Note D - Leases

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note D - Leases

We have operating and finance leases for corporate and business offices, service facilities, call centers and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that we are reasonably certain to exercise. Our leases have remaining lease terms of one year to nine years, some of which include options to extend the leases for up to an additional five years.

We sublease our Fullerton (CA), Jacksonville (FL) and Uxbridge (UK) facilities.  The leases and subleases for these three facilities expire at various dates, the latest being during fiscal year 2023.  

As of June 30, 2022, assets recorded under finance and operating leases were approximately $0.7 million and $18.3 million respectively, and accumulated depreciation associated with finance leases was $0.8 million. As of December 31, 2021, assets recorded under finance and operating leases were approximately $0.8 million and $21.4 million respectively, and accumulated depreciation associated with finance leases was $0.7 million.  Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to determine the commencement date present value of lease payment is the interest rate implicit in the lease, or when that is not readily determinable, our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Since none of our leases has a readily determinable implicit interest rate, we use our incremental borrowing rate under our Texas Capital Bank Revolver Facility as the discount rate.  Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

There was no impairment of leases during the three and six months ended June 30, 2022. 

The following table presents supplemental balance sheet information related to our financing and operating leases:

In thousands	As of June 30, 2022
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	18,309	$	673	$	18,982
Liabilities
Current portion of lease liabilities		5,119		188		5,307
Long-term lease liabilities		16,477		117		16,594
Total Lease Liabilities	$	21,596	$	305	$	21,901

In thousands	As of December 31, 2021
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	21,382	$	760	$	22,142
Liabilities
Short-term lease liabilities		6,359		194		6,553
Long-term lease liabilities		19,004		211		19,215
Total Lease Liabilities	$	25,363	$	405	$	25,768

For the three and six months ended June 30, 2022 and 2021, the components of lease expense were as follows:

In thousands	Three Months Ended June 30, 2022			Three Months Ended June 30, 2021
Operating lease cost	$	1,419		$	1,913
Finance lease cost:
Amortization of right-of-use assets		41			49
Interest on lease liabilities		4			8
Total Finance lease cost		45			57
Variable lease cost		447			634
Sublease income		(160	)		(169	)
Total lease cost, net	$	1,751		$	2,435

In thousands	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
Operating lease cost	$	3,000		$	4,032
Finance lease cost:
Amortization of right-of-use assets		87			98
Interest on lease liabilities		9			15
Total Finance lease cost		96			113
Variable lease cost		986			1,554
Sublease income		(411	)		(358	)
Total lease cost, net	$	3,671		$	5,341

Other information related to leases was as follows:

In thousands	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,097		$	7,637
Operating cash flows from finance leases		8			13
Financing cash flows from finance leases		101			112
Weighted Average Remaining Lease term
Operating leases		6.2			5.8
Finance leases		1.8			2.5
Weighted Average Discount Rate
Operating leases		3.40	%		3.53	%
Finance leases		5.53	%		5.33	%

The maturities of the Company’s finance and operating lease liabilities as of June 30, 2022 are as follows: 

In thousands	Operating Leases (1)		Finance Leases
Year Ending December 31,
Remainder of 2022	$	2,437	$	100
2023		5,222		166
2024		3,820		48
2025		2,117		6
2026		2,014		—
2027		8,229		—
Total future minimum lease payments		23,839		320
Less: imputed interest		2,243		15
Total lease liabilities	$	21,596	$	305

(1) Non-cancelable sublease proceeds for the remainder of the fiscal year ending December 31, 2022 and the fiscal year ending December 31, 2023 of $0.6 million and $0.2 million, respectively, are not included in the table above.