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LEASES

9 Months Ended

Sep. 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 nine months ended September 30, 2020 and 2019 are as follows (in thousands):


	Location in Statements of	Three Months Ended September 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	1,933	$	1,855
Interest on lease liabilities - finance leases	Interest expense		49		43
Operating lease cost (cost resulting from lease payments)	Cost of services		11,446		10,910
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		530		551
Operating lease cost (cost resulting from lease payments)	Restructuring		261		—
Operating lease cost	Impairment		948		—
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		310		242
Short-term lease cost	Cost of services		1,029		1,107
Variable lease cost (cost excluded from lease payments)	Cost of services		(1)		—
Less: Sublease income	Selling, general and administrative		(220)		(126)
Less: Sublease income	Other income (expense), net		(676)		(496)
Total lease cost		$	15,609	$	14,086


	Location in Statements of	Nine Months Ended September 30,
Description	Comprehensive Income (Loss)	2020		2019
Amortization of ROU assets - finance leases	Depreciation and amortization	$	5,777	$	5,260
Interest on lease liabilities - finance leases	Interest expense		157		83
Operating lease cost (cost resulting from lease payments)	Cost of services		35,126		34,256
Operating lease cost (cost resulting from lease payments)	Selling, general and administrative		1,493		3,181
Operating lease cost (cost resulting from lease payments)	Restructuring		697		—
Operating lease cost	Impairment		1,456		—
Operating lease cost (cost resulting from lease payments)	Other income (expense), net		839		726
Short-term lease cost	Cost of services		2,909		3,419
Variable lease cost (cost excluded from lease payments)	Cost of services		(285)		—
Less: Sublease income	Selling, general and administrative		(614)		(319)
Less: Sublease income	Other income (expense), net		(1,788)		(1,488)
Total lease cost		$	45,767	$	45,118

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


	Three Months Ended September 30,
	2020		2019
Finance lease - operating cash flows	$	17	$	43
Finance lease - financing cash flows	$	2,143	$	2,111
Operating lease - operating cash flows (fixed payments)	$	13,824	$	12,185
New ROU assets - operating leases	$	—	$	1,301
Modified ROU assets - operating leases	$	111	$	18,807
New ROU assets - finance leases	$	1,464	$	1,886


	Nine Months Ended September 30,
	2020		2019
Finance lease - operating cash flows	$	53	$	83
Finance lease - financing cash flows	$	6,010	$	8,096
Operating lease - operating cash flows (fixed payments)	$	41,241	$	38,260
New ROU assets - operating leases	$	6,795	$	8,358
Modified ROU assets - operating leases	$	6,332	$	42,008
New ROU assets - finance leases	$	2,292	$	6,133


	September 30, 2020		December 31, 2019
Weighted average remaining lease term - finance leases		2.62 years		2.91 years
Weighted average remaining lease term - operating leases		3.86 years		4.27 years
Weighted average discount rate - finance leases		1.57%		1.43%
Weighted average discount rate - operating leases		6.97%		7.22%

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


Description	Location in Balance Sheet	September 30, 2020		December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	132,571	$	150,808
Finance lease assets	Property, plant and equipment, net		14,530		18,016
Total leased assets		$	147,101	$	168,824

Liabilities
Current
Operating	Current operating lease liabilities	$	44,181	$	45,218
Finance	Other current liabilities		6,757		7,470
Non-current
Operating	Non-current operating lease liabilities		106,921		127,395
Finance	Other long-term liabilities		6,040		8,896
Total lease liabilities		$	163,899	$	188,979

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

September 30, 2020


	Operating		Sub-lease		Finance
	Leases		Income		Leases
Year 1	$	51,934	$	(3,443)	$	6,808
Year 2		46,728		(3,455)		3,552
Year 3		36,717		(3,293)		1,849
Year 4		19,229		(2,852)		852
Year 5		10,247		(2,940)		13
Thereafter		9,362		(1,225)		—
Total minimum lease payments	$	174,217	$	(17,208)	$	13,074
Less imputed interest		(23,115)				(277)
Total lease liability	$	151,102			$	12,797

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 delivery 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.