Leases

12 Months Ended

Dec. 31, 2019

LEASES

In February 2016, the FASB issued ASC 842, which outlines a comprehensive change to the lease accounting model and supersedes prior lease guidance ("ASC 840"). The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months, and also changes the definition of a lease and expands the disclosure requirements of lease arrangements.

The Company adopted this guidance on January 1, 2019 using the modified retrospective transition effective date method. As part of that adoption, we have elected the package of three practical expedients, which includes the following: an entity may elect not to reassess whether expired or existing contracts contain a lease under the revised definition of a lease; an entity may elect not to reassess the lease classification for expired or existing leases; and an entity may elect not to reassess whether previously capitalized initial direct costs would qualify for capitalization. The Company has elected not to utilize the hindsight expedient in determining the lease term, and to not record leases with an initial term of 12 months or less on our balance sheet. Additionally, the Company has elected to account for lease components and non-lease components as a single lease component for all asset classes. Lease expense is recognized over the expected term on a straight-line basis. The adoption did not have a material impact on the Company's condensed consolidated statements of income or cash flows.

The Company enters into operating leases primarily for real estate to support research and development ("R&D") sites and general office space in North America, with additional locations in Europe and Asia. The Company does not currently have any finance leases. Certain of our leases include options to extend the lease at our discretion at the end of the lease term, or terminate the lease early subject to certain conditions and penalties. We do not include any renewal options in our lease terms for calculating our lease liabilities, as the renewal options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the specific facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable, and, as such, the Company utilizes its incremental borrowing rate as the discount rate based on information available on the lease commencement date. Our incremental borrowing rate represents the rate we would incur to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. We utilized the incremental borrowing rate as of January 1, 2019, our adoption date, for operating leases that commenced prior to that date. Upon our adoption of ASU 2016-02, the Company recorded the following operating lease right-of-use assets and operating lease liabilities as of January 1, 2019. Additionally, the table below includes the balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2019 (in thousands):



	Balance Sheet Classification	January 1, 2019		December 31, 2019
Assets
Operating lease right-of-use assets, net	Other Non-current Assets	$	13,634	$	24,513
Total Lease Assets		$	13,634	$	24,513

Liabilities
Operating lease liabilities - Current	Other Accrued Expenses	$	3,519	$	3,437
Operating lease liabilities - Noncurrent	Other Long-Term Liabilities	13,652		24,142
Total Lease Liabilities		$	17,171	$	27,579

The components of lease costs which were included within operating expenses in our consolidated statement of income were as follows (in thousands):



	For the Year Ended December 31,
	2019
Operating lease cost	$	4,776
Short-term lease cost	925
Variable lease cost	1,502

For the year ended December 31, 2019, sublease income was insignificant. Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2019 was $5.2 million and was included in net cash provided by operating activities in our consolidated statement of cash flows. Operating lease right-of-use assets obtained in exchange for operating lease obligations totaled $14.4 million during the year ended December 31, 2019. As of December 31, 2019, the weighted average remaining operating lease term was 7.1 years and the weighted average discount rate used to determine the operating lease liabilities was 5.8%.

The maturities of our operating lease liabilities as of December 31, 2019 under ASC 842, excluding short-term leases with terms less than 12 months, were as follows (in thousands):



Maturity of Operating Lease Liabilities	December 31, 2019
2020	$	3,296
2021	5,311
2022	5,341
2023	4,605
2024	4,409
Thereafter	11,355
Total lease payments	$	34,317
Less: Imputed interest	(6,738		)
Present value of lease liabilities	$	27,579

The undiscounted maturities of our operating leases as of December 31, 2018 under ASC 840, including short-term leases with terms less than 12 months, were as follows (in thousands):



Maturity of Operating Leases	December 31, 2018
2019	$	5,362
2020	3,386
2021	2,883
2022	2,920
2023	2,184
Thereafter	5,582