Leases

3 Months Ended

Mar. 31, 2023

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 6 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 months ended March 31, 2023 and 2022.


	Three Months Ended March 31,
	2023		2022
	(in thousands)
Lease cost
Operating lease cost	$	1,387	$	1,386
Short-term lease cost	232		355
Variable lease cost	450		82
Total lease cost	$	2,069	$	1,823

Supplemental information required by ASC 842 is presented below for the three months ended March 31, 2023 and 2022.


	Three Months Ended March 31,
	2023			2022
	(dollar amounts in thousands)
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,514		$	1,711
Weighted-average remaining lease term — operating leases	4.0 years			4.4 years
Weighted-average discount rate — operating leases	5.1		%	4.2		%

During the three months ended March 31, 2023 and 2022, the Company’s ROU Assets and Lease Liabilities were reduced by $0.7 million and $0.9 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 March 31, 2023:


Period/Year	Operating Leases
	(in thousands)
April 1 to December 31, 2023	$	4,169
2024	4,308
2025	2,675
2026	1,539
2027	1,365
2028	1,389
Thereafter	116
Total minimum lease payments	$	15,561
Less: imputed lease payments	1,507
Present value of lease liabilities	$	14,054