Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

The Company adopted ASC 842 on January 1, 2019. ASC 842 requires the recognition of lease assets and lease liabilities for leases classified as operating leases. The original guidance required application of ASC 842 on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date as the date of initial application of transition. The Company elected not to restate comparative periods and, accordingly, the financial results reported for periods prior to January 1, 2019 have not been restated. In ASC 842, a lease is defined as follows: “[a] contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.”

Upon adoption, the Company recognized all leases greater than one year in duration on the balance sheet as right-of-use assets and lease liabilities. The Company made certain assumptions and judgments when applying ASC 842. The Company elected practical expedients available for the transition, such as whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases, and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. For all asset classes, the Company elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

Many of our lease agreements contain renewal options which are recognized if it is determined that the Company is reasonably certain to renew the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions. The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement and amortize such expense over the term of the lease beginning with the commencement date. Variable lease components that are not fixed at the beginning of the lease are recognized as incurred.

Under certain third-party service agreements, the Company controls a specific space or underlying asset used in providing the service by the third-party service provider. These arrangements meet the definition under ASC 842 and therefore are accounted for under ASC 842. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when reasonably certain to be exercised. The present value of lease payments is determined using the incremental borrowing rate based on the information available at the lease commencement date.

Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations for the three and nine months ended September 30, 2019 was $1,264 and $3,796, respectively. The future minimum lease payments under our operating leases as of September 30, 2019 are:

Remainder of 2019	$	1,265
2020	2,958
2021	1,265
2022	1,183
2023	376
2024 and thereafter	529
Total minimum lease payments	$	7,576
Less amount representing interest	$	(604	)
Present value of net minimum operating lease payments	$	6,972
Less current installments of obligation under current-operating lease liabilities	$	3,584
Obligations under long-term operating lease liabilities, excluding current installments	$	3,388
Weighted-average remaining lease term - operating leases (years)	2.89
Weighted-average discount rate - operating leases	5.50		%

During the first quarter of 2018, the Company entered into a five-year financing lease for three satellite hubs for its HTS network. As of September 30, 2019, the gross costs and accumulated depreciation associated with this lease are included in revenue generating assets and amounted to $3,068 and $736, respectively. Obligations under financing leases are stated at the present value of minimum lease payments.

The property and equipment held under this financing lease are amortized on a straight‑line basis over the seven-year estimated useful life of the asset, since the lease meets the bargain purchase option criteria. Amortization of assets held under financing leases is included within depreciation expense. Depreciation expense for these capital assets was $110 and $110 for the three months ended September 30, 2019 and 2018, respectively, and $329 and $298 for the nine months ended September 30, 2019 and 2018, respectively.

The future minimum lease payments under this financing lease as of September 30, 2019 are:

Remainder of 2019	$	156
2020	624
2021	624
2022	624
2023	45
2024 and thereafter	—
Total minimum lease payments	$	2,073
Less amount representing interest	$	(23	)
Present value of net minimum financing lease payments	$	2,050
Less current installments of obligation under accrued other	$	612
Obligations under other long-term liabilities, excluding current installments	$	1,438
Weighted-average remaining lease term - finance leases (years)	3.42
Weighted-average discount rate - finance leases	1.53		%

Lessor

The Company enters into leases with certain customers primarily of the TracPhone VSAT systems. These leases are classified as sales-type leases as title of the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,862 as of September 30, 2019 and the non-current portion of the net investment in these leases was $5,970 as of September 30, 2019. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $177 and $508 during the three and nine months ended September 30, 2019, respectively.

The future undiscounted cash flows from these leases as of September 30, 2019 are:

Remainder of 2019	$	1,550
2020	3,815
2021	2,783
2022	1,661
2023	1,059
2024	261
Total undiscounted cash flows	$	11,129
Present value of lease payments	$	9,832
Difference between undiscounted cash flows and discounted cash flows	$	1,297

Leases

Leases

The Company adopted ASC 842 on January 1, 2019. ASC 842 requires the recognition of lease assets and lease liabilities for leases classified as operating leases. The original guidance required application of ASC 842 on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date as the date of initial application of transition. The Company elected not to restate comparative periods and, accordingly, the financial results reported for periods prior to January 1, 2019 have not been restated. In ASC 842, a lease is defined as follows: “[a] contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.”

