Leases

9 Months Ended

Sep. 30, 2022

Note 7—Leases

The Company recognizes ROU Assets and lease liabilities (“Lease Liabilities”) for automobiles, office buildings, IT equipment, and small storage units for the temporary storage of operational equipment. The Company’s leases have remaining lease terms ranging from less than 1 year to 7 years, and have extension options ranging from 1 year to 5 years. Most leases include the option to terminate the lease within 1 year.

Upon adopting ASC 842, the Company made accounting policy elections using practical expedients offered under the guidance to combine lease and non-lease components within leasing arrangements and to recognize the payments associated with short-term leases in earnings on a straight-line basis over the lease term, with the cost associated with variable lease payments recognized when incurred. These accounting policy elections impact the value of the Company’s ROU Assets and Lease Liabilities. The value of the Company’s ROU Assets is determined as the non-depreciated fair value of its leasing arrangements and is recorded to “Property and equipment, net” on the Company’s Consolidated Balance Sheets. The value of the Company’s Lease Liabilities is the present value of fixed lease payments not yet paid, discounted using either the rate implicit in the lease contract if that rate can be determined, or the Company’s incremental borrowing rate (“IBR”) and is recorded in “Other accrued expenses” and “Lease liability — long-term portion” on the Company’s Consolidated Balance Sheets. The Company’s IBR is determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

Any future lease payments that are not fixed based on the terms of the lease contract, or fluctuate based on a factor other than an index or rate, are considered variable lease payments and are not included in the value of the Company’s ROU Assets or Lease Liabilities. The Company's variable lease payments are mostly incurred from automobile leases and relate to miscellaneous transportation costs including repair costs, insurance, and terminal rental adjustments payments due at lease settlement. Such rental adjustment payments can result in a reduction to the Company's total variable lease payments.

Components of lease expense required by ASC 842 are presented below for the three and nine months ended September 30, 2022 and 2021.


	Three Months Ended September 30,
	2022		2021
	(in thousands)
Lease cost
Operating lease cost	$	1,449	$	1,629
Short-term lease cost	283		122
Variable lease cost	230		73
Total lease cost	$	1,962	$	1,824


	Nine Months Ended September 30,
	2022		2021
	(in thousands)
Lease cost
Operating lease cost	$	4,364	$	4,547
Short-term lease cost	863		558
Variable lease cost	557		(458)
Total lease cost	$	5,784	$	4,647

Supplemental information required by ASC 842 is presented below for the nine months ended September 30, 2022 and 2021.


	Nine Months Ended September 30,
	2022			2021
	(dollar amounts in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,853		$	4,902
Weighted-average remaining lease term — operating leases	4.2 years			4.8 years
Weighted-average discount rate — operating leases	4.3		%	4.2		%

During the three and nine months ended September 30, 2022, the Company’s ROU Assets and Lease Liabilities were reduced by $0.3 million and $1.6 million, respectively, due to lease cancellations. During the three and nine months ended September 30, 2021, the Company's ROU Assets and Lease Liabilities were reduced by $0.3 million and $0.6 million, respectively, due to lease cancellations.

The following is a schedule by calendar year of future minimum lease payments under operating leases that have remaining terms as of September 30, 2022:


Period/Year	Operating Leases
	(in thousands)
October 1 to December 31, 2022	$	1,511
2023	5,107
2024	3,323
2025	1,461
2026	1,337
2027	1,363
Thereafter	1,505
Total minimum lease payments	$	15,607
Less: imputed lease payments	1,417
Present value of lease liabilities	$	14,190