Lease Commitments

3 Months Ended

Mar. 31, 2020

During the three months ended March 31, 2020, the Company entered into a material lease in Allen, TX, related to a new client contract. This lease has an opening ROU asset and lease liability balance of $11,455,000. The Company has included the below annual lease disclosures for comparability between reporting periods.

The Company determines if an arrangement is a lease at inception. The Company's and its subsidiaries' leases include office space, computer equipment, and automobiles under operating and finance leases. These lease agreements have remaining lease terms of 1 to 11 years. Some of these lease agreements include options to extend the leases for up to 5 years, options to terminate the leases within 1 year, rental escalation clauses and periodic adjustments for inflation, all of which are considered in the determination of lease payments. These lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease liability at the present value of the fixed lease payments over the term. Variable lease payments are not included in the calculation of the right-of-use asset and lease liability. The Company does not separate nonlease components from lease components and instead accounts for each as a single lease component for all classes of its assets. The Company applies a portfolio approach to effectively account for the right-of-use asset and lease liability for certain equipment leases.

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company's leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at lease commencement.

The Company, as sublessor, subleases certain office space which mostly consists of a two-building office complex in Plantation, Florida in which the terms of the primary lease and the related subleases end in December 2021. Under all of its executed sublease arrangements, the sublessees are obligated to pay the Company sublease payments of $3.2 million during the remainder of 2020, $4.2 million in 2021 and $0.1 million in 2022.

The Company's finance leases are not material for the three months ended as of March 31, 2020 and are excluded from the disclosures below. The following table presents the lease-related assets and liabilities recorded on the Company's unaudited Condensed Consolidated Balance Sheets related to its operating leases:



(in thousands)	Classification on Balance Sheet	March 31, 2020			December 31, 2019
Assets:
Operating lease	Operating lease right-of-use assets, net	$	108,974		$	102,354
Liabilities:
Current operating lease liabilities	Current operating lease liabilities	29,277			30,765
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	95,522			87,064
Total operating lease liabilities		$	124,799		$	117,829

Weighted-Average Remaining Lease Term		6.14 years			5.72 years
Weighted-Average Discount Rate⁽¹⁾		5.3		%	5.4		%

⁽¹⁾ Upon adoption of Topic 842, discount rates used for existing leases were established at the transition date.

The components of operating lease costs within the Company's unaudited Condensed Consolidated Statements of Operations consisted of the following for the three months ended March 31, 2020:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Operating lease cost	$	9,535	$	9,394
Variable lease cost	2,193		2,009
Sublease income	1,099		943

Supplemental cash flow information related to operating leases for the three months ended March 31, 2020 were as follows:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,495	$	9,596

Right-of-use assets obtained in exchange for lease obligations ⁽¹⁾	$	16,173	$	4,220

⁽¹⁾Amount excludes $122.3 million of right-of-use assets recognized upon adoption of Topic 842.

Future undiscounted operating lease payments reconciled to total operating lease liabilities are as follows:



(in thousands)	March 31, 2020
2020	$	25,883
2021	32,656
2022	20,461
2023	14,540
2024	11,289
Thereafter	43,035
Total undiscounted lease payments	147,864
Less imputed interest	(23,064		)
Present value of future lease payments	$	124,799

Lease Commitments



(in thousands)	Classification on Balance Sheet	March 31, 2020			December 31, 2019
Assets:
Operating lease	Operating lease right-of-use assets, net	$	108,974		$	102,354
Liabilities:
Current operating lease liabilities	Current operating lease liabilities	29,277			30,765
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	95,522			87,064
Total operating lease liabilities		$	124,799		$	117,829

Weighted-Average Remaining Lease Term		6.14 years			5.72 years
Weighted-Average Discount Rate⁽¹⁾		5.3		%	5.4		%

⁽¹⁾ Upon adoption of Topic 842, discount rates used for existing leases were established at the transition date.

The components of operating lease costs within the Company's unaudited Condensed Consolidated Statements of Operations consisted of the following for the three months ended March 31, 2020:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Operating lease cost	$	9,535	$	9,394
Variable lease cost	2,193		2,009
Sublease income	1,099		943

Supplemental cash flow information related to operating leases for the three months ended March 31, 2020 were as follows:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,495	$	9,596

Right-of-use assets obtained in exchange for lease obligations ⁽¹⁾	$	16,173	$	4,220

⁽¹⁾Amount excludes $122.3 million of right-of-use assets recognized upon adoption of Topic 842.

Future undiscounted operating lease payments reconciled to total operating lease liabilities are as follows:



(in thousands)	March 31, 2020
2020	$	25,883
2021	32,656
2022	20,461
2023	14,540
2024	11,289
Thereafter	43,035
Total undiscounted lease payments	147,864
Less imputed interest	(23,064		)
Present value of future lease payments	$	124,799

Lease Commitments



(in thousands)	Classification on Balance Sheet	March 31, 2020			December 31, 2019
Assets:
Operating lease	Operating lease right-of-use assets, net	$	108,974		$	102,354
Liabilities:
Current operating lease liabilities	Current operating lease liabilities	29,277			30,765
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	95,522			87,064
Total operating lease liabilities		$	124,799		$	117,829

Weighted-Average Remaining Lease Term		6.14 years			5.72 years
Weighted-Average Discount Rate⁽¹⁾		5.3		%	5.4		%

⁽¹⁾ Upon adoption of Topic 842, discount rates used for existing leases were established at the transition date.

The components of operating lease costs within the Company's unaudited Condensed Consolidated Statements of Operations consisted of the following for the three months ended March 31, 2020:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Operating lease cost	$	9,535	$	9,394
Variable lease cost	2,193		2,009
Sublease income	1,099		943

Supplemental cash flow information related to operating leases for the three months ended March 31, 2020 were as follows:



	Three Months Ended		Three Months Ended
(in thousands)	March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	9,495	$	9,596

Right-of-use assets obtained in exchange for lease obligations ⁽¹⁾	$	16,173	$	4,220

⁽¹⁾Amount excludes $122.3 million of right-of-use assets recognized upon adoption of Topic 842.

Future undiscounted operating lease payments reconciled to total operating lease liabilities are as follows:



(in thousands)	March 31, 2020
2020	$	25,883
2021	32,656
2022	20,461
2023	14,540
2024	11,289
Thereafter	43,035
Total undiscounted lease payments	147,864
Less imputed interest	(23,064		)
Present value of future lease payments	$	124,799