Note D - Leases

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note D - Leases

We have operating and finance leases for corporate and business offices, service facilities, call centers and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that we are reasonably certain to exercise (short-term leases). Our leases have remaining lease terms of one year to six years, some of which include options to extend the leases for up to an additional five years, and some of which include options to terminate the leases within one year.

We sublease our Fullerton (CA), Jacksonville (FL) and Uxbridge (UK) facilities.  The leases and subleases for these three facilities expire at various dates, the latest being fiscal year 2023.  

As of September 30, 2021, assets recorded under finance and operating leases were approximately $0.8 million and $19.6 million respectively, and accumulated depreciation associated with finance leases was $0.7 million. As of December 31, 2020, assets recorded under finance and operating leases were approximately $1.0 million and $23.8 million respectively, and accumulated depreciation associated with finance leases was $0.5 million.  Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to determine the commencement date present value of lease payment is the interest rate implicit in the lease, or when that is not readily determinable, our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Since none of our leases has readily determinable implicit interest rates, we use our incremental borrowing rate as the discount rate.  Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

During the nine months ended September 30, 2021, we impaired two leases for the facilities we no longer occupied. The resulting impairment charges are included in our restructuring expenses for the three and nine months ended  September 30, 2021.   Please refer to Note N, Restructuring Charges for further details.

The following table presents supplemental balance sheet information related to our financing and operating leases:

In thousands	As of September 30, 2021
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	19,569	$	810	$	20,379
Liabilities
Short-term lease liabilities		6,410		205		6,615
Long-term lease liabilities		17,289		257		17,546
Total Lease Liabilities	$	23,699	$	462	$	24,161

In thousands	As of December 31, 2020
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	23,793	$	957	$	24,750
Liabilities
Short-term lease liabilities		6,436		227		6,663
Long-term lease liabilities		20,892		403		21,295
Total Lease Liabilities	$	27,328	$	630	$	27,958

For the three and nine months ended September 30, 2021 and 2020, the components of lease expense were as follows:

In thousands	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
Operating lease cost	$	1,853		$	1,951
Finance lease cost:
Amortization of right-of-use assets		49			59
Interest on lease liabilities		6			10
Total Finance lease cost		55			69
Variable lease cost		577			604
Sublease income		(117	)		(228	)
Total lease cost, net	$	2,368		$	2,396

In thousands	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Operating lease cost	$	5,885		$	6,435
Finance lease cost:
Amortization of right-of-use assets		147			191
Interest on lease liabilities		21			37
Total Finance lease cost		168			228
Variable lease cost		2,131			2,246
Sublease income		(475	)		(228	)
Total lease cost, net	$	7,709		$	8,681

Other information related to leases was as follows:

In thousands	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	11,179		$	14,535
Operating cash flows from finance leases		19			32
Financing cash flows from finance leases		169			357
Weighted Average Remaining Lease term
Operating leases		5.8			3.0
Finance leases		2.3			3.2
Weighted Average Discount Rate
Operating leases		3.50	%		4.67	%
Finance leases		5.36	%		5.28	%

The maturities of the Company’s finance and operating lease liabilities as of September 30, 2021 are as follows: 

In thousands	Operating Leases (1)		Finance Leases
Year Ending December 31,
Remainder of 2021	$	1,997	$	63
2022		6,698		209
2023		4,765		166
2024		3,327		48
2025		1,581		6
2026		7,505		—
Total future minimum lease payments		25,873		492
Less: imputed interest		2,174		30
Total lease liabilities	$	23,699	$	462

(1) Non-cancelable sublease proceeds for the remainder of the fiscal year ending December 31, 2021 and the fiscal years ending December 31, 2022 and 2023 of $0.2 million, $0.6 million, and $0.2 million, respectively, are not included in the table above.