Leases

3 Months Ended

Mar. 31, 2019

The Company adopted ASU 2016-02 on January 1, 2019, and elected the modified retrospective method of implementation. The standard requires the recognition of ROU assets and lease liabilities for leases, which are defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company has elected the practical expedient which allows for leases with an initial term of 12 months or less to be excluded from recognition on the condensed consolidated statement of financial condition and for which lease expense is recognized on a straight-line basis over the lease term.

For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. These leases are primarily for corporate office space, datacenters, and technology equipment. The leases have remaining terms of 1 year to 13 years, some of which include options to extend the initial term at the Company's discretion. The lease terms used in calculating ROU assets and lease liabilities include the options to extend the initial term when the Company is reasonably certain of exercising the options. The Company's lease agreements do not contain any material residual value guarantees, restrictions or covenants. In addition to the base rental costs, the Company’s lease agreements for corporate office space generally provide for rent escalations resulting from increased assessments for operating expenses, real estate taxes and other charges. Payments for such reimbursable expenses are considered variable and are recognized as variable lease costs in the period in which the obligation for those payments was incurred.

The Company also subleases certain office space and facilities to third parties. The subleases have remaining terms of 1 to 13 years. The Company recognizes sublease income on a straight-line basis over the term of the sublease within Other, net on the condensed consolidated statement of comprehensive income.

As the implied discount rate for most of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate on its secured borrowings, which was based on the information available as of the initial transition date, January 1, 2019, in determining the present value of lease payments.

Lease assets and liabilities are summarized as follows:



(in thousands)	Financial Statement Location	March 31, 2019
Operating leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	350,423
Operating lease liabilities	Operating lease liabilities	394,764

Finance leases
Property and equipment, at cost	Property, equipment, and capitalized software, net	37,258
Accumulated depreciation	Property, equipment, and capitalized software, net	(17,056		)
Finance lease liabilities	Accounts payable, accrued expenses, and other liabilities	20,648

Weighted average remaining lease term and discount rate are as follows:



	March 31, 2019
Weighted average remaining lease term
Operating leases	7.89 years
Finance leases	1.85 years
Weighted average discount rate
Operating leases	5.69	%
Finance leases	3.57	%

The components of lease expense were as follows:



(in thousands)	Three Months Ended March 31, 2019
Operating lease cost:
Fixed	$	14,797
Variable	1,578
Total Operating lease cost	16,375

Finance lease cost:
Amortization of right-of-use assets	2,970
Interest on lease liabilities	186
Total Finance lease cost	3,156

Sublease income	2,560

Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of March 31, 2019, are as follows:



(in thousands)	Operating Leases			Finance Leases
2019	$	56,594		$	10,225
2020	74,482			10,060
2021	71,669			2,436
2022	65,689			—
2023	62,778			—
2024 and thereafter	164,245			—
Total lease payments	495,457			22,721
Less imputed interest	(100,693		)	(2,073		)
Total lease liability	394,764			20,648

Future lease payments under non-cancelable leases and sublease receipts as of December 31, 2018 are as follows:



(thousands)	Capital		Operating		Subleases
2019	$	21,983	$	32,755	$	(8,979	)
2020	11,283		30,473		(9,324		)
2021	1,651		25,564		(8,844		)
2022	—		22,710		(8,552		)
2023	—		21,456		(8,695		)
Thereafter	—		113,779		(36,312		)
Total minimum lease payments	$	34,917	$	246,737	$	(80,706	)

Leases

Lease assets and liabilities are summarized as follows:



(in thousands)	Financial Statement Location	March 31, 2019
Operating leases
Operating lease right-of-use assets	Operating lease right-of-use assets	$	350,423
Operating lease liabilities	Operating lease liabilities	394,764

Finance leases
Property and equipment, at cost	Property, equipment, and capitalized software, net	37,258
Accumulated depreciation	Property, equipment, and capitalized software, net	(17,056		)
Finance lease liabilities	Accounts payable, accrued expenses, and other liabilities	20,648

Weighted average remaining lease term and discount rate are as follows:



	March 31, 2019
Weighted average remaining lease term
Operating leases	7.89 years
Finance leases	1.85 years
Weighted average discount rate
Operating leases	5.69	%
Finance leases	3.57	%

The components of lease expense were as follows:



(in thousands)	Three Months Ended March 31, 2019
Operating lease cost:
Fixed	$	14,797
Variable	1,578
Total Operating lease cost	16,375

Finance lease cost:
Amortization of right-of-use assets	2,970
Interest on lease liabilities	186
Total Finance lease cost	3,156

Sublease income	2,560

Future minimum lease payments under operating and finance leases with non-cancelable lease terms, as of March 31, 2019, are as follows:



(in thousands)	Operating Leases			Finance Leases
2019	$	56,594		$	10,225
2020	74,482			10,060
2021	71,669			2,436
2022	65,689			—
2023	62,778			—
2024 and thereafter	164,245			—
Total lease payments	495,457			22,721
Less imputed interest	(100,693		)	(2,073		)
Total lease liability	394,764			20,648

Future lease payments under non-cancelable leases and sublease receipts as of December 31, 2018 are as follows:



(thousands)	Capital		Operating		Subleases
2019	$	21,983	$	32,755	$	(8,979	)
2020	11,283		30,473		(9,324		)
2021	1,651		25,564		(8,844		)
2022	—		22,710		(8,552		)
2023	—		21,456		(8,695		)
Thereafter	—		113,779		(36,312		)
Total minimum lease payments	$	34,917	$	246,737	$	(80,706	)