Quarterly report pursuant to Section 13 or 15(d)

LEASES

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LEASES
9 Months Ended
Sep. 30, 2019
LEASES

NOTE 8.             LEASES 

The Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC 842 not to include short-term leases with a duration of 12 months or less on the balance sheet. As of September 30, 2019, and December 31, 2018, all leases were classified as operating leases. Building leases generally carry terms of 5 to 10 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 5 years depending on the class of vehicle. The exercise of renewal options is at the Company's sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the fixed payments associated with such renewal periods. We separate lease and nonlease components of contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

 

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.

 

(in thousands)          
Lease Classification   Financial Statement Classification   Nine Months Ended
September 30, 2019
 
Short-term lease cost   Cost of services provided, Sales, general, and administrative expenses   $ 135  
Operating lease cost   Cost of services provided, Sales, general, and administrative expenses     19,361  
Total lease expense       $ 19,496  
             
Other Information            
      Weighted-average remaining lease term - operating leases     4.00  
      Weighted-average discount rate - operating leases     3.94  
Cash paid for amounts included in the measurement of lease liabilities:        
       Operating cash flows for operating leases      19,091  

 

ROLLINS, INC. AND SUBSIDIARIES

Lease Commitments

Future minimum lease payments at September 30, 2019 were as follows:

 

(in thousands)   Operating
Leases 
 
2019 (excluding the nine months ended September 30, 2019)   $ 18,791  
2020     66,981  
2021     51,969  
2022     33,688  
2023     17,716  
2024     9,492  
Thereafter     15,257  
Total future minimum lease payments     213,894  
Less: Amount representing interest     16,239  
Total future minimum lease payments, net of interest   $ 197,655  

 

Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $96.4 million for building leases and $117.5 million for vehicle leases. As of September 30, 2019, the Company had no additional future obligations for leases that had not yet commenced.

Future commitments under operating leases as of December 31, 2018 were as summarized:

(in thousands)   Operating
Leases
 
2019   $ 28,751  
2020     18,024  
2021     14,463  
2022     11,142  
2023     8,998  
Thereafter     16,234  
Total future minimum lease payments, net of interest   $ 97,612  

 

Future commitments presented in the table above exclude lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option.