Note D - Leases

3 Months Ended

Mar. 31, 2022

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.

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 March 31, 2022, assets recorded under finance and operating leases were approximately $0.7 million and $19.6 million respectively, and accumulated depreciation associated with finance leases was $0.8 million. As of December 31, 2021, assets recorded under finance and operating leases were approximately $0.8 million and $21.4 million respectively, and accumulated depreciation associated with finance leases was $0.7 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 a readily determinable implicit interest rate, 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.

There is no impairment of leases during the three months ended March 31, 2022. 

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

In thousands	As of March 31, 2022
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	19,584	$	714	$	20,298
Liabilities
Short-term lease liabilities		5,606		186		5,792
Long-term lease liabilities		17,564		164		17,728
Total Lease Liabilities	$	23,170	$	350	$	23,520

In thousands	As of December 31, 2021
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	21,382	$	760	$	22,142
Liabilities
Short-term lease liabilities		6,359		194		6,553
Long-term lease liabilities		19,004		211		19,215
Total Lease Liabilities	$	25,363	$	405	$	25,768

For the three months ended March 31, 2022 and 2021, the components of lease expense were as follows:

In thousands	Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
Operating lease cost	$	1,581		$	2,119
Finance lease cost:
Amortization of right-of-use assets		46			49
Interest on lease liabilities		5			7
Total Finance lease cost		51			56
Variable lease cost		539			920
Sublease income		(251	)		(171	)
Total lease cost, net	$	1,920		$	2,924

Other information related to leases was as follows:

In thousands	Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,789		$	3,950
Operating cash flows from finance leases		4			7
Financing cash flows from finance leases		55			56
Weighted average remaining lease term
Operating leases		6.2			5.8
Finance leases		2.0			2.8
Weighted average discount rate
Operating leases		3.41	%		3.58	%
Finance leases		5.47	%		5.30	%

The maturities of the Company’s finance and operating lease liabilities as of March 31, 2022 are as follows: 

In thousands	Operating Leases (1)		Finance Leases
Year Ending December 31,
Remainder of 2022	$	4,189	$	150
2023		5,237		166
2024		3,822		48
2025		2,118		6
2026		2,014		—
2027		8,229		—
Total future minimum lease payments		25,609		370
Less: imputed interest		2,439		20
Total lease liabilities	$	23,170	$	350

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