. White, who served on our board of directors until his retirement on November 30, 2020. The leases extend through August 19, 2022 and August 31, 2022 with annual base lease payments for the first year under this lease totaling approximately $0.3 million and $0.7 million, with annual adjustments based on the higher of (i) an amount equal to 4% of the total annual rent for the immediately preceding year or (ii) the percentage of increase in the CPI. These transactions were not considered significant as of December 31, 2020.