NOTE 8. OPERATING AND FINANCE LEASE RIGHT-OF-USE ASSETS

Leasing Transactions

Our leased assets include offices and studios, transmitter locations, antenna sites, tower and tower sites or land. Our current lease portfolio has remaining terms from less than one-year up to twenty years. Many of these leases contain options under which we can extend the term for five to twenty years. Renewal options are excluded from our calculation of lease liabilities unless we are reasonably assured to exercise the renewal option. Our lease agreements do not contain residual value guarantees or material restrictive covenants. We lease certain property from our principal stockholders or trusts and partnerships created for the benefit of the principal stockholders and their families. These leases are designated as Related Party leases in the details provided.

Operating leases are reflected on our balance sheet within operating lease ROU assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Operating lease ROU assets and liabilities are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

 

Balance Sheet

The adoption of ASC 842 resulted in recording a non-cash transitional adjustment to operating lease ROU assets and operating lease liabilities of $65.0 million and $74.4 million, respectively. The difference between the operating lease ROU assets and operating lease liabilities at transition represented existing deferred rent expense and prepaid rent that was derecognized upon adoption. During the three month period ended March 31, 2019, we recorded an additional ROU asset and corresponding lease liability of $0.3 million.

Supplemental balance sheet information related to leases was as follows:

 

		March 31, 2019
		(Dollars in thousands)
		Related Party				Other				Total
Operating Leases
Operating leases ROU assets		$	9,163			$	53,957			$	63,120
Operating lease liabilities (current)			903				8,561				9,464
Operating lease liabilities (noncurrent)			8,633				53,214				61,847
Total operating lease liabilities		$	9,536			$	61,775			$	71,311

 

Weighted Average Remaining Lease Term
Operating leases			8.7 years
Finance leases			3.8 years
Weighted Average Discount Rate
Operating leases			8.05	%
Finance leases			4.28	%

Lease Expense

The components of lease expense were as follows:

 

		Three Months Ended March 31, 2019
		(Dollars in thousands)
Amortization of ROU Assets		$	33
Interest on finance lease liabilities			2
Finance lease expense			35
Operating lease expense			3,497
Variable lease expense			252
Short-term lease expense			225
Total lease expense		$	4,009

Supplemental Cash Flow

Supplemental cash flow information related to leases was as follows:

 

		Three Months Ended March 31, 2019
		(Dollars in thousands)
Operating cash flows from operating leases		$	2,267
Operating cash flows from finance leases			33
Financing cash flows from finance leases			21
Cash paid for amounts included in the measurement of lease liabilities		$	2,321
ROU assets acquired in exchange for new operating lease liabilities			288

 

Maturities

Future minimum lease payments required under leases that have initial or remaining non-cancelable lease terms in excess of one year as of March 31, 2019, are as follows:

 

		Operating Leases
		Related Parties				Other				Total				Finance Leases				Total
		(Dollars in thousands)
2019 (Apr-Dec)		$	1,227			$	9,349			$	10,576			$	64			$	10,640
2020			1,665				12,785				14,450				66				14,516
2021			1,669				11,660				13,329				51				13,380
2022			1,647				10,081				11,728				43				11,771
2023			1,207				8,925				10,132				22				10,154
Thereafter			7,510				40,120				47,630				3				47,633
Undiscounted Cash Flows		$	14,925			$	92,920			$	107,845			$	249			$	108,094
Less: imputed interest			5,389				31,145				36,534				19				36,553
Total		$	9,536			$	61,775			$	71,311			$	230			$	71,541
Reconciliation to lease liabilities:
Lease liabilities - current		$	903			$	8,561			$	9,464			$	74			$	9,538
Lease liabilities - long-term			8,633				53,214				61,847				156				62,003
Total Lease Liabilities		$	9,536			$	61,775			$	71,311			$	230			$	71,541

Future minimum lease payments under leases that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018, based on the former accounting guidance for leases, were as follows:

 

		Operating Leases
		Related Party				Other				Total				Finance Leases				Total
		(Dollars in thousands)
2019		$	1,730			$	11,633			$	13,363			$	58			$	13,421
2020			1,763				11,592				13,355				39				13,394
2021			1,767				10,596				12,363				31				12,394
2022			1,730				9,490				11,220				27				11,247
2023			1,234				8,584				9,818				8				9,826
Thereafter			13,364				48,109				61,473				—				61,473
		$	21,588			$	100,004			$	121,592			$	163			$	121,755