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Note D - Leases

6 Months Ended

Jun. 30, 2021

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 leases). Our leases have remaining lease terms of one year to six years, some of which include options to extend the leases for up to an additional five years, and some of which include options to terminate the leases within one year.

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 fiscal year 2023.

As of June 30, 2021, assets recorded under finance and operating leases were approximately $0.9 million and $21.7 million respectively, and accumulated depreciation associated with finance leases was $0.6 million. As of December 31, 2020, assets recorded under finance and operating leases were approximately $1.0 million and $23.8 million respectively, and accumulated depreciation associated with finance leases was $0.5 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 readily determinable implicit interest rates, we use our incremental borrowing rate 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.

During the three months ended March 31, 2021, we impaired a lease for a facility we were vacating. The resulting impairment charge is included in our restructuring expenses for the six months ended June 30, 2021.

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

In thousands	*As of June 30, 2021*
	Operating Leases		Finance Leases		*Total*
Right-of-use Assets	$	21,707	$	859	$	22,566

Liabilities
Short-term lease liabilities		6,653		217		6,870
Long-term lease liabilities		18,783		302		19,085
Total Lease Liabilities	$	25,436	$	519	$	25,955

In thousands	*As of December 31, 2020*
	Operating Leases		Finance Leases		*Total*
Right-of-use Assets	$	23,793	$	957	$	24,750

Liabilities
Short-term lease liabilities		6,436		227		6,663
Long-term lease liabilities		20,892		403		21,295
Total Lease Liabilities	$	27,328	$	630	$	27,958

For the three and six months ended June 30, 2021 and 2020, the components of lease expense were as follows:

In thousands	*Three Months Ended June 30, 2021*			*Three Months Ended June 30, 2020*
Operating lease cost	$	1,913		$	2,119

Finance lease cost:
Amortization of right-of-use assets		49			65
Interest on lease liabilities		8			13
Total Finance lease cost		57			78
Variable lease cost		634			722
Sublease income		(169	)		—
Total lease cost, net	$	2,435		$	2,919

In thousands	*Six Months Ended June 30, 2021*			*Six Months Ended June 30, 2020*
Operating lease cost	$	4,032		$	4,484

Finance lease cost:
Amortization of right-of-use assets		98			132
Interest on lease liabilities		15			27
Total Finance lease cost		113			159
Variable lease cost		1,554			1,642
Sublease income		(358	)		—
Total lease cost, net	$	5,341		$	6,285

Other information related to leases was as follows:

In thousands	*Six Months Ended June 30, 2021*			*Six Months Ended June 30, 2020*
Supplemental Cash Flows Information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,637		$	10,661
Operating cash flows from finance leases		13			23
Financing cash flows from finance leases		112			191

Weighted Average Remaining Lease term
Operating leases		5.8			3.2
Finance leases		2.5			3.0

Weighted Average Discount Rate
Operating leases		3.53	%		4.66	%
Finance leases		5.33	%		6.34	%

The maturities of the Company’s finance and operating lease liabilities as of June 30, 2021 are as follows:

In thousands	*Operating Leases (1)*		*Finance Leases*
Year Ending December 31,
Remainder of 2021	$	3,893	$	126
2022		6,744		209
2023		4,775		166
2024		3,328		48
2025		1,581		6
2026		7,505		—
Total future minimum lease payments		27,826		555
Less: imputed interest		2,390		36
Total lease liabilities	$	25,436	$	519

(1) Non-cancelable sublease proceeds for the remainder of the fiscal year ending December 31, 2021 and the fiscal years ending December 31, 2022 and 2023 of $378k, $649k, and $236k, respectively, are not included in the table above.