Leases

3 Months Ended

Mar. 31, 2019

Lease Obligations

We determine if an arrangement is a lease at inception. Operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, we use the portfolio approach in determining the discount rate used to present value lease payments. We give consideration to our line of credit as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

We have operating and finance leases for office space and certain equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning on or after January 1, 2019, we account for lease components separately from non-lease components for all asset classes.

Our leases have remaining terms of less than 1 to 4 years, some of which include one or more options to renew for up to 2 years, and some of which include options to terminate the leases within 1 year. The exercise of lease renewal options is at our sole discretion and such options are included in ROU assets and liabilities for renewal periods that are reasonably certain of exercise. Certain of our lease agreements include stated rental payment escalations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate to third parties. Finance leases as of March 31, 2019 were immaterial.



Leases (in thousands)	Classification	March 31, 2019
Assets
Operating lease assets	Other assets	$	11,659
Liabilities
Current
Operating	Other current liabilities	$	3,877
Noncurrent
Operating	Other long-term liabilities	8,897
Total lease liabilities		$	12,774

The components of lease expense were as follows (in thousands):



	Classification	Three Months Ended March 31, 2019
Operating lease expense ⁽¹⁾	Sales, general and administrative expenses ⁽²⁾	$	1,017
Sublease income	Other income	(42		)
Net lease expense		$	975

⁽¹⁾Includes short-term leases, which are immaterial.

⁽²⁾An immaterial portion of operating lease expense is included within research and development expenses and cost of sales.

Other information related to leases was as follows (in thousands, except lease term and discount rate):



	Three Months Ended March 31, 2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	961
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	84
Weighted average remaining lease term
Operating leases	3.2 years
Weighted average discount rate
Operating leases	3.6		%

Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as follows (in thousands):



	Operating		Sublease income			Net
2019 Remaining	$	3,419	$	(246	)	$	3,173
2020	4,203		(82		)	4,121
2021	3,325		—			3,325
2022	2,449		—			2,449
2023	1,173		—			1,173
2024	—		—			—
Thereafter	—		—			—
Total minimum lease payments	14,569		(328		)	14,241
Less: Amount representing interest						(1,467		)
Present value of lease payments						$	12,774

As of March 31, 2019, we do not have any leases that have not yet commenced other than the land lease purchase agreement described in Note 12.

Disclosures related to periods prior to adoption of Topic 842

Rent expense under all operating leases, including both cancelable and non-cancelable leases, was $4.2 million and $2.9 million for the years ended December 31, 2018 and 2017, respectively.

Future minimum lease payments under non-cancelable leases at December 31, 2018, were as follows (in thousands):



	Operating		Capital
2019	$	3,670	$	40
2020	3,572		36
2021	2,961		—
2022	2,001		—
2023	573		—
Thereafter	—		—
Total minimum lease payments	$	12,777	76
Less: Amount representing interest			(6		)
Capital lease obligation			$	70

Leases