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Note D - Leases

9 Months Ended

Sep. 30, 2022

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 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 2024.

As of September 30, 2022, assets recorded under finance and operating leases were approximately $0.6 million and $17.2 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 nine months ended September 30, 2022. During the nine months ended September 30, 2021, we recorded an impairment on two leases for the facilities we no longer occupied. The impairment charges are included in our restructuring expenses for the three and nine months ended September 30, 2021. Please refer to Note N, Restructuring Charges for further details.

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

In thousands	*As of September 30, 2022*
	Operating Leases		Finance Leases		*Total*
Right-of-use Assets	$	17,164	$	632	$	17,796

Liabilities
Current portion of lease liabilities		4,982		189		5,171
Long-term lease liabilities		15,865		69		15,934
Total Lease Liabilities	$	20,847	$	258	$	21,105

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 nine months ended September 30, 2022 and 2021, the components of lease expense were as follows:

In thousands	*Three Months Ended September 30, 2022*			*Three Months Ended September 30, 2021*
Operating lease cost	$	1,393		$	1,853

Finance lease cost:
Amortization of right-of-use assets		39			49
Interest on lease liabilities		4			6
Total Finance lease cost		43			55
Variable lease cost		433			577
Sublease income		(128	)		(117	)
Total lease cost, net	$	1,741		$	2,368

In thousands	*Nine Months Ended September 30, 2022*			*Nine Months Ended September 30, 2021*
Operating lease cost	$	4,393		$	5,885

Finance lease cost:
Amortization of right-of-use assets		126			147
Interest on lease liabilities		13			21
Total Finance lease cost		139			168
Variable lease cost		1,419			2,131
Sublease income		(539	)		(475	)
Total lease cost, net	$	5,412		$	7,709

Other information related to leases was as follows:

In thousands	*Nine Months Ended September 30, 2022*			*Nine Months Ended September 30, 2021*
Supplemental Cash Flows Information

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,995		$	11,179
Operating cash flows from finance leases		12			19
Financing cash flows from finance leases		148			169

Weighted Average Remaining Lease term
Operating leases		6.3			5.8
Finance leases		1.6			2.3

Weighted Average Discount Rate
Operating leases		3.39	%		3.50	%
Finance leases		5.60	%		5.36	%

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

In thousands	*Operating Leases (1)*		*Finance Leases*
Year Ending December 31,
Remainder of 2022	$	1,462	$	50
2023		5,259		166
2024		3,836		48
2025		2,116		6
2026		2,014		—
2027 and beyond		8,225		—
Total future minimum lease payments		22,912		270
Less: imputed interest		2,065		12
Total lease liabilities	$	20,847	$	258

(1) Non-cancelable sublease proceeds for the remainder of the fiscal year ending December 31, 2022 and the fiscal year ending December 31, 2023 and 2024 of $0.8 million, $0.9 million and $0.4 million, respectively, are not included in the table above.