LEASES

3 Months Ended

Mar. 31, 2020

10. LEASES

The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. Effective January 1, 2019, right-of-use assets and operating lease liabilities are included in its consolidated balance sheet. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.

In accordance with ASC 842, the Company records on its consolidated balance sheet leases with a term greater than 12 months. The Company has elected, in compliance with current accounting standards, not to record leases with an initial terms of 12 months or less in the consolidated balance sheet. ASC 842 requires the separation of the fixed lease components from the variable lease components. The Company has elected the practical expedient to account for separate lease components of a contract as a single lease cost thus causing all fixed payments to be capitalized. Non-lease and variable cost components are not included in the measurement of the right-of-use assets or operating lease liabilities. The Company also elected the package of practical expedients permitted within ASC 842, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of- use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense.

The components of lease expense were as follows (in thousands):

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Operating lease cost	$	7,812	$	7,587
Short-term lease cost		294		371
Variable lease cost		1,532		1,581
Total lease cost *	$	9,638	$	9,539

* Sublease income was immaterial

Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.

Supplemental information related to leases was as follows (in thousands):

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019

Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)	$	7,790	$	7,706

Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands) *	$	11,540	$	89,885

* Includes the right-of-use assets obtained in exchange for lease liabilities of $82.6 million which were recognized upon adoption of ASC Topic 842 at January 1, 2019.

The aggregate future lease payments for operating leases as of March 31, 2020 were as follows (in thousands):

Fiscal Year	Amount
2020 (excluding the three months ended March 31, 2020)	$	22,273
2021		24,801
2022		18,922
2023		13,514
2024		8,298
2025 and therafter		9,318
Total lease payments	$	97,126
Less: imputed interest		7,723
Total operating lease liabilities	$	89,403

Average lease terms and discount rates were as follows:

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
Weighted-average remaining lease term - Operating leases	4.25 Years			3.7 Years

Weighted-average discount rate - Operating leases		3.9	%		3.8	%