BREAD FINANCIAL HOLDINGS, INC. Leases Disclosure
12. LEASES
The Company has operating leases for general office properties, warehouses, data centers, customer care centers, automobiles and certain equipment. As of December 31, 2020, the Company’s leases have remaining lease terms of less than 1 year to 18 years, some of which may include renewal options.
The components of lease expense were as follows:
Years Ended December 31, | ||||||
| 2020 | 2019 | ||||
(in millions) | ||||||
Operating lease cost |
| $ | 40.5 | $ | 41.1 | |
Short-term lease cost | 1.0 | 2.7 | ||||
Variable lease cost | 6.2 | 6.8 | ||||
Total | $ | 47.7 | $ | 50.6 | ||
Lease expense was $47.5 million for the year ended December 31, 2018.
Other information related to leases was as follows:
December 31, | December 31, | |||||
| 2020 | 2019 | ||||
Weighted-average remaining lease term (in years): | ||||||
Operating leases | 10.8 | 11.5 | ||||
Weighted-average discount rate: | ||||||
Operating leases | 5.2% | 5.2% | ||||
Supplemental cash flow information related to leases was as follows:
Years Ended December 31, | ||||||
| 2020 | 2019 | ||||
(in millions) | ||||||
Cash paid for amounts included in the measurement of lease liabilities: |
| |||||
Operating cash flows from operating leases | $ | 45.8 | $ | 46.6 | ||
Right-of-use assets obtained in exchange for lease obligations: | ||||||
Operating leases | $ | 7.6 | $ | 28.4 | ||
Maturities of the lease liabilities as of December 31, 2020 were as follows:
Operating | |||
Year | Leases | ||
| (in millions) | ||
2021 | $ | 38.8 | |
2022 |
| 41.2 | |
2023 |
| 38.3 | |
2024 |
| 36.0 | |
2025 |
| 35.2 | |
Thereafter |
| 209.6 | |
Total undiscounted lease liabilities | 399.1 | ||
Less: Amount representing interest | (99.1) | ||
Total present value of minimum lease payments | $ | 300.0 | |
Amounts recognized in the December 31, 2020 consolidated balance sheet: | |||
Current operating lease liabilities | $ | 23.6 | |
Long-term operating lease liabilities | 276.4 | ||
Total | $ | 300.0 | |
The Company evaluates its right of use (“ROU”) assets for impairment in accordance with ASC 360, “Property, Plant and Equipment,” when events or changes in circumstances indicate that a ROU asset’s carrying amount may not be recoverable. The Company performed an impairment assessment for the ROU assets associated with its locations where it ceased use with the intent to sublease. As a result, the Company recorded an asset impairment charge of $18.4 million in its Card Services segment. The impairment charge is included in cost of operations in the Company’s consolidated statements of income for the year ended December 31, 2020. Following the incurred impairment, the ROU assets for these locations will be amortized on an accelerated basis in accordance with ASC 842.
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.