Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Leases

v3.20.4
Note 8 - Leases
6 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Lessee, Leases [Text Block]

(8)

Leases

 

We have operating leases for many of our design centers that expire at various dates through fiscal 2040. In addition, we also lease certain tangible assets, including computer equipment and vehicles with initial lease terms ranging from three to five years. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. Certain operating leases have renewal options and rent escalation clauses as well as various purchase options. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet these criteria are included in the lease term at lease commencement.

 

The Company's lease terms and discount rates are as follows:

   

December 31,

 
   

2020

   

2019

 

Weighted-average remaining lease term (in years)

               

Operating leases

    6.6       6.7  

Financing leases

    1.7       1.9  

Weighted-average discount rate

               

Operating leases

    4.3 %     3.7 %

Financing leases

    4.3 %     4.4 %

 

Lease expense for operating leases consists of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term. Variable lease payments are generally expensed as incurred, where applicable, and include certain index-based changes in rent, certain non-lease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. Leases with an initial term of twelve months or less are not recorded on the balance sheet. In addition, certain of our equipment lease agreements include variable lease payments, which are based on the usage of the underlying asset. The variable portion of payments are not included in the initial measurement of the asset or lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred.

 

The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):

 

     

Three months ended

December 31,

 
 

Statement of Comprehensive Income Location

 

2020

   

2019

 

Operating lease cost(1)

Selling, general and administrative (“SG&A”)

  $ 7,461     $ 8,169  

Financing lease cost

                 

Depreciation of property

SG&A

    144       146  

Interest on lease liabilities

Interest and other financing costs

    3       8  

Short-term lease cost(2)

SG&A

    240       355  

Variable lease cost(3)

SG&A

    2,351       2,373  

Less: Sublease income

SG&A

    (454 )     (596 )

Total lease expense

  $ 9,745     $ 10,455  

 

The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):

 

     

Six months ended

December 31,

 
 

Statement of Comprehensive Income Location

 

2020

   

2019

 

Operating lease cost(1)

SG&A

  $ 14,953     $ 16,191  

Financing lease cost

                 

Depreciation of property

SG&A

    295       293  

Interest on lease liabilities

Interest and other financing costs

    8       17  

Short-term lease cost(2)

SG&A

    480       742  

Variable lease cost(3)

SG&A

    4,613       4,836  

Less: Sublease income

SG&A

    (892 )     (1,102 )

Total lease expense

  $ 19,457     $ 20,977  

 

 

(1)

Lease expense for operating leases consists of both fixed and variable components. Expense related to fixed lease payments are recognized on a straight-line basis over the lease term.

 

 

(2)

Leases with initial terms of one year or less are not capitalized and instead expensed on a straight-line basis over the lease term.

 

 

(3)

Variable lease payments are generally expensed as incurred, where applicable, and include certain index-based changes in rent, certain non-lease components, such as maintenance, real estate taxes, insurance and other services provided by the lessor, and other charges included in the lease.

 

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheets as of December 31, 2020 (in thousands):

 

Fiscal Year

 

Operating Leases

   

Financing Leases

 

2021 (remaining six months)

  $ 16,408     $ 160  

2022

    29,552       78  

2023

    23,147       39  

2024

    18,374       19  

2025

    14,961       8  

Thereafter

    45,640       -  

Total undiscounted future minimum lease payments(1)(2)

    148,082       304  

Less: imputed interest(3)

    (20,541 )     (9 )

Total present value of lease obligations

  $ 127,541     $ 295  

 

 

(1)

Certain operating leases have renewal options and rent escalation clauses as well as various purchase options. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet these criteria are included in the lease term at lease commencement.

 

 

(2)

Excludes future commitments under short-term lease agreements of $0.3 million as of December 31, 2020 as leases with an initial term of twelve months or less are not recorded on the balance sheet.

 

 

(3)

Calculated using the incremental borrowing rate for each lease at lease commencement.

 

As of  December 31, 2020, we have entered into two additional financing leases for computer equipment, which have not yet commenced and are therefore not part of the tables above nor included in the consolidated balance sheet as property, plant and equipment (assets) and other current and non-current liabilities. The leases commence when we obtain possession of the underlying leased assets which were in January 2021. The leases are for a period of three years and have aggregate undiscounted future rent payments of $1.4 million.

 

As of December 31, 2020, we did not have any operating leases that had not commenced.

 

Other supplemental information for our leases is as follows (in thousands):

 

   

Six months ended

December 31,

 
   

2020

   

2019

 

Cash paid for amounts included in the measurement of lease liabilities

               

Operating cash flows from operating leases

  $ 16,706     $ 16,037  

Operating cash flows from financing leases

  $ 290     $ 278  

Operating lease assets obtained in exchange for operating lease liabilities

  $ 12,102     $ 14,326