Leases

9 Months Ended

Sep. 30, 2020

(11) Leases

The Company leases facilities consisting of office and warehouse space as well as vehicles and office equipment. The Company's facility leases have various remaining terms extending over 10 years, some of which may include one or more options to extend the associated lease term by up to 5-10 years, and some may include options for the Company or the lessor to terminate the leases prior to the end of the lease term. The exercise of lease renewal options is at the Company's discretion. From time to time, the Company may sublease office or warehouse space. This sublease activity is currently not significant. The Company's vehicle and office equipment leases currently have remaining lease terms extending up to 3 years and these leases typically have original terms of approximately 4-6 years. The Company has not historically extended its vehicle and office equipment leases beyond their original term. Similarly, the Company has not historically subleased these assets.

In addition, certain ATM placement agreements are deemed to contain an operating lease of merchant space under Accounting Standards Codification ("ASC") 842, Leases. These ATM placement agreements have remaining terms extending from less than 1 year to more than 5 years. These arrangements consist of semi-permanent or through-the-wall placements of company-owned ATMs at merchant or financial institution locations. These arrangements are deemed to contain a lease as the counterparty lacks the practical ability to substitute alternative space. The renewal provisions under ATM placement agreements vary.

The Company's through-the-wall ATM placement agreements that require fixed payments are deemed to contain an operating lease. These placement agreements may also require variable merchant commissions based on the type and volume of transactions conducted at the ATMs at their respective location. To the extent the merchant commissions are variable, the commission payments to the merchants are not deemed part of the lease payment that gives rise to the operating lease asset and operating lease liability recognized on the Company's Consolidated Balance Sheets. In addition, the merchant commissions may also change, in accordance with the terms of these agreements, in response to changes in interchange fees or interest rates. Certain Company facility leases require variable payments based on an index or external market rates. The Company's vehicle and office equipment leases do not generally include variable payments.

The Company recognizes the accounting impact of lease extension options when reasonably certain that a right to extend a lease will be exercised. The Company does not provide residual value guarantees within or in conjunction with any of its leases. As of September 30, 2020, all material leases of facilities, vehicles, office equipment, and merchant space had commenced.

The Company is not currently party to any significant finance leases. As a result, the net assets recorded under finance leases and the associated liabilities are not material.

Balance sheet information related to operating leases is as follows:


	Classification	September 30, 2020		December 31, 2019
Assets		(In thousands)
Operating lease assets	Operating lease assets	$	62,418	$	76,548
Total operating lease assets		$	62,418	$	76,548

Liabilities
Current
Operating lease liabilities	Current portion of other long-term liabilities	$	18,374	$	20,345
Noncurrent
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	58,782		69,531
Total operating lease liabilities		$	77,156	$	89,876

Operating lease costs during the three and nine months ended September 30, 2020 and 2019 were as follows:


			Three Months Ended		Nine Months Ended
	Classification		September 30, 2020		September 30, 2020
		(In thousands)
Operating lease costs	Cost of ATM operating revenues (1)		$	6,247	$	17,353
Operating lease costs	Selling, general, and administrative expenses (2)		1,228		3,775
Total operating lease cost			$	7,475	$	21,128

(1)Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed direct operating lease costs. The variable lease cost associated with these leases was not significant. In addition, includes the fixed and variable cost associated with ATM placement agreements that are deemed to contain a lease. The variable cost associated with these placements were approximately $0.6 million and $1.8 million in the three and nine months ended September 30, 2020, respectively.

(2)Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed general and administrative operating lease costs. The variable lease cost associated with these leases was not significant.


			Three Months Ended		Nine Months Ended
	Classification		September 30, 2019		September 30, 2019
		(In thousands)
Operating lease costs	Cost of ATM operating revenues (1)		$	7,197	$	21,473
Operating lease costs	Selling, general, and administrative expenses (2)		1,361		4,275
Total operating lease cost			$	8,558	$	25,748

(1)Includes the fixed and variable cost of facilities, vehicles, and equipment that are deemed direct operating lease costs. The variable lease cost associated with these leases was not significant. In addition, includes the fixed and variable cost associated with ATM placement agreements that are deemed to contain a lease. The variable cost associated with these placements were approximately $0.7 million and $2.9 million in the three and nine months ended September 30, 2019, respectively.

The following table presents the weighted-average remaining term and weighted-average discount rate associated with the Company's operating leases.

Lease Term and Discount Rate

September 30, 2020

December 31, 2019

Weighted-average remaining lease term (years)

Operating leases

7.3

6.9

Weighted-average discount rate

Operating leases

3.70%

3.47%

Additional lease information is summarized below:


	Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019
	(In thousands)
Operating cash outflows resulting from payments of operating lease liabilities	$	14,344	$	15,237
New operating lease assets recognized during the period	7,520		12,929

The following table presents the undiscounted cash flows associated with the Company's recognized operating lease liabilities in the next five years and thereafter as of September 30, 2020.


Maturity of Recognized Operating Lease Liabilities	Operating Lease Payments(1)
	(In thousands)
Remainder of 2020	$	7,507
2021	19,825
2022	12,687
2023	9,911
2024	8,156
After 2024	32,599
Total lease payments	90,685
Less: Interest (2)	(13,529)
Present value of operating lease liabilities (3)	$	77,156

(1)Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements. The Company has identified no extensions that are reasonably certain of being exercised and there are no significant lease agreements that have been signed and not yet commenced.

(2)Calculated using the estimated incremental borrowing rate for each lease.

(3)Includes current operating lease liabilities of $18.4 million and noncurrent operating lease liabilities of $58.8 million.