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LEASES

12 Months Ended

Dec. 31, 2021

10. LEASES

We have entered into various leases for certain facilities, land, underground conduit, colocations, and equipment used in our operations. For leases with a term greater than 12 months, we recognize a right-to-use asset and a lease liability based on the present value of lease payments over the lease term. The leases have remaining lease terms of one year to 87 years and may include one or more options to renew, which can extend the lease term from one to five years or more. Operating lease expense is recognized on a straight-line basis over the lease term.

As most of our leases do not provide a readily determinable implicit rate, we use our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. We use the implicit rate when a rate is readily determinable. Our leases may also include scheduled rent increases and options to extend or terminate the lease which is included in the determination of lease payments when it is reasonably certain that we will exercise that option. For all asset classes, we do not separate lease and nonlease components, as such we account for the components as a single lease component.

Leases with an initial term of 12 months or less are not recognized on the balance sheet and the expense for these short-term leases is recognized on a straight-line basis over the lease term. Short-term lease expense, which is recognized in cost of services and products, was not material to the consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019. Variable lease payments are expensed as incurred.

The following table summarizes the components of our lease right-of use assets and liabilities at December 31, 2021 and 2020:


(In thousands)	Balance Sheet Classification	2021			2020
Operating leases
Operating lease right-of-use assets	Other assets	$	25,072		$	25,808
Current lease liabilities	Accrued expense	$	(6,383)		$	(5,824)
Noncurrent lease liabilities	Other long-term liabilities	$	(19,072)		$	(20,192)

Finance leases
Finance lease right-of-use assets, net of accumulated depreciation of $16,255 and $23,034	Property, plant and equipment, net	$	28,240		$	17,373
Current lease liabilities	Current portion of long-term debt and finance lease obligations	$	(7,959)		$	(5,061)
Noncurrent lease liabilities	Long-term debt and finance lease obligations	$	(17,031)		$	(12,406)

Weighted-average remaining lease term
Operating leases			7.1 years			7.2 years
Finance leases			4.6 years			6.2 years
Weighted-average discount rate
Operating leases			6.27	%		6.43	%
Finance leases			5.55	%		6.99	%

The components of lease expense for the years ended December 31, 2021, 2020 and 2019 consisted of the following:


	Year Ended December 31,
(In thousands)	2021		2020		2019
Finance lease cost:
Amortization of right-of-use assets	$	4,152	$	7,442	$	12,031
Interest on lease liabilities		1,106		1,356		1,993
Operating lease cost		8,359		8,421		8,902
Variable lease cost		2,054		2,205		2,392
Total lease cost	$	15,671	$	19,424	$	25,318

The following table presents supplemental cash flow information related to leases for the years ended December 31, 2021, 2020 and 2019:


	Year Ended December 31,
(In thousands)	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	8,111	$	8,325	$	8,701
Operating cash flows for finance leases		1,106		1,356		1,993
Financing cash flows for finance leases		6,365		9,020		12,519
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases		5,673		6,842		2,269
Finance leases		13,888		2,534		6,227

At December 31, 2021, the aggregate maturities of our lease liabilities were as follows:


(In thousands)		Operating Leases		Finance Leases
2022	$	7,726	$	9,020
2023		5,646		7,150
2024		4,030		5,150
2025		3,357		1,869
2026		1,909		1,727
Thereafter		9,460		2,994
Total lease payments		32,128		27,910
Less: Interest		(6,673)		(2,920)
	$	25,455	$	24,990

Lessor

We have various arrangements for use of our network assets for which we are the lessor, including tower space, certain colocation, conduit and dark fiber arrangements. These leases meet the criteria for operating lease classification. Lease income associated with these types of leases is not material. Occasionally, we enter into arrangements where the term may be for a major part of the asset’s remaining economic life such as in indefeasible right of use (“IRU”) arrangements for dark fiber or conduit, which meet the criteria for sales-type lease classification. During the years ended December 31, 2021, 2020 and 2019, we entered into IRU arrangements for exclusive access to and unrestricted use of specific assets. These arrangements were recognized as sales-type leases as the term of the arrangements were for a major part of the asset’s remaining economic life. The arrangements did not have a material impact on our financial statements for the respective years.

We elected the practical expedient to combine lease and non-lease components in our lessor arrangements. We have arrangements where the non-lease component associated with the lease component is the predominant component in the contract, such as in revenue contracts that involve the customer leasing equipment from us. In such cases, we account for the combined component in accordance with ASC 606 as the service component is the predominant component in the contract.