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Leases
 12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases Leases
We lease office space and equipment under noncancelable operating and finance leases with various expiration dates, some of which contain renewal options.
Operating Leases
We determine if an arrangement is a lease and we account for leases in accordance with ASC Topic 842, “Leases,” which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the consolidated balance sheets and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements.
In accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease ROU assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheets based on their contractual due dates. The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which was 5.75% for all operating leases. Our operating lease agreements may include options to extend the lease term or terminate it early. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options.
Operating lease expense is recognized as rent expense on a straight-line basis over the lease term. Some of our operating leases contain lease and non-lease components, which we account for as a single component. We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure included in Note 1 – Overview and Summary of Significant Accounting Policies.
Finance Leases
On March 1, 1996, we entered into a 20-year capital lease for a building in Ashburn, Virginia that serves as our corporate headquarters. We had accounted for this transaction as a capital lease and had accordingly recorded assets and a corresponding liability of approximately $12.3 million. Effective November 1, 2013, this lease was terminated and we entered into a 13-year lease (the “2013 lease”) that would have expired in October 31, 2026. The 2013 lease was treated as a modification in accordance with ASC 840, “Leases”. As a result of the 2013 lease, the corresponding capital asset and liability increased by $11.7 million, resulting in a net book value of the capital asset of $13.1 million, and capital obligation of $15.5 million. The 2013 lease included an option to purchase, assign to, or designate a purchaser on June 1, 2014, which required notice of intent to exercise the option by not later than March 31, 2014.
On March 28, 2014, we entered into a definitive agreement with an unrelated third party to assign the purchase option to that third party in return for cash consideration of $1.7 million, payable upon the closing of the purchase transaction, and certain obligations under the agreement, including entering into a new 15-year lease with the third party upon the third party’s exercise of the purchase option and purchase of the building from the prior landlord. On March 28, 2014, we provided the prior landlord notice of our assignment and exercise of the purchase option. On May 28, 2014, the third party completed the purchase transaction and the 2013 lease was terminated, with no ongoing obligations, by mutual agreement between the prior landlord and the Company. On the same day we entered into a new lease (the “2014 lease”) with the third party that expires on May 31, 2029. The 2014 lease was treated as a modification of the prior lease on the property in accordance with ASC 840, and determined to be a capital lease. As a result of the 2014 lease, the corresponding capital asset increased by $5.7 million, resulting in a net book value of the capital asset of $18.3 million and the liability increased by $6.7 million, resulting in a capital obligation of $22.0 million. In accordance with the 2014 Lease, the basic rent increases by a fixed 2.5% escalation annually. The adoption of ASC 842 on January 1, 2019 did not have a material impact on the existing finance leases.
The weighted average remaining lease terms and discount rates were as follows:
Years Ended December 31,
20212020
Weighted average remaining lease term (in years):
Finance leases7.3 years8.3 years
Operating leases1.7 years2.5 years
Weighted average discount rate:
Finance leases5.04 %5.04 %
Operating leases5.75 %5.75 %
Future minimum lease commitments at December 31, 2021 were as follows (in thousands):
Operating LeasesFinance Leases
2022$602 $2,149 
2023373 2,202 
202428 2,258 
2025— 2,314 
2026— 2,372 
After 2026
— 5,972 
Total minimum lease payments1,003 17,267 
Less imputed interest(51)(2,966)
Net present value of minimum lease payments952 14,301 
Less current portion(564)(1,461)
Long-term lease obligations at December 31, 2021$388 $12,840 
The components of lease expense were as follows (in thousands):
Years Ended December 31,
20212020
Operating lease cost$713 $724 
Short-term lease cost (1)
13 93 
Finance lease cost
Amortization of finance lease assets1,221 1,221 
Interest on finance lease liabilities758 822 
Total finance lease cost1,979 2,043 
Total lease costs$2,705 $2,860 
(1)Leases that have terms of 12 months or less.
Supplemental cash flow information related to leases was as follows (in thousands):
Years Ended December 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - operating leases$768 $745 
Cash flows from operating activities - finance leases$758 $820 
Cash flows from financing activities - finance leases$1,339 $1,225 
Rent expense charged to operations totaled $0.8 million, $1.9 million, and $1.8 million for 2021, 2020, and 2019, respectively.
