XML 24 R14.htm IDEA: XBRL DOCUMENT v3.22.2.2
Leases
 9 Months Ended
Sep. 30, 2022
Leases [Abstract]  
Leases Leases
Lessee

The Company's leases are primarily for multiple office facilities which are contracted under various cancelable and non-cancelable operating leases, most of which provide extension or early termination options. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.

As of September 30, 2022, the weighted average implicit rate was 3.63% and the weighted average remaining lease term was 1.5 years.

The following table summarizes the impact of the Company's leases in its financial statements (in thousands):
Balance SheetFinancial statement captionSeptember 30, 2022December 31, 2021
Right-of-use asset - operatingOther assets$3,101 $5,099 
Lease liability - operatingAccounts payable and other accrued expenses$3,518 $5,790 
Three Months Ended September 30,Nine Months Ended September 30,
Income StatementFinancial statement caption2022202120222021
Operating lease cost(1)
Administrative expenses$797 $829 $2,444 $2,408 
(1)     Includes short-term leases that are immaterial.

Cash paid for amounts of lease liabilities included in operating cash flows was $2.6 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.
Lessor

Operating Leases

As of September 30, 2022, the Company has deferred revenue balances related to operating leases with uneven payment terms. These amounts will be amortized to revenue as follows (in thousands):

Year ending December 31,
2022$16,880 
202370,281 
202472,803 
202562,215 
202639,022 
2027 and thereafter59,744 
Total$320,945 

Finance Leases

The following table summarizes the components of the net investment in finance leases (in thousands):
September 30, 2022December 31, 2021
Future minimum lease payment receivable(1)
$2,259,896 $2,122,165 
Estimated residual receivable(2)
217,795 205,994 
Gross finance lease receivables(3)
2,477,691 2,328,159 
Unearned income(4)
(773,049)(769,869)
Net investment in finance leases(5)
$1,704,642 $1,558,290 
(1)     There were no executory costs included in gross finance lease receivables as of September 30, 2022 and December 31, 2021.
(2)     The Company's finance leases generally include a purchase option at nominal amounts that is reasonably certain to be exercised, and therefore, the Company has immaterial residual value risk for assets.
(3)    The gross finance lease receivable is reduced as billed to customers and reclassified to accounts receivable until paid by customers.
(4)     There were no unamortized initial direct costs as of September 30, 2022 and December 31, 2021.
(5)    One major customer represented 88% and 91% of the Company's finance lease portfolio as of September 30, 2022 and December 31, 2021, respectively. No other customer represented more than 10% of the Company's finance lease portfolio in each of those periods.

The Company’s finance lease portfolio lessees are primarily comprised of the largest international shipping lines. In its estimate of expected credit losses, the Company evaluates the overall credit quality of its finance lease portfolio. The Company considers an account past due when a payment has not been received in accordance with the terms of the related lease agreement and maintains allowances, if necessary, for doubtful accounts. These allowances are based on, but not limited to, historical experience which includes stronger and weaker economic cycles, each lessee's payment history, management's current assessment of each lessee's financial condition, consideration of current economic conditions and reasonable market forecasts.

During the third quarter of 2022, there was a default on certain finance leases in our portfolio for which the full amount is not expected to be recovered, and the Company recognized an impairment charge of $8.1 million which is recorded in the provision for doubtful accounts in the consolidated statements of operations. At the time of default, the net investment in finance lease was re-classified to leasing equipment on the consolidated balance sheet.

The Company has reviewed the remaining finance lease portfolio for expected credit losses considering the factors noted above for each lessee, and based on its assessment as of September 30, 2022, further credit losses are not expected in the portfolio. As of September 30, 2022, the Company does not have an allowance on its gross finance lease receivables and does not have any material past due balances.

Also included in the provision for doubtful accounts is a benefit of $8.2 million related to a recovery in the third quarter of 2022, from the estate of a customer that had defaulted a number of years ago.
Leases Leases
Lessee

The Company's leases are primarily for multiple office facilities which are contracted under various cancelable and non-cancelable operating leases, most of which provide extension or early termination options. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.

As of September 30, 2022, the weighted average implicit rate was 3.63% and the weighted average remaining lease term was 1.5 years.

The following table summarizes the impact of the Company's leases in its financial statements (in thousands):
Balance SheetFinancial statement captionSeptember 30, 2022December 31, 2021
Right-of-use asset - operatingOther assets$3,101 $5,099 
Lease liability - operatingAccounts payable and other accrued expenses$3,518 $5,790 
Three Months Ended September 30,Nine Months Ended September 30,
Income StatementFinancial statement caption2022202120222021
Operating lease cost(1)
Administrative expenses$797 $829 $2,444 $2,408 
(1)     Includes short-term leases that are immaterial.

Cash paid for amounts of lease liabilities included in operating cash flows was $2.6 million and $2.4 million for the nine months ended September 30, 2022 and 2021, respectively.
Lessor

Operating Leases

As of September 30, 2022, the Company has deferred revenue balances related to operating leases with uneven payment terms. These amounts will be amortized to revenue as follows (in thousands):

Year ending December 31,
2022$16,880 
202370,281 
202472,803 
202562,215 
202639,022 
2027 and thereafter59,744 
Total$320,945 

Finance Leases

The following table summarizes the components of the net investment in finance leases (in thousands):
September 30, 2022December 31, 2021
Future minimum lease payment receivable(1)
$2,259,896 $2,122,165 
Estimated residual receivable(2)
217,795 205,994 
Gross finance lease receivables(3)
2,477,691 2,328,159 
Unearned income(4)
(773,049)(769,869)
Net investment in finance leases(5)
$1,704,642 $1,558,290 
(1)     There were no executory costs included in gross finance lease receivables as of September 30, 2022 and December 31, 2021.
(2)     The Company's finance leases generally include a purchase option at nominal amounts that is reasonably certain to be exercised, and therefore, the Company has immaterial residual value risk for assets.
(3)    The gross finance lease receivable is reduced as billed to customers and reclassified to accounts receivable until paid by customers.
(4)     There were no unamortized initial direct costs as of September 30, 2022 and December 31, 2021.
(5)    One major customer represented 88% and 91% of the Company's finance lease portfolio as of September 30, 2022 and December 31, 2021, respectively. No other customer represented more than 10% of the Company's finance lease portfolio in each of those periods.

The Company’s finance lease portfolio lessees are primarily comprised of the largest international shipping lines. In its estimate of expected credit losses, the Company evaluates the overall credit quality of its finance lease portfolio. The Company considers an account past due when a payment has not been received in accordance with the terms of the related lease agreement and maintains allowances, if necessary, for doubtful accounts. These allowances are based on, but not limited to, historical experience which includes stronger and weaker economic cycles, each lessee's payment history, management's current assessment of each lessee's financial condition, consideration of current economic conditions and reasonable market forecasts.

During the third quarter of 2022, there was a default on certain finance leases in our portfolio for which the full amount is not expected to be recovered, and the Company recognized an impairment charge of $8.1 million which is recorded in the provision for doubtful accounts in the consolidated statements of operations. At the time of default, the net investment in finance lease was re-classified to leasing equipment on the consolidated balance sheet.

The Company has reviewed the remaining finance lease portfolio for expected credit losses considering the factors noted above for each lessee, and based on its assessment as of September 30, 2022, further credit losses are not expected in the portfolio. As of September 30, 2022, the Company does not have an allowance on its gross finance lease receivables and does not have any material past due balances.

Also included in the provision for doubtful accounts is a benefit of $8.2 million related to a recovery in the third quarter of 2022, from the estate of a customer that had defaulted a number of years ago.