Note D - Leases

9 Months Ended

Sep. 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 September 30, 2023, assets recorded under finance and operating leases were approximately $0.5 million and $16.3 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 nine months ended September 30, 2023 and 2022. 

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

In thousands	As of September 30, 2023
	Operating Leases		Finance Leases		Total
Right-of-use Assets	$	16,289	$	484	$	16,773
Liabilities
Current portion of lease liabilities		5,388		58		5,446
Long-term lease liabilities		13,538		15		13,553
Total Lease Liabilities	$	18,926	$	73	$	18,999

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 nine months ended September 30, 2023 and 2022, the components of lease expense were as follows:

In thousands	Three Months Ended September 30, 2023			Three Months Ended September 30, 2022
Operating lease cost	$	1,338		$	1,393
Finance lease cost:
Amortization of right-of-use assets		35			39
Interest on lease liabilities		2			4
Total Finance lease cost		37			43
Variable lease cost		537			433
Sublease income		(177	)		(128	)
Total lease cost, net	$	1,735		$	1,741

In thousands	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
Operating lease cost	$	4,160		$	4,393
Finance lease cost:
Amortization of right-of-use assets		115			126
Interest on lease liabilities		6			13
Total Finance lease cost		121			139
Variable lease cost		1,525			1,419
Sublease income		(676	)		(539	)
Total lease cost, net	$	5,130		$	5,412

Other information related to leases was as follows:

In thousands	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,525		$	10,995
Operating cash flows from finance leases		6			12
Financing cash flows from finance leases		144			148
Weighted Average Remaining Lease term
Operating leases		5.6			6.3
Finance leases		1.3			1.6
Weighted Average Discount Rate
Operating leases		3.56	%		3.39	%
Finance leases		7.04	%		5.60	%

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

In thousands	Operating Leases (1)		Finance Leases
Year Ending December 31,
Remainder of 2023	$	1,600	$	18
2024		5,286		50
2025		2,873		8
2026		2,373		—
2027		2,291		—
2027 and beyond		6,217		—
Total future minimum lease payments		20,640		76
Less: imputed interest		1,714		3
Total lease liabilities	$	18,926	$	73

(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 $0.2 million and $0.4 million, respectively, are not included in the table above.