Note D - Leases

6 Months Ended

Jun. 30, 2023

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 (short-term lease). Our leases have remaining lease terms of one to eight years, some of which may include options to extend the leases for up to an additional five years.

We subleased our Fullerton (CA), Jacksonville (FL) and Uxbridge (UK) facilities.  The lease and sublease for Fullerton (CA) facility expired in April 2023,  the lease and sublease for Uxbridge (UK) facility will expire in October 2023 and the lease and sublease for Jacksonville (FL) facility will expire at the end of July 2024.  

As of June 30, 2023, assets recorded under finance and operating leases were approximately $0.5 million and $17.5 million, respectively, and accumulated amortization associated with finance leases was $1.0 million. As of December 31, 2022, assets recorded under finance and operating leases were approximately $0.6 million and $18.6 million, respectively, and accumulated amortization associated with finance leases was $1.0 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, we utilize 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, 2023 and 2022. 

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

In thousands	As of June 30, 2023
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	17,491	$	520	$	18,011
Liabilities
Current portion of lease liabilities		5,810		93		5,903
Long-term lease liabilities		14,602		29		14,631
Total Lease Liabilities	$	20,412	$	122	$	20,534

In thousands	As of December 31, 2022
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	18,574	$	595	$	19,169
Liabilities
Short-term lease liabilities		5,587		160		5,747
Long-term lease liabilities		16,523		52		16,575
Total Lease Liabilities	$	22,110	$	212	$	22,322

For the three and six months ended June 30, 2023 and 2022, the components of lease expense were as follows:

In thousands	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022
Operating lease cost	$	1,366		$	1,419
Finance lease cost:
Amortization of right-of-use assets		40			41
Interest on lease liabilities		2			4
Total Finance lease cost		42			45
Variable lease cost		486			447
Sublease income		(213	)		(160	)
Total lease cost, net	$	1,681		$	1,751

In thousands	Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
Operating lease cost	$	2,822		$	3,000
Finance lease cost:
Amortization of right-of-use assets		80			87
Interest on lease liabilities		4			9
Total Finance lease cost		84			96
Variable lease cost		988			986
Sublease income		(499	)		(411	)
Total lease cost, net	$	3,395		$	3,671

Other information related to leases was as follows:

In thousands	Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,453		$	7,097
Operating cash flows from finance leases		4			8
Financing cash flows from finance leases		95			101
Weighted Average Remaining Lease term
Operating leases		5.6			6.2
Finance leases		1.2			1.8
Weighted Average Discount Rate
Operating leases		3.63	%		3.40	%
Finance leases		6.21	%		5.53	%

The maturities of the Company’s finance and operating lease liabilities as of June 30, 2023 are as follows: 

In thousands	Operating Leases (1)		Finance Leases
Year Ending December 31,
Remainder of 2023	$	3,228	$	68
2024		5,297		50
2025		2,885		8
2026		2,374		1
2027		2,291		—
2027 and beyond		6,229		—
Total future minimum lease payments		22,304		127
Less: imputed interest		1,892		5
Total lease liabilities	$	20,412	$	122

(1) Non-cancelable sublease proceeds for the remainder of the fiscal year ending December 31, 2023 and the fiscal year ending December 31, 2024 of $0.3 million and $0.4 million, respectively, are not included in the table above.