Leases

3 Months Ended

Mar. 31, 2019

3. Leases

We adopted ASU 2016-02 on January 1, 2019 using the cumulative-effect adjustment transition method. The new guidance required the recognition of leased arrangements on the balance sheet as a right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets.

We determine whether an arrangement is a lease at inception. Assets leased under an operating lease arrangement are recorded in Right-of-use assets – operating leases and the associated lease liability is included in Current operating lease liabilities and Long-term operating lease liabilities within the consolidated balance sheets. Assets leased under finance lease arrangements are recorded within fixed assets and the associated lease liabilities are recorded within Accrued expenses and Other liabilities within the consolidated balance sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate in conjunction with the market swap rate for the expected remaining lease team at commencement date for new leases, or as of January 1, 2019 for existing leases, in determining the present value of future lease payments. Our expected lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

We have elected the group of practical expedients under ASU 2016-02 to forego assessing upon adoption: (1) whether any expired contracts are or contain leases; (2) the lease classification for any existing or expired leases and (3) any indirect costs that would have qualified for capitalization for any existing leases. We have lease agreements with lease and non-lease components, which are generally accounted for separately except for real estate and vehicle leases, which we have elected to combine through a practical expedient under ASU 2016-02. Non-lease components for our leases typically comprise of executory costs, which under the practical expedient allows for all executory costs to be recorded as lease payments. Additionally, for certain equipment leases, we apply a portfolio approach to effectively record right-of-use assets and liabilities.

Our operating leases mainly include office leases and our finance leases include office and computer equipment leases. Our leases have remaining lease terms of approximately 1 year to 10 years, some of which include options to extend the leases for up to 5 years, which may include options to terminate the leases within 1 year. Total costs associated with leased assets are as follows:

(In thousands)	Three months ended March 31, 2019
Operating lease cost ⁽¹⁾	$	6,717
Less: Sublease income		(802	)
Total operating lease costs		5,915
Finance lease costs:
Amortization of right-of-use assets ⁽²⁾		51
Interest on lease liability ⁽³⁾		3
Total finance lease costs	$	54

⁽¹⁾

Operating lease costs are recognized on a straight-line basis and are included in Selling, general and administrative expenses within the consolidated statement of operations.

⁽²⁾

Amortization of finance right-of-use assets is recognized on a straight-line basis and is included in in Selling, general and administrative expenses within the consolidated statement of operations.

⁽³⁾

Interest on finance lease liabilities is recorded as Interest expense within the consolidated statement of operations.

Supplemental information for operating and finance leases is as follows:

(In thousands)	Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,287
Operating cash flows from finance leases	$	3
Financing cash flows from finance leases	$	37
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	124,811
Finance leases	$	263

The balance sheet location and balances for operating and finance leases are as follows:

(In thousands, except lease term and discount rate)	March 31, 2019
Operating leases:
Right-of-use assets - operating leases	$	97,411
Current operating lease liabilities	$	24,154
Long-term operating lease liabilities	$	95,112

Finance leases:
Fixed assets, gross	$	524
Accumulated depreciation		286
Fixed assets, net	$	238

Current finance lease liabilities ⁽¹⁾	$	130
Long-term finance lease liabilities ⁽²⁾	$	97

Weighted average remaining lease term (in years)
Operating leases		6
Finance leases		2

Weighted average discount rate
Operating leases		4.6	%
Finance leases		5.0	%

⁽¹⁾

Current finance lease liabilities are included in Accrued expenses within the consolidated balance sheets.

⁽²⁾

Long-term finance lease liabilities are included in Other liabilities within the consolidated balance sheets.

The future maturities of our leasing arrangements including lease and non-lease components are shown in the below table. The maturities are calculated using foreign currency exchange rates in effect as of March 31, 2019.

	March 31, 2019
(in thousands)	Operating Leases			Finance Leases
Remainder of 2019	$	22,128		$	107
2020		24,839			85
2021		20,773			40
2022		19,205			6
2023		16,817			0
Thereafter		33,171			0
Total lease liabilities		136,933			238
Less: Amount representing interest		(17,667	)		(11	)
Less: Short-term lease liabilities		(24,154	)		(130	)
Total long-term lease liabilities	$	95,112		$	97