Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Note 9. Commitments and Contingencies

We lease approximately 70,000 square feet of office space in Seattle, Washington for our corporate headquarters under a lease that expires in December 2026 with the option to renew for two five year terms. The terms of the lease provide for rental payments on a graduated scale and the right to terminate this lease beginning in December 2022, subject to the payment of certain early termination fees. We received landlord incentives totaling $4.7 million which we recorded as deferred rent obligations and are amortizing as a reduction in rental expense over the remaining term of the lease. As part of the lease amendment in May 2016 for approximately 18,000 square feet of additional office space, we will receive in 2017 landlord incentives totaling $1.7 million to offset the costs of leasehold improvements.

We lease approximately 11,000 square feet of space in Seattle for a design laboratory under an operating lease that expires in October 2018 with an option to renew for an additional one or three year term. The terms of the lease provide for rental payments on a graduated scale and the right to terminate this lease early, beginning in December 2015, subject to the payment of certain early termination fees. We received landlord incentives of $108,000 and have used $95,000. We recorded these incentives as deferred rent obligations and are amortizing them as a reduction in rental expense over the term of the lease.

We recognize rent expense on a straight-line basis over the lease period. Total rent expense under operating leases was $2.9 million and $1.1 million for the years ended December 31, 2016 and 2015, respectively.

We lease a portion of our property and equipment under capital leases, which include options allowing us to purchase the equipment at the end of the lease term.

The following table presents future minimum lease payments under operating and capital leases as of December 31, 2016 were as follows:

	OPERATING		CAPITAL
	(in thousands)
2017	$	3,096	$	1,330
2018		3,029		1,038
2019		2,900		574
2020		2,984		261
2021		3,069		—
Thereafter		16,603		—
Total minimum lease payments	$	31,681	$	3,203
Less: Portion representing interest				(375	)
Present value of capital lease obligations				2,828
Less: Current portion of capital lease obligations				(1,130	)
Capital lease obligations net of current portion			$	1,698

In the normal course of business, we periodically enter into agreements that require us to indemnify either major customers or suppliers for specific risks. While our maximum exposure under these indemnification provisions cannot be estimated, these indemnifications are not expected to have a material impact on our consolidated results of operations or financial condition.

Obligations with Third-Party Manufacturers

We manufacture products with a third-party manufacturer under recurring one year agreements. We are committed to purchase $14.1 million of inventory as of December 31, 2016.