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LEASES

6 Months Ended

Jun. 30, 2020

(11)LEASES

Operating leases are included in the 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 the 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 which 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 and 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. Rent 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 three and six months ended June 30, 2020 and 2019 are as follows (in thousands):


	Location in Statements of	Three Months Ended June 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	1,928	$	1,798
Interest on lease liabilities - finance leases	Interest expense		52		32
Operating lease cost (cost resulting from lease payments)	Cost of services		11,642		12,647
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		858		1,363
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		287		242
Short-term lease cost	Cost of services		883		1,247
Variable lease cost (cost excluded from lease payments)	Cost of services		(284)		—
Less: Sublease income	Selling, general and administrative		(212)		(126)
Less: Sublease income	Other income (expense), net		(616)		(496)
Total lease cost		$	14,538	$	16,707


	Location in Statements of	Six Months Ended June 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	3,844	$	3,405
Interest on lease liabilities - finance leases	Interest expense		108		40
Operating lease cost (cost resulting from lease payments)	Cost of services		23,680		23,346
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		1,400		2,630
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		529		484
Short-term lease cost	Cost of services		1,880		2,312
Variable lease cost (cost excluded from lease payments)	Cost of services		(284)		—
Less: Sublease income	Selling, general and administrative		(394)		(193)
Less: Sublease income	Other income (expense), net		(1,112)		(992)
Total lease cost		$	29,651	$	31,032

Other supplementary information for the three and six months ended June 30, 2020 and 2019 are as follows (dollar values in thousands):


	Three Months Ended June 30,
	2020		2019
Finance lease - operating cash flows	$	17	$	32
Finance lease - financing cash flows	$	1,735	$	2,202
Operating lease - operating cash flows (fixed payments)	$	13,280	$	13,741
New ROU assets - operating leases	$	247	$	5,368
Modified ROU assets - operating leases	$	6,221	$	10,202
New ROU assets - finance leases	$	320	$	1,657


	Six Months Ended June 30,
	2020		2019
Finance lease - operating cash flows	$	36	$	40
Finance lease - financing cash flows	$	3,867	$	5,985
Operating lease - operating cash flows (fixed payments)	$	27,417	$	26,075
New ROU assets - operating leases	$	6,795	$	7,057
Modified ROU assets - operating leases	$	6,221	$	23,201
New ROU assets - finance leases	$	828	$	4,247


	June 30, 2020		December 31, 2019
Weighted average remaining lease term - finance leases		2.63 years		2.91 years
Weighted average remaining lease term - operating leases		4.02 years		4.27 years
Weighted average discount rate - finance leases		1.60%		1.43%
Weighted average discount rate - operating leases		6.90%		7.22%

Operating and financing lease right-of-use assets and lease liabilities within the Consolidated Balance Sheet as of June 30, 2020 and December 31, 2019 are as follows (in thousands):


Description	Location in Balance Sheet	June 30, 2020		December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	142,701	$	150,808
Finance lease assets	Property, plant and equipment, net		14,989		18,016
Total leased assets		$	157,690	$	168,824

Liabilities
Current
Operating	Current operating lease liabilities	$	45,121	$	45,218
Finance	Other current liabilities		6,987		7,470
Non-current
Operating	Non-current operating lease liabilities		116,558		127,395
Finance	Other long-term liabilities		6,423		8,896
Total lease liabilities		$	175,089	$	188,979

The future minimum operating lease and finance lease payments required under non-cancelable leases as of June 30, 2020 and December 31, 2019 are as follows (in thousands):

June 30, 2020


	Operating		Sub-lease		Finance
	Leases		Income		Leases
Year 1	$	54,344	$	(3,401)	$	6,829
Year 2		47,643		(3,437)		4,149
Year 3		41,159		(3,433)		1,609
Year 4		21,523		(2,828)		817
Year 5		13,215		(2,940)		104
Thereafter		10,230		(1,960)		—
Total minimum lease payments	$	188,114	$	(17,999)	$	13,508
Less imputed interest		(26,435)				(98)
Total lease liability	$	161,679			$	13,410

December 31, 2019


	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

In 2008, the Company sub-leased one of its customer engagement centers to a third party for the remaining term of the lease. The sub-lease began on January 1, 2009 and rental income will be recognized on a straight-line basis over the term of the sub-lease through 2026. 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. In 2020, the Company sub-leased one of its office spaces for the remaining term of the original lease. The sub-lease began on February 6, 2020 and ends June 14, 2023.