Upon adoption, the Company recognized all leases greater than one year in duration on the balance sheet as right-of-use assets and lease liabilities. The Company made certain assumptions and judgments when applying ASC 842. The Company elected practical expedients available for the transition, such as whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases, and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. For all asset classes, the Company elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

Many of our lease agreements contain renewal options which are recognized if it is determined that the Company is reasonably certain to renew the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions. The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement and amortize such expense over the term of the lease beginning with the commencement date. Variable lease components that are not fixed at the beginning of the lease are recognized as incurred.

Under certain third-party service agreements, the Company controls a specific space or underlying asset used in providing the service by the third-party service provider. These arrangements meet the definition under ASC 842 and therefore are accounted for under ASC 842. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when reasonably certain to be exercised. The present value of lease payments is determined using the incremental borrowing rate based on the information available at the lease commencement date.

Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations for the three and nine months ended September 30, 2019 was $1,264 and $3,796, respectively. The future minimum lease payments under our operating leases as of September 30, 2019 are:

Remainder of 2019	$	1,265
2020	2,958
2021	1,265
2022	1,183
2023	376
2024 and thereafter	529
Total minimum lease payments	$	7,576
Less amount representing interest	$	(604	)
Present value of net minimum operating lease payments	$	6,972
Less current installments of obligation under current-operating lease liabilities	$	3,584
Obligations under long-term operating lease liabilities, excluding current installments	$	3,388
Weighted-average remaining lease term - operating leases (years)	2.89
Weighted-average discount rate - operating leases	5.50		%

During the first quarter of 2018, the Company entered into a five-year financing lease for three satellite hubs for its HTS network. As of September 30, 2019, the gross costs and accumulated depreciation associated with this lease are included in revenue generating assets and amounted to $3,068 and $736, respectively. Obligations under financing leases are stated at the present value of minimum lease payments.

The property and equipment held under this financing lease are amortized on a straight‑line basis over the seven-year estimated useful life of the asset, since the lease meets the bargain purchase option criteria. Amortization of assets held under financing leases is included within depreciation expense. Depreciation expense for these capital assets was $110 and $110 for the three months ended September 30, 2019 and 2018, respectively, and $329 and $298 for the nine months ended September 30, 2019 and 2018, respectively.

The future minimum lease payments under this financing lease as of September 30, 2019 are:

Remainder of 2019	$	156
2020	624
2021	624
2022	624
2023	45
2024 and thereafter	—
Total minimum lease payments	$	2,073
Less amount representing interest	$	(23	)
Present value of net minimum financing lease payments	$	2,050
Less current installments of obligation under accrued other	$	612
Obligations under other long-term liabilities, excluding current installments	$	1,438
Weighted-average remaining lease term - finance leases (years)	3.42
Weighted-average discount rate - finance leases	1.53		%

Lessor

The Company enters into leases with certain customers primarily of the TracPhone VSAT systems. These leases are classified as sales-type leases as title of the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,862 as of September 30, 2019 and the non-current portion of the net investment in these leases was $5,970 as of September 30, 2019. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $177 and $508 during the three and nine months ended September 30, 2019, respectively.

The future undiscounted cash flows from these leases as of September 30, 2019 are:

Remainder of 2019	$	1,550
2020	3,815
2021	2,783
2022	1,661
2023	1,059
2024	261
Total undiscounted cash flows	$	11,129
Present value of lease payments	$	9,832
Difference between undiscounted cash flows and discounted cash flows	$	1,297

Leases

Leases

The Company adopted ASC 842 on January 1, 2019. ASC 842 requires the recognition of lease assets and lease liabilities for leases classified as operating leases. The original guidance required application of ASC 842 on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which included an option to not restate comparative periods in transition and elect to use the effective date as the date of initial application of transition. The Company elected not to restate comparative periods and, accordingly, the financial results reported for periods prior to January 1, 2019 have not been restated. In ASC 842, a lease is defined as follows: “[a] contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.”

