Operating and Finance Lease Right-of-Use Assets

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Operating and Finance Lease Right-of-Use Assets

NOTE 8. OPERATING AND FINANCE LEASE RIGHT-OF-USE ASSETS

Leases

We account for leases in accordance with ASC 842, “Leases” that requires lessees to recognize Right of Use (“ROU”) assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows.

Leasing Transactions

Our leased assets include offices and studios, transmitter locations, antenna sites, towers, tower sites, and land. Our lease portfolio has terms remaining from less than one-year up to twenty years. Many of these leases contain options under which we can extend the term from five to twenty years, the exercise of which is at our sole discretion. Renewal options are excluded from our calculation of lease liabilities unless we are reasonably assured to exercise the renewal option. Our lease agreements do not contain residual value guarantees or material restrictive covenants. We lease certain properties from our principal stockholders or from trusts and partnerships created for the benefit of the principal stockholders and their families. These leases are designated as Related Party leases in the details provided. We are obligated to pay taxes, insurance and common area maintenance charges under a majority of our lease agreements.

Operating leases are reflected on our balance sheet within operating lease ROU assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Operating lease ROU assets and liabilities are recognized at the commencement date, or the date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the lease terms. Variable lease costs, such as common area maintenance, property taxes and insurance, are expensed as incurred.

Due to the adverse economic impact of the COVID-19 pandemic, we began negotiating with landlords in April 2020 to obtain rent concessions in order to improve short-term liquidity. We withheld portions of and/or delayed payments to landlords as we negotiated terms. Total payments withheld at June 30, 2020 were approximately $0.6 million and are included in current lease liabilities. Additional negotiations of payment terms are still in process.

In some instances, the renegotiations have led to agreements with landlords for rent abatements or rental deferrals. In accordance with the FASB’s recent Staff Q&A regarding rent concessions related to the effects of the COVID-19 pandemic, we will not apply the lease modification guidance under ASC 842 to rent concessions that result in the total payments required under the modified contract that are substantially the same as or less than total payments required by the original contract. If other terms of the lease are changed or renegotiated in connection with the concession process, then the changes will be treated as a modification in accordance with ASC 842.

For qualifying rent abatement concessions, we recorded negative lease expense for abatement during the period of relief. During the three months ended June 30, 2020, we recognized negative lease expense related to rent abatement concessions of $0.1 million. Additionally, we deferred cash payments of $0.3 million at June 30, 2020 that are included in short term and long-term operating lease liabilities as applicable based on repayment terms that range from August 2020 through December 2024.

Balance Sheet

Supplemental balance sheet information related to leases is as follows:

	June 30, 2020
	(Dollars in thousands)
Operating Leases	Related Party		Other		Total
Operating leases ROU assets	$	7,449	$	44,450	$	51,899
Operating lease liabilities (current)	$	1,026	$	8,562	$	9,588
Operating lease liabilities (non-current)		6,680		44,676		51,356
Total operating lease liabilities	$	7,706	$	53,238	$	60,944

Weighted Average Remaining Lease Term
Operating leases	8.5 years
Finance leases	3.0 years
Weighted Average Discount Rate
Operating leases	7.74	%
Finance leases	4.59	%

Lease Expense

The components of lease expense were as follows:

	Six Months Ended June 30, 2020
	(Dollars in thousands)
Amortization of finance lease ROU Assets	$	36
Interest on finance lease liabilities		4
Finance lease expense		40
Operating lease expense		7,402
Variable lease expense		400
Short-term lease expense		309
Total lease expense	$	8,151

Supplemental Cash Flow

Supplemental cash flow information related to leases was as follows:

	Six Months Ended June 30, 2020
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,354
Operating cash flows from finance leases		3
Financing cash flows from finance leases		35
Leased assets obtained in exchange for new operating lease liabilities		2,080
Leased assets obtained in exchange for new finance lease liabilities		—

Maturities

Future minimum lease payments under leases that had initial or remaining non-cancelable lease terms in excess of one year as of June 30, 2020, are as follows:

	Related Parties			Other Operating Leases			Total Operating Leases			Finance Leases			Total
	(Dollars in thousands)
2021	$	1,617		$	11,998		$	13,615		$	65		$	13,680
2022		1,610			11,194			12,804			49			12,853
2023		1,470			10,107			11,577			39			11,616
2024		1,017			8,036			9,053			14			9,067
2025		1,021			6,149			7,170			2			7,172
Thereafter		4,582			28,477			33,059			0			33,059
Undiscounted Cash Flows	$	11,317		$	75,961		$	87,278		$	169		$	87,447
Less: imputed interest		(3,611	)		(22,723	)		(26,334	)		(10	)		(26,344	)
Total	$	7,706		$	53,238		$	60,944		$	159		$	61,103
Reconciliation to lease liabilities:
Lease liabilities - current	$	1,026		$	8,562		$	9,588		$	61		$	9,649
Lease liabilities - long-term		6,680			44,676			51,356			98			51,454
Total Lease Liabilities	$	7,706		$	53,238		$	60,944		$	159		$	61,103