Leases

9 Months Ended

Sep. 30, 2021

The Company leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031. Office and equipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years. Some of the Company’s leases include options to terminate within one year.

For the first nine months of 2021, the Company recorded impairments of $9.4 million on its operating lease right of use assets primarily related to exiting certain lease space as the Company regularly evaluates its office space requirements in light more of its workforce working from home as part of a permanent “remote” or “partial remote” work model. During the third quarter of 2020, the Company had also decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily also due to work from home models. The Company recorded a non-cash impairment charge of $9.8 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $3.6 million for associated property and equipment. The impairments were determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment. The fair value of the right-of-use asset was based on the estimated sublease income for the affected facilities taking into consideration the time it will take to obtain a sublease tenant, the applicable discount rate and the sublease rate which represent Level 3 unobservable inputs. The impairments are presented in general and administrative expenses on the Condensed Consolidated Statements of Operations.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

Finance leases are not material to the Company’s Condensed Consolidated Financial Statements and are therefore not included in the disclosures below.

The components of lease expense were as follows (in thousands):


	Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020		2021		2020

Operating lease cost		$	6,173	$	16,888	$	23,976	$	33,106
Short-term lease cost		712		264		2,653		1,357
Total lease cost		$	6,885	$	17,152	$	26,629	$	34,463

Supplemental balance sheet information related to leases was as follows (in thousands):


	September 30, 2021		December 31, 2020
Operating leases
Operating lease right-of-use assets	$	88,331	$	105,845
Total operating lease right-of-use assets	$	88,331	$	105,845

Operating lease liabilities, current	$	31,636	$	32,211
Operating lease liabilities, noncurrent	84,519		99,177

Total operating lease liabilities	$	116,155	$	131,388

Supplemental cash flow information related to leases was as follows (in thousands):


	Nine Months Ended September 30,
	2021		2020

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	21,869	$	21,764
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	9,274	$	7,968

Other supplemental operating lease information consists of the following:


	September 30, 2021		December 31, 2020

Operating leases:
Weighted average remaining lease term	5.1 years		5.2 years
Weighted average discount rate	3.83	%	3.93	%

Maturities of operating lease liabilities as of September 30, 2021 were as follows (in thousands):


	Operating Leases
Fiscal Year:
2021 (remainder)	$	8,507
2022	31,926
2023	26,494
2024	18,840
2025	10,496
Thereafter	35,250
Total lease payments	$	131,513
Less: Imputed interest	15,358
Present value of operating lease liabilities	$	116,155

Total sublease income for the three months ended September 30, 2021 and 2020 was $0.5 million and $0.4 million, respectively, and was $1.4 million and $2.2 million for the nine months ended September 30, 2021 and 2020, respectively. Total estimated aggregate sublease income to be received in the future is $5.2 million.

For the first nine months of 2020, the Company recorded $2.1 million associated with its sublease tenants in default as a result of the economic effects of COVID-19. The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.

Significant Judgments

Discount Rate

The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable. Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

Options

The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Practical Expedients

As a practical expedient, the Company has not separated lease components from nonlease components for its real property operating leases. Certain of the Company’s leases contain nonlease components such as maintenance and certain utility costs.

In addition, the Company elected and applied the available transition practical expedients upon adoption. By electing these practical expedients, the Company did:

•not reassess whether expired or existing contracts contain leases under the new definition of a lease;

•not reassess lease classification for expired or existing leases; and

•not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.