Leases Leases
We lease office space and equipment under noncancelable operating and finance leases with various expiration dates, some of which contain renewal options.
Operating Leases
We determine if an arrangement is a lease and we account for leases in accordance with ASC Topic 842, “Leases,” which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability on the consolidated balance sheets and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements.
In accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease ROU assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheets based on their contractual due dates. The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which was 5.75% for all operating leases. Our operating lease agreements may include options to extend the lease term or terminate it early. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options.
Operating lease expense is recognized as rent expense on a straight-line basis over the lease term. Some of our operating leases contain lease and non-lease components, which we account for as a single component. We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure included in Note 1 – Overview and Summary of Significant Accounting Policies.
Finance Leases
On March 1, 1996, we entered into a 20-year capital lease for a building in Ashburn, Virginia that serves as our corporate headquarters. We had accounted for this transaction as a capital lease and had accordingly recorded assets and a corresponding liability of approximately $12.3 million. Effective November 1, 2013, this lease was terminated and we entered into a 13-year lease (the “2013 lease”) that would have expired in October 31, 2026. The 2013 lease was treated as a modification in accordance with ASC 840, “Leases”. As a result of the 2013 lease, the corresponding capital asset and liability increased by $11.7 million, resulting in a net book value of the capital asset of $13.1 million, and capital obligation of $15.5 million. The 2013 lease included an option to purchase, assign to, or designate a purchaser on June 1, 2014, which required notice of intent to exercise the option by not later than March 31, 2014.
On March 28, 2014, we entered into a definitive agreement with an unrelated third party to assign the purchase option to that third party in return for cash consideration of $1.7 million, payable upon the closing of the purchase transaction, and certain obligations under the agreement, including entering into a new 15-year lease with the third party upon the third party’s exercise of the purchase option and purchase of the building from the prior landlord. On March 28, 2014, we provided the prior landlord notice of our assignment and exercise of the purchase option. On May 28, 2014, the third party completed the purchase transaction and the 2013 lease was terminated, with no ongoing obligations, by mutual agreement between the prior landlord and the Company. On the same day we entered into a new lease (the “2014 lease”) with the third party that expires on May 31, 2029. The 2014 lease was treated as a modification of the prior lease on the property in accordance with ASC 840, and determined to be a capital lease. As a result of the 2014 lease, the corresponding capital asset increased by $5.7 million, resulting in a net book value of the capital asset of $18.3 million and the liability increased by $6.7 million, resulting in a capital obligation of $22.0 million. In accordance with the 2014 Lease, the basic rent increases by a fixed 2.5% escalation annually. The adoption of ASC 842 on January 1, 2019 did not have a material impact on the existing finance leases.
The weighted average remaining lease terms and discount rates were as follows:
Years Ended December 31,
20212020
Weighted average remaining lease term (in years):
Finance leases7.3 years8.3 years
Operating leases1.7 years2.5 years
Weighted average discount rate:
Finance leases5.04 %5.04 %
Operating leases5.75 %5.75 %
Future minimum lease commitments at December 31, 2021 were as follows (in thousands):
Operating LeasesFinance Leases
2022$602 $2,149 
2023373 2,202 
202428 2,258 
2025— 2,314 
2026— 2,372 
After 2026
— 5,972 
Total minimum lease payments1,003 17,267 
Less imputed interest(51)(2,966)
Net present value of minimum lease payments952 14,301 
Less current portion(564)(1,461)
Long-term lease obligations at December 31, 2021$388 $12,840 
The components of lease expense were as follows (in thousands):
Years Ended December 31,
20212020
Operating lease cost$713 $724 
Short-term lease cost (1)
13 93 
Finance lease cost
Amortization of finance lease assets1,221 1,221 
Interest on finance lease liabilities758 822 
Total finance lease cost1,979 2,043 
Total lease costs$2,705 $2,860 
(1)Leases that have terms of 12 months or less.
Supplemental cash flow information related to leases was as follows (in thousands):
Years Ended December 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - operating leases$768 $745 
Cash flows from operating activities - finance leases$758 $820 
Cash flows from financing activities - finance leases$1,339 $1,225 
Rent expense charged to operations totaled $0.8 million, $1.9 million, and $1.8 million for 2021, 2020, and 2019, respectively.