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LEASES
 9 Months Ended
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.