LEASES

6 Months Ended

Jun. 30, 2019

Our leases consist primarily of operating real estate leases for office space in the markets in which we conduct business. Many of our operating leases include escalating rental payments and incentives, as well as termination and renewal options. Certain of our lease agreements provide that we pay the cost of property taxes, insurance and maintenance. As described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies," we adopted ASU 2016-02 on January 1, 2019. Unless otherwise indicated, the following information in this footnote applies only to periods after December 31, 2018.

We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if we obtain substantially all of the economic benefits of, and have the right to control the use of, an asset for a period of time. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement. We recognize right-of-use assets and leases liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Lease costs are recognized as expense on a straight-line basis over the lease term. We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option. The weighted-average remaining lease term at June 30, 2019 was 10.1 years. Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated

right-of-use asset at the lease commencement date. The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date. As of June 30, 2019, the weighted-average discount rate used in the measurement of our lease liabilities was 5.0%.

The effects of adopting ASU 2016-02 on our balance sheet, as of January 1, 2019, are set forth in the table below. Adoption did not have a material effect on any line items in our consolidated statement of income or on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows. As of June 30, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following (in thousands):



	Balance Sheet Location	June 30, 2019		January 1, 2019



Assets:
Operating lease right-of-use assets⁽¹⁾	Other noncurrent assets	$	219,006	$	235,979

Liabilities:
Operating lease liabilities (current)	Accounts payable and accrued liabilities	$	34,589	$	37,339
Operating lease liabilities (noncurrent)	Other noncurrent liabilities	224,751		236,697
Total operating lease liabilities		$	259,340	$	274,036

⁽¹⁾Approximately 90% of our operating lease right-of-use assets are located in the United States.

As of June 30, 2019, maturities of lease liabilities were as follows (in thousands):



Year ending December 31,
2019	$	24,694
2020	42,249
2021	35,221
2022	32,536
2023	28,964
2024	27,187
2025 and thereafter	147,981
Total lease payments⁽¹⁾	338,832
Imputed interest	(79,492		)
Total operating lease liabilities	$	259,340

⁽¹⁾Total lease payments do not include approximately $86.0 million for operating leases that had not yet commenced at June 30, 2019. We expect the lease commencement dates for these leases to occur later in 2019 and in 2020.

Operating lease costs in our consolidated statement of income for the three months ended June 30, 2019 were $14.1 million, including $12.9 million in selling, general and administrative expenses and $1.2 million in cost of services.Operating lease costs in our consolidated statement of income for the six months ended June 30, 2019 were $29.8 million, including $27.4 million in selling, general and administrative expenses and $2.4 million in cost of services.Total lease costs for the three and six months ended June 30, 2019 include variable lease costs of approximately $2.6 million and $5.0 million, respectively, which are primarily comprised of the cost of property taxes, insurance and maintenance. Lease costs for leases with a term of less than twelve months were not material for the three and six months ended June 30, 2019.

Cash paid for amounts included in the measurement of operating lease liabilities for the six months ended June 30, 2019 was $26.1 million, which is included as a component of cash provided by operating activities in the consolidated statement of cash flows. Operating lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were approximately $4.0 million for the six months ended June 30, 2019.

Future minimum payments at December 31, 2018 for noncancelable operating leases were as follows (in thousands):



Year ending December 31:
2019	$	50,095
2020	47,700
2021	40,035
2022	37,055
2023	33,298
2024 and thereafter	225,225
Total future minimum payments⁽¹⁾	$	433,408

⁽¹⁾Future minimum lease payments include approximately $70 million for operating leases that had not commenced at December 31, 2018.