Lease Obligations

9 Months Ended

Sep. 30, 2019

The Company determines if an arrangement is a lease at inception by considering whether (1) explicitly or implicitly identified assets have been deployed in the agreement and (2) the Company obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the agreement. Amounts related to operating leases are included in “Right-of-use assets”, “Current maturities of operating lease liabilities” and “Operating lease liabilities, net of current maturities” in the condensed consolidated balance sheets. Amounts related to finance leases are included in “Property, plant and equipment, net”, “Current maturities of long-term debt”, and “Long-term debt, net of current maturities” in the condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized at the commencement date and consist of the present value of remaining lease payments over the lease term, initial direct costs, prepaid lease payments less any lease incentives. Operating lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. The Company uses the implicit rate, when readily determinable or the incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. The lease terms may include options to extend or terminate the lease which are recorded in the financial statements if it is reasonably certain that the Company will exercise such options. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease agreements with lease and non-lease components are accounted for separately. The Company does not recognize leases with terms of less than twelve months in the condensed consolidated balance sheets and will recognize those lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term.

The Company leases offices, processing centers, warehouse spaces and, to a lesser extent, certain equipment. These leases have remaining terms of 1 year to 7 years, some of which have options to extend for up to 10 years and/or options to terminate within 1 year. The options to renew are not recognized as part of the Company’s ROU assets and operating lease liabilities as the Company is not reasonably certain that it will exercise these options.

Total operating lease expense, including short-term lease expense was $8.9 million and $12.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Future maturities of lease obligations follows (in thousands):



For the year ending September 30,	Operating Leases			Finance Leases			Total
2020	$	13,193		$	1,254		$	14,447
2021	11,975			1,070			13,045
2022	11,404			—			11,404
2023	11,389			—			11,389
2024	5,257			—			5,257
Thereafter	5,242			—			5,242
Total lease payments	58,460			2,324			60,784
Less imputed interest	(11,598		)	(186		)	(11,784		)
Total	$	46,862		$	2,138		$	49,000

The weighted average remaining lease term as of September 30, 2019 and December 31, 2018 was 5.00 years and 5.26 years, respectively. The weighted average discount rate used to determine the operating lease liability as of September 30, 2019 and December 31, 2018 was 6.53% and 6.25%, respectively.

Equipment Finance Leases

The Company has entered into equipment finance leases that are due in installments for the purpose of financing the purchase of computer equipment through August 2021. Interest accrues under these leases at rates from 4.3% to 8.7% per annum, and the leases are collateralized by liens on the computer equipment. The assets are amortized over the lesser of their related lease terms or their estimated useful lives and such charges are reflected within depreciation expense.

Lease Obligations

Total operating lease expense, including short-term lease expense was $8.9 million and $12.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Future maturities of lease obligations follows (in thousands):



For the year ending September 30,	Operating Leases			Finance Leases			Total
2020	$	13,193		$	1,254		$	14,447
2021	11,975			1,070			13,045
2022	11,404			—			11,404
2023	11,389			—			11,389
2024	5,257			—			5,257
Thereafter	5,242			—			5,242
Total lease payments	58,460			2,324			60,784
Less imputed interest	(11,598		)	(186		)	(11,784		)
Total	$	46,862		$	2,138		$	49,000

Equipment Finance Leases