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LEASES | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
LEASES | LEASES Our leases consist primarily of operating real estate leases for office space and data centers in the markets in which we conduct business. We also have operating and finance leases for computer and other equipment. Many of our 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 lease liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Operating lease costs and depreciation expense for finance leases 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 for operating and finance leases at September 30, 2019 was 7.5 years and 5.4 years, respectively. 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 September 30, 2019, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 4.1% and 2.8%, respectively. 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 September 30, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following:
|  | Balance Sheet Location |  | September 30, 2019 |  | January 1, 2019
|  |  |  | (in thousands)
Assets: |  |  |  |  |  |
Operating lease right-of-use assets: |  |  |  |  |  |
Real estate |  | Other noncurrent assets |  | $ | 368,816 |  |  | $ | 231,720 |
Computer equipment |  | Other noncurrent assets |  | 85,961 |  |  | — |
Other |  | Other noncurrent assets |  | 1,215 |  |  | 4,259 |
Total operating lease right-of-use-assets |  |  |  | 455,992 |  |  | 235,979 |
Finance lease right-of-use assets: |  |  |  |  |  |
Computer equipment |  | Property and equipment, net |  | $ | 22,020 |  |  | $ | — |
Other |  | Property and equipment, net |  | 4,702 |  |  | — |
|  |  |  | 26,722 |  |  | — |
Less accumulated depreciation: |  |  |  |  |  |
Computer equipment |  | Property and equipment, net |  | (470 | ) |  | — |
Other |  | Property and equipment, net |  | (17 | ) |  | — |
Total accumulated depreciation |  |  |  | (487 | ) |  | — |
Total finance lease right-of-use assets |  |  |  | 26,235 |  |  | — |
Total right-of-use assets(1) |  |  |  | $ | 482,227 |  |  | $ | 235,979 |
Liabilities: |  |  |  |  |  |
Operating lease liabilities (current) |  | Accounts payable and accrued liabilities |  | $ | 88,280 |  |  | $ | 37,339 |
Operating lease liabilities (noncurrent) |  | Other noncurrent liabilities |  | 413,111 |  |  | 236,697 |
Finance lease liabilities (current) |  | Current portion of long-term debt |  | 6,414 |  |  | — |
Finance lease liabilities (noncurrent) |  | Long-term debt |  | 27,852 |  |  | — |
Total lease liabilities |  |  |  | $ | 535,657 |  |  | $ | 274,036 |
(1) Approximately 85% of our right-of-use assets are located in the United States. As of September 30, 2019, maturities of lease liabilities were as follows:
|  | Operating Leases |  | Finance Leases
|  | (in thousands)
Year ending December 31, |  |  |  |
Remainder of 2019 |  | $ | 22,197 |  |  | $ | 1,781 |
2020 |  | 106,212 |  |  | 7,328 |
2021 |  | 97,330 |  |  | 7,100 |
2022 |  | 86,099 |  |  | 7,066 |
2023 |  | 57,251 |  |  | 6,674 |
2024 |  | 47,250 |  |  | 6,597 |
2025 and thereafter |  | 180,794 |  |  | 273 |
Total lease payments(1) |  | 597,133 |  |  | 36,819 |
Imputed interest |  | (95,742 | ) |  | (2,553 | )
Total lease liabilities |  | $ | 501,391 |  |  | $ | 34,266 |
(1) Total operating lease payments did not include approximately $40 million for operating leases that had not yet commenced at September 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 September 30, 2019 were $23.4 million, including $20.4 million in selling, general and administrative expenses and $3.0 million in cost of services. Operating lease costs in our consolidated statement of income for the nine months ended September 30, 2019 were $53.3 million, including $47.9 million in selling, general and administrative expenses and $5.4 million in cost of services. Total lease costs for the three and nine months ended September 30, 2019 include variable lease costs of approximately $9.0 million and $14.0 million, respectively, which are primarily comprised of the cost of property taxes, insurance and maintenance. Finance lease costs and lease costs for leases with a term of less than twelve months were not material for the three and nine months ended September 30, 2019. Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2019 was $43.0 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 $23.5 million for the nine months ended September 30, 2019. In connection with the Merger, we acquired right-of-use assets and assumed lease liabilities of $256.6 million and $271.9 million, respectively. 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 included approximately $70 million for operating leases that had not commenced at December 31, 2018.