Upon adoption, the Company recognized all leases greater than one year in duration on the balance sheet as right-of-use assets and lease liabilities. The Company made certain assumptions and judgments when applying ASC 842. The Company elected practical expedients available for the transition, such as whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases, and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. For all asset classes, the Company elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

Many of our lease agreements contain renewal options which are recognized if it is determined that the Company is reasonably certain to renew the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions. The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement and amortize such expense over the term of the lease beginning with the commencement date. Variable lease components that are not fixed at the beginning of the lease are recognized as incurred.

Under certain third-party service agreements, the Company controls a specific space or underlying asset used in providing the service by the third-party service provider. These arrangements meet the definition under ASC 842 and therefore are accounted for under ASC 842. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when reasonably certain to be exercised. The present value of lease payments is determined using the incremental borrowing rate based on the information available at the lease commencement date.

Lessee

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment. Lease expense from continuing operations for the three and nine months ended September 30, 2019 was $1,264 and $3,796, respectively. The future minimum lease payments under our operating leases as of September 30, 2019 are:

Remainder of 2019	$	1,265
2020	2,958
2021	1,265
2022	1,183
2023	376
2024 and thereafter	529
Total minimum lease payments	$	7,576
Less amount representing interest	$	(604	)
Present value of net minimum operating lease payments	$	6,972
Less current installments of obligation under current-operating lease liabilities	$	3,584
Obligations under long-term operating lease liabilities, excluding current installments	$	3,388
Weighted-average remaining lease term - operating leases (years)	2.89
Weighted-average discount rate - operating leases	5.50		%

During the first quarter of 2018, the Company entered into a five-year financing lease for three satellite hubs for its HTS network. As of September 30, 2019, the gross costs and accumulated depreciation associated with this lease are included in revenue generating assets and amounted to $3,068 and $736, respectively. Obligations under financing leases are stated at the present value of minimum lease payments.

The property and equipment held under this financing lease are amortized on a straight‑line basis over the seven-year estimated useful life of the asset, since the lease meets the bargain purchase option criteria. Amortization of assets held under financing leases is included within depreciation expense. Depreciation expense for these capital assets was $110 and $110 for the three months ended September 30, 2019 and 2018, respectively, and $329 and $298 for the nine months ended September 30, 2019 and 2018, respectively.

The future minimum lease payments under this financing lease as of September 30, 2019 are:

Remainder of 2019	$	156
2020	624
2021	624
2022	624
2023	45
2024 and thereafter	—
Total minimum lease payments	$	2,073
Less amount representing interest	$	(23	)
Present value of net minimum financing lease payments	$	2,050
Less current installments of obligation under accrued other	$	612
Obligations under other long-term liabilities, excluding current installments	$	1,438
Weighted-average remaining lease term - finance leases (years)	3.42
Weighted-average discount rate - finance leases	1.53		%

Lessor

The Company enters into leases with certain customers primarily of the TracPhone VSAT systems. These leases are classified as sales-type leases as title of the equipment transfers to the customer at the end of the lease term. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the net present value of all payments under these leases as revenue, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three to five years) using an implicit interest rate. The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $3,862 as of September 30, 2019 and the non-current portion of the net investment in these leases was $5,970 as of September 30, 2019. The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets. Interest income from sales-type leases was $177 and $508 during the three and nine months ended September 30, 2019, respectively.

The future undiscounted cash flows from these leases as of September 30, 2019 are:

Remainder of 2019	$	1,550
2020	3,815
2021	2,783
2022	1,661
2023	1,059
2024	261
Total undiscounted cash flows	$	11,129
Present value of lease payments	$	9,832
Difference between undiscounted cash flows and discounted cash flows	$	1,297