(15)LEASES

The Company adopted ASU 842, Leases, as of January 1, 2019 using the effective date as the date of initial application. As a result, prior year financials were not recast under the new standard and therefore, those amounts are not presented.

Operating leases are included in our Consolidated Balance Sheet as Operating lease assets, Current operating lease liabilities and Non-current operating lease liabilities. Finance leases are included in Property, plant and equipment, Other current liabilities and Other long-term liabilities in our Consolidated Balance Sheet. The Company primarily leases real estate and equipment under various arrangements that provide the Company the right-of-use for the underlying asset that require lease payments over the lease term. The Company determines the value of each lease by computing the present value of each lease payment using the interest rate implicit in the lease, if available; otherwise the Company estimates its incremental borrowing rate over the lease term. The Company determines its incremental borrowing rate based on its estimated credit risk with adjustments for each individual leases’ geographical risk and lease term. Operating lease assets also include prepaid rent, initial direct costs less any tenant improvements.

The Company’s real estate portfolio typically includes one or more options to renew, with renewal terms that generally can extend the lease term from one to 10 years. The exercise of these lease renewal options is at the Company’s discretion and is included in the lease term only if the Company is reasonably certain to exercise. The Company also has service arrangements whereby it controls specific space provided by a third-party service provider. These arrangements meet the definition of a lease and are accounted for under ASC 842. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in the Consolidated Statements of Comprehensive Income (Loss). The Company’s lease agreements do not contain any material residual value guarantees or restrictive guarantees.

The components of lease expense for the year ended December 31, 2019 are as follows (in thousands):


	Location in Statements of	Year Ended
Description	Comprehensive Income (Loss)	December 31, 2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	7,157
Interest on lease liabilities - finance leases	Interest expense		141
Operating lease cost (cost resulting from lease payments)	Cost of services		47,269
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		3,731
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		968
Short-term lease cost	Cost of services		4,338
Less: Sublease income	Selling, general and administrative		(445)
Less: Sublease income	Other income (expense), net		(1,984)
Total lease cost		$	61,175

Other supplementary information for the year ended December 31, 2019 are as follows (dollar values in thousands):


	Year Ended
	December 31, 2019
Finance lease - operating cash flows	$	103
Finance lease - financing cash flows	$	10,251
Operating lease - operating cash flows (fixed payments)	$	51,898
New ROU assets - operating leases	$	15,494
Modified ROU assets - operating leases	$	46,543
New ROU assets - finance leases	$	6,133


	December 31, 2019
Weighted average remaining lease term - finance leases		2.91 yrs
Weighted average remaining lease term - operating leases		4.27 yrs
Weighted average discount rate - finance leases		1.43%
Weighted average discount rate - operating leases		7.22%

Operating and financing lease right-of-use assets and lease liabilities within our Consolidated Balance Sheet as of December 31, 2019 and January 1, 2019 (date of adoption of ASU 842) are as follows (in thousands):


				January 1, 2019
Description	Location in Balance Sheet	December 31, 2019		(date of adoption)
Assets
Operating lease assets	Operating lease assets	$	150,808	$	129,894
Finance lease assets	Property, plant and equipment, net		18,016		18,261
Total leased assets		$	168,824	$	148,155

Liabilities
Current
Operating	Current operating lease liabilities	$	45,218	$	35,535
Finance	Other current liabilities		7,470		8,770
Non-current
Operating	Non-current operating lease liabilities		127,395		112,754
Finance	Other long-term liabilities		8,896		10,765
Total lease liabilities		$	188,979	$	167,824

The future minimum operating lease and finance lease payments required under non-cancelable leases as of December 31, 2019 are as follows (in thousands):


	Operating		Sub-lease		Finance
	Leases		Income		Leases
Year 1	$	54,903	$	(2,976)	$	7,594
Year 2		47,892		(621)		5,587
Year 3		43,590		(345)		2,139
Year 4		28,124		(201)		1,109
Year 5		14,494		—		331
Thereafter		14,734		—		—
Total minimum lease payments	$	203,737	$	(4,143)	$	16,760
Less imputed interest		(31,124)				(394)
Total lease liability	$	172,613			$	16,366

The future minimum rental and capital lease payments under non-cancelable leases as of December 31, 2018 are as follows (in thousands):


	Operating		Sub-lease		Capital
	Leases		Income		Leases
Year 1	$	47,379	$	(2,624)	$	8,770
Year 2		36,045		(2,631)		5,548
Year 3		30,678		(276)		3,798
Year 4		26,584		—		1,005
Year 5		17,226		—		414
Thereafter		25,362		—		—
Total minimum lease payments	$	183,274	$	(5,531)	$	19,535
Less imputed interest						—
Total lease liability					$	19,535

In 2008, the Company sub-leased one of its customer engagement centers to a third party for the remaining term of the original lease. The sub-lease began on January 1, 2009 and rental income is recognized on a straight-line basis over the term of the sub-lease through 2021. In 2017, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on November 6, 2017 and ends May 31, 2021. In 2019, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on March 1, 2019 and ends July 31, 2023.

Asset Retirement Obligations

The Company records asset retirement obligations (“ARO”) for several of its customer engagement center leases. Capitalized costs related to ARO’s are included in Other long-term assets in the accompanying Consolidated Balance Sheets while the ARO liability is included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. Following is a summary of the amounts recorded (in thousands):


	Balance at								Balance at
	December 31,		Additions and						December 31,
	2018		Modifications		Accretion		Settlements		2019

ARO liability total	$	2,482	$	788	$	26	$	(292)	$	3,004


	Balance at								Balance at
	December 31,		Additions and						December 31,
	2017		Modifications		Accretion		Settlements		2018

ARO liability total	$	1,938	$	1,153	$	14	$	(623)	$	2,482

Increases to ARO result from a new lease agreement or modifications on an ARO from a preexisting lease agreement. Modifications to ARO liabilities and accumulated accretion occur when lease agreements are amended or when assumptions change, such as the rate of inflation. Modifications are accounted for prospectively as changes in estimates. Settlements occur when leased premises are vacated and the actual cost of restoration is paid. Differences between the actual costs of restoration and the balance recorded as ARO liabilities are recognized as gains or losses in the accompanying Consolidated Statements of Comprehensive Income (Loss).