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Leases | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
Leases |
9. | Leases
We are the lessee in contracts for our office space tenancies and leased vehicles. These arrangements account for the significant portion of our lease liabilities and right-of-use assets. We continually monitor our service arrangements to evaluate whether they meet the definition of a lease. The base terms for our lease arrangements typically do not extend beyond 10 years. We commonly have renewal options in our leases, but most of these options do not create a significant economic incentive for us to extend the lease term. Therefore, payments during periods covered by these renewal options are typically not included in our lease liabilities and right-of-use assets. Specific to our vehicle leases, early termination options are common and economic penalties associated with early termination of these contracts are typically significant enough to make it reasonably certain that we will not exercise such options. Therefore, payments during periods covered by these early termination options in vehicle leases are typically included in our lease liabilities and right-of-use assets. As an accounting policy election, our short-term leases with an initial term of 12 months or less are not recognized as lease liabilities and right-of-use assets in the consolidated balance sheets. The rent expense associated with short term leases is recognized on a straight-line basis over the lease term. Most of our office space leases include variable payments based on our share of actual common area maintenance and operating costs of the leased property. Many of our vehicle leases include variable payments based on actual service and fuel costs. For both office space and vehicle leases, we have elected the practical expedient to not separate lease components from non-lease components. Therefore, these costs are classified as variable lease payments. Lease payments are typically discounted at our incremental borrowing rate because the interest rate implicit in the lease cannot be readily determined in the absence of key inputs which are typically not reported by our lessors. Because we do not generally borrow on a collateralized basis, judgement was used to estimate the secured borrowing rate associated with our leases based on relevant market data and our inputs applied to accepted valuation methodologies. The incremental borrowing rate calculated for each lease also reflects the lease term, currency, and geography specific to each lease. Supplemental balance sheet information related to our leases is as follows (dollars in thousands):
Category |  | Classification |  | September 30, 2019 |
Assets |  |  |  |  |  |
Operating lease assets |  | Operating lease assets |  | $ | 980,337 |
Financing lease assets |  | Other assets, net |  |  | 80,304 |
Total leased assets |  |  |  | $ | 1,060,641 |
Liabilities |  |  |  |  |  |
Current: |  |  |  |  |  |
Operating |  | Operating lease liabilities |  | $ | 162,866 |
Financing |  | Other current liabilities |  |  | 30,562 |
Non-current: |  |  |  |  |  |
Operating |  | Non-current operating lease liabilities |  |  | 1,039,865 |
Financing |  | Other liabilities |  |  | 50,204 |
Total lease liabilities |  |  |  | $ | 1,283,497 |
Components of lease cost are as follows (dollars in thousands):
Component |  | Classification |  | Three Months Ended September 30, 2019 |  |  | Nine Months Ended September 30, 2019 |
Operating lease cost |  | Operating, administrative and other |  | $ | 47,126 |  |  | $ | 139,951 |
Finance lease cost: |  |  |  |  |  |  |  |  |  |
Amortization of right-to-use assets |  | (1) |  |  | 8,041 |  |  |  | 22,328 |
Interest on lease liabilities |  | Interest expense |  |  | 378 |  |  |  | 826 |
Variable lease cost |  | (2) |  |  | 20,582 |  |  |  | 53,634 |
Sublease income |  | Revenue |  |  | (608 | ) |  |  | (1,881 | )
Total lease cost |  |  |  | $ | 75,519 |  |  | $ | 214,858 |
(1) | Amortization costs of $6.6 million and $18.2 million, respectively, from vehicle finance leases utilized in client outsourcing arrangements are included in cost of services. Amortization costs of $1.4 million and $4.1 million, respectively, from all other finance leases are included in depreciation and amortization.
(2) | Variable lease costs of $4.8 million and $11.7 million, respectively, from leases in client outsourcing arrangements are included in cost of services. Variable lease costs of $15.8 million and $41.9 million, respectively, from all other leases are included in operating, administrative and other.
Weighted average remaining lease term and discount rate for our operating leases are as follows:
|  | September 30, 2019 |
Weighted-average remaining lease term: |  |  |  |
Operating leases |  | 9 years |
Finance leases |  | 3 years |
Weighted-average discount rate: |  |  |  |
Operating leases |  | 3.4% |
Finance leases |  | 2.3% |
Maturities of lease liabilities by fiscal year as of September 30, 2019 are as follows (dollars in thousands):
|  | Operating Leases |  |  | Financing Leases |
2019 |  | $ | 40,311 |  |  | $ | 8,401 |
2020 |  |  | 174,631 |  |  |  | 29,734 |
2021 |  |  | 190,249 |  |  |  | 21,740 |
2022 |  |  | 168,339 |  |  |  | 14,162 |
2023 |  |  | 150,954 |  |  |  | 7,777 |
Thereafter |  |  | 683,568 |  |  |  | 2,421 |
Total remaining lease payments at September 30, 2019 |  | $ | 1,408,052 |  |  | $ | 84,235 |
Less: Interest |  |  | 205,321 |  |  |  | 3,469 |
Present value of lease liabilities at September 30, 2019 |  | $ | 1,202,731 |  |  | $ | 80,766 |
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 and under the previous lease accounting standard, the following is a schedule by year of future minimum lease payments for noncancelable operating leases as of December 31, 2018 (dollars in thousands):
2019 |  | $ | 238,954 |
2020 |  |  | 219,351 |
2021 |  |  | 202,205 |
2022 |  |  | 172,267 |
2023 |  |  | 145,705 |
Thereafter |  |  | 510,741 |
Total minimum payment required |  | $ | 1,489,223 |
Supplemental cash flow information and non-cash activity related to our operating leases are as follows (dollars in thousands):
|  | Nine Months Ended September 30, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | $ | 121,964 |
Operating cash flows from financing leases |  |  | 1,059 |
Financing cash flows from financing leases |  |  | 23,260 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  |  | 149,259 |
Right-of-use assets obtained in exchange for new financing lease liabilities |  |  | 40,819 |
Other non-cash increases in operating lease right-of-use assets (1) |  |  | 35,510 |
Other non-cash decreases in finance lease right-of-use assets (1) |  |  | (1,011 | )
(1) | These noncash increases in right-of-use assets resulted from lease modifications and remeasurements.

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