LEASES | LEASES Our leases consist primarily of operating real estate leases for office space and data centers in the markets in which we conduct business. We also have operating and finance leases for computer and other equipment. Many of our 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 lease liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Operating lease costs and depreciation expense for finance leases 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 for operating and finance leases at September 30, 2019 was 7.5 years and 5.4 years, respectively. 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 September 30, 2019, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 4.1% and 2.8%, respectively. 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 September 30, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following:
|  | Balance Sheet Location |  | September 30, 2019 |  | January 1, 2019
|  |  |  | (in thousands)
Assets: |  |  |  |  |  |
Operating lease right-of-use assets: |  |  |  |  |  |
Real estate |  | Other noncurrent assets |  | $ | 368,816 |  |  | $ | 231,720 |
Computer equipment |  | Other noncurrent assets |  | 85,961 |  |  | — |
Other |  | Other noncurrent assets |  | 1,215 |  |  | 4,259 |
Total operating lease right-of-use-assets |  |  |  | 455,992 |  |  | 235,979 |
Finance lease right-of-use assets: |  |  |  |  |  |
Computer equipment |  | Property and equipment, net |  | $ | 22,020 |  |  | $ | — |
Other |  | Property and equipment, net |  | 4,702 |  |  | — |
|  |  |  | 26,722 |  |  | — |
Less accumulated depreciation: |  |  |  |  |  |
Computer equipment |  | Property and equipment, net |  | (470 | ) |  | — |
Other |  | Property and equipment, net |  | (17 | ) |  | — |
Total accumulated depreciation |  |  |  | (487 | ) |  | — |
Total finance lease right-of-use assets |  |  |  | 26,235 |  |  | — |
Total right-of-use assets(1) |  |  |  | $ | 482,227 |  |  | $ | 235,979 |
Liabilities: |  |  |  |  |  |
Operating lease liabilities (current) |  | Accounts payable and accrued liabilities |  | $ | 88,280 |  |  | $ | 37,339 |
Operating lease liabilities (noncurrent) |  | Other noncurrent liabilities |  | 413,111 |  |  | 236,697 |
Finance lease liabilities (current) |  | Current portion of long-term debt |  | 6,414 |  |  | — |
Finance lease liabilities (noncurrent) |  | Long-term debt |  | 27,852 |  |  | — |
Total lease liabilities |  |  |  | $ | 535,657 |  |  | $ | 274,036 |
(1) Approximately 85% of our right-of-use assets are located in the United States. As of September 30, 2019, maturities of lease liabilities were as follows:
|  | Operating Leases |  | Finance Leases
|  | (in thousands)
Year ending December 31, |  |  |  |
Remainder of 2019 |  | $ | 22,197 |  |  | $ | 1,781 |
2020 |  | 106,212 |  |  | 7,328 |
2021 |  | 97,330 |  |  | 7,100 |
2022 |  | 86,099 |  |  | 7,066 |
2023 |  | 57,251 |  |  | 6,674 |
2024 |  | 47,250 |  |  | 6,597 |
2025 and thereafter |  | 180,794 |  |  | 273 |
Total lease payments(1) |  | 597,133 |  |  | 36,819 |
Imputed interest |  | (95,742 | ) |  | (2,553 | )
Total lease liabilities |  | $ | 501,391 |  |  | $ | 34,266 |
(1) Total operating lease payments did not include approximately $40 million for operating leases that had not yet commenced at September 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 September 30, 2019 were $23.4 million, including $20.4 million in selling, general and administrative expenses and $3.0 million in cost of services. Operating lease costs in our consolidated statement of income for the nine months ended September 30, 2019 were $53.3 million, including $47.9 million in selling, general and administrative expenses and $5.4 million in cost of services. Total lease costs for the three and nine months ended September 30, 2019 include variable lease costs of approximately $9.0 million and $14.0 million, respectively, which are primarily comprised of the cost of property taxes, insurance and maintenance. Finance lease costs and lease costs for leases with a term of less than twelve months were not material for the three and nine months ended September 30, 2019. Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2019 was $43.0 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 $23.5 million for the nine months ended September 30, 2019. In connection with the Merger, we acquired right-of-use assets and assumed lease liabilities of $256.6 million and $271.9 million, respectively. 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 included approximately $70 million for operating leases that had not commenced at December 31, 2018.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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