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Finance and Operating Leases
12 Months Ended
Jun. 30, 2021
Finance and Operating Leases  
Finance and Operating Leases

6. Finance and Operating Leases

Finance Leases

The Company is a lessee under finance leases for student computers and peripherals under agreements with PNC Equipment Finance, LLC (“PNC”) and Banc of America Leasing & Capital, LLC (“BALC”). As of June 30, 2021 and 2020, the finance lease liability was $68.9 million and $17.9 million, respectively, with lease interest rates ranging from 1.52% to 3.87%. As of June 30, 2021 and 2020, the balance of the associated right-of-use assets was $49.0 million and $19.8 million, respectively. The right-of-use asset is recorded within property and equipment, net on the consolidated balance sheets. Lease amortization expense associated with the Company’s finance leases is recorded within instructional costs and services on the consolidated statements of operations.

Individual leases under the agreement with PNC include 36-month payment terms at varying rates, with a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases.

The Company entered into an agreement with BALC in April 2020 for $25.0 million (increased to $41.0 million in July 2020) to provide financing for its leases through March 2021 at varying rates. The Company entered into additional agreements during fiscal year 2021 to provide financing of $54.0 million for its student computers and peripherals leases through October 2021 at varying rates. Individual leases with BALC include 12-month and 36-month payment terms,

fixed rates ranging from 1.52% to 2.58%, and a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases.

The following is a summary, as of June 30, 2021 and June 30, 2020, respectively, of the present value of the net minimum lease payments under the Company’s finance leases:

    

Year Ended June 30,

    

2021

2020

(in thousands)

2021

$

$

13,587

2022

28,715

2,653

2023

28,105

2,040

2024

14,303

Total minimum payments

71,123

18,280

Less: imputed interest

(2,219)

(342)

Finance lease liability

68,904

17,938

Less: current portion of finance lease liability

(27,336)

(13,304)

Long-term finance lease liability

$

41,568

$

4,634

Operating Leases

The Company is a lessee under operating leases for various facilities to support the Company’s operations. As of June 30, 2021 and 2020, the operating lease liability was $98.1 million and $117.2 million, respectively. As of June 30, 2021 and 2020 the balance of the associated right-of-use assets was $94.7 million and $111.8 million, respectively. The impact of Galvanize’s adoption of ASC 842 was part of the purchase price accounting which is discussed in more detail in Note 13, “Acquisitions and Investments.” Lease expense associated with the Company’s operating leases is recorded within both instructional costs and services and selling, general, and administrative expenses on the consolidated statements of operations.

Individual operating leases range in terms of 1 to 11 years and expire on various dates through fiscal year 2031 and the minimum lease payments are discounted using the Company’s incremental borrowing rate.

The following is a summary as of June 30, 2021 and June 30, 2020, respectively, of the present value of the minimum lease payments under the Company’s operating leases:

    

    

Year Ended June 30,

    

2021

2020

(in thousands)

2021

$

$

23,626

2022

23,030

22,326

2023

16,204

15,841

2024

15,032

14,769

2025

14,222

13,949

Thereafter

38,679

38,544

Total minimum payments

107,167

129,055

Less: imputed interest

(9,060)

(11,822)

Operating lease liability

98,107

117,233

Less: current portion of operating lease liability

(20,649)

(20,689)

Long-term operating lease liability

$

77,458

$

96,544

The Company is subleasing two of its facilities through May 2022 and one through July 2023. Sublease income is recorded as an offset to the related lease expense within both instructional costs and services and selling, general, and administrative expenses on the consolidated statements of operations. The following is a summary as of June 30, 2021 and June 30, 2020, respectively, of the expected sublease income:

    

    

Year Ended June 30,

    

2021

2020

(in thousands)

2021

$

$

1,960

2022

1,496

1,496

2023

797

797

2024

66

66

Total sublease income

$

2,359

$

4,319

The following is a summary of the Company’s lease cost, weighted-average remaining lease term, weighted-average discount rate and certain other cash flows as it relates to its operating leases for the years ended June 30, 2021 and 2020:

Year Ended June 30, 

2021

  

2020

(in thousands)

Lease cost

Finance lease cost:

Amortization of right-of-use assets

$

28,647

$

16,740

Interest on lease liabilities

1,111

820

Instructional costs and services:

Operating lease cost

15,877

6,902

Short-term lease cost

181

222

Sublease income

(920)

(419)

Selling, general, and administrative expenses:

Operating lease cost

6,681

6,227

Short-term lease cost

970

992

Sublease income

(916)

(760)

Total lease cost

$

51,631

$

30,724

Other information

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$

(21,025)

$

(13,124)

Financing cash flows from finance leases

(24,315)

(27,675)

Right-of-use assets obtained in exchange for new finance lease liabilities

66,861

17,160

Right-of-use assets obtained in exchange for new operating lease liabilities

1,643

6,311

Weighted-average remaining lease term - finance leases

2.52

yrs.

0.79

yrs.

Weighted-average remaining lease term - operating leases

6.58

yrs.

7.15

yrs.

Weighted-average discount rate - finance leases

2.45

%

2.86

%

Weighted-average discount rate - operating leases

2.75

%

2.76

%