Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jun. 30, 2019

The Company's lease agreements primarily cover office facilities and equipment and expire at various dates. The Company's leases are predominantly operating leases, which are included in right-of-use assets and lease liabilities on the Company's Condensed Consolidated Statements of Financial Condition. The Company's current lease arrangements expire from 2019 through 2030, some of which include options to extend or terminate the lease. However, the Company in general is not reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options are not considered in the lease term or the right-of-use asset and lease liabilities balances.

The Company’s lease population does not include any residual value guarantees, and therefore none were considered in the calculation of the lease balances. The Company has leases with variable payments, most commonly in the form of common area maintenance charges which are based on actual costs incurred. These variable payments were excluded from the right-of-use asset and lease liability balances since they are not fixed or in-substance fixed payments. Leases with variable rate adjustments, such as Consumer Price Index (CPI) adjustments, were reflected based on contractual lease payments as outlined within the lease agreement and not adjusted for any CPI increases or decreases. We have lease agreements with lease and non-lease components. We have elected the practical expedient to account for lease and non-lease components as a single lease component.

For leases with terms greater than 12 months, right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its incremental borrowing rate. Our lease agreements generally do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate the Company’s incremental borrowing rate based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter in determining the present value of future payments. Lease expense for net present value of payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the Condensed Consolidated Statements of Financial Condition; we recognize lease expense for these leases on a straight-line basis over the term of the lease.

Lease cost. The Company’s components of lease cost for the three and six months ended June 30, 2019 were as follows:



	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Operating lease cost	$	2,356		$	4,760
Short-term lease cost	24			57
Variable lease cost	219			482
Amortization of finance lease assets	60			60
Interest on finance lease liabilities	4			4
Sublease income	(25		)	(49		)
Total lease cost	$	2,638		$	5,314

Lease commitments. The table below summarizes the Company’s scheduled future minimum lease payments under operating and finance leases, recorded on the Condensed Consolidated Statements of Financial Condition as of June 30, 2019:



	Operating and Finance Leases
Remainder of 2019	$	4,595
2020	7,965
2021	5,829
2022	5,132
2023	3,899
Thereafter	15,750
Total lease payments	43,170
Less imputed interest	(6,775		)
Present value of lease payments	$	36,395

As of June 30, 2019, we have additional operating leases, primarily for additional office space at Securities America, that have not yet commenced.

In connection with an office lease entered into in March 2016, Securities America has exercised an option to lease additional office space, which is under construction, for 12 years and would require the payment of an estimated average annual rent of $2,000, subject to certain adjustments. The Company currently expects that this lease would commence in 2020 upon completion of the construction. Such estimated rent amounts are not included in the total minimum lease payments above.

The table below presents additional information related to our leases as of June 30, 2019:



Weighted Average Remaining Lease Term:
Operating leases	7.16 years

Weighted Average Discount Rate:
Operating leases	4.37	%

Supplemental cash flow information. The table below presents supplemental cash flow information related to leases during the six months ended June 30, 2019:



	Six months ended June 30, 2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating and finance leases	$	5,391

Non-cash investing and financing activities. The Right-of-use assets obtained in exchange for lease obligations during the six months ended June 30, 2019 was:



	Six months ended June 30, 2019
Operating and finance leases	$	6,993

Subleases and lessor activity. The Company had rental income from subleasing activity during the period ended June 30, 2019 which was immaterial to the Company’s consolidated financial statements.