Commitments and Contingencies

Lease Commitments

We lease certain office and residential space under non-cancelable operating leases with various lease terms through June 2043. Rent expense for the years ended December 31, 2015, 2014 and 2013 was $3.7 million, $3.2 million and $2.5 million, respectively.

We lease computer equipment under capital lease agreements that expire through September 2018. The total amount financed under these capital leases was $0.5 million, $1.7 million and $1.7 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Build to Suit

We entered into a lease agreement for land and an office building in Ames, Iowa, which was constructed in two phases. As part of the lease agreement, the landlord was responsible for constructing the building in accordance with our specifications and agreed to fund $11.8 million for the first phase and $11.1 million for the second phase of construction. We were the developer of the project and responsible for construction costs in excess of these amounts. As a result of this involvement, we were deemed the “owner” for accounting purposes during the construction period and were required to capitalize the construction costs associated with the office building. Upon completion of each phase of the project, we performed a sale-leaseback analysis pursuant to ASC 840, Leases, to determine if the building could be removed from the balance sheet. We determined there was continuing involvement, which precluded derecognition of the building. The construction liability of $11.8 million was reclassified to a financing obligation, and $17.1 million of costs capitalized during construction was placed in service during June 2013 for the initial phase. Upon completion of the second phase of the project, the construction liability of $11.1 million was reclassified to a financing obligation, and $19.9 million of costs capitalized during construction was placed in service during 2014.

Total cash payments due under the arrangement were allocated on a relative fair value basis between rent related to the land lease and debt service payments related to the financing obligation. The portion of the lease payments allocated to the land is expensed straight-line over the term of the lease from the point we took possession of the land and including renewal periods where renewal was deemed reasonably assured at the inception of the lease. The lease contains purchase options to acquire the landlord’s interest in the land lease and building at any time beginning three years from the commencement date of the lease. In addition, the lease requires us upon certain events, such as a change in control, to purchase the building from the landlord. The purchase options were deemed to be fair value at the inception of the lease.

As of December 31, 2015, future estimated minimum lease payments under non-cancelable operating, capital and financing leases were as follows (in thousands):



	Operating Leases		Capital Leases			Financing Obligations
2016	$	2,655	$	1,009		$	2,458
2017	2,904		414			2,681
2018	2,761		66			2,681
2019	1,933		—			2,681
2020	1,391		—			2,681
Thereafter	8,151		—			29,653
Total minimum lease payments	$	19,795	1,489			42,835
Less: Amount representing interest			(82		)	(21,351		)
Present value of capital lease and financing obligations			$	1,407		$	21,484

Government Grants

Since 2009, we have participated in a program with a local area community college, enlisted by the state of Iowa, that provides reimbursement of training dollars spent on employees hired in Iowa. The community college funds training through the sale of certificates for the amount of anticipated training expenses to be incurred and an estimate of the costs to administer the program. At each payroll date, the state allows us to divert a specified portion of employee state income tax withholdings for the qualified employees to the community college. The community college uses the funds to pay for the program and principal and interest on the certificates. In the event that the funds generated from withholding taxes are insufficient to pay the principal and interest on the certificates, we would be liable for any shortfall. To date, we have entered into three agreements under this program and have been reimbursed for training costs incurred for a total of 378 employees.

During the years ended December 31, 2015, 2014 and 2013, we were reimbursed $0, $194,000 and $1.5 million, respectively. We have concluded that the realization of these amounts is contingent on continuing employment levels. Therefore, in accordance with ASC 450, the amounts received are recorded on the balance sheet as a liability until all contingencies have been resolved. We release the liability to “Other income and (expense), net” on our statement of operations once the amounts diverted and paid to the community college have reduced the total principal and interest due on the certificates to a level below the amounts reimbursed to date. The amount recognized in other income is measured as the excess of the reimbursements received as of each balance sheet date over the total principal and interest due on the certificates, net of amounts diverted. To the extent we have not diverted amounts sufficient to reduce the principal and interest on the certificates to a level below the reimbursements received for each of the programs, there is no benefit recorded in the statement of operations.

During the years ended December 31, 2015 and 2014, the total benefit recorded on the statement of operations was $744,000 and $99,000, respectively. There was no benefit recorded in 2013. At December 31, 2015 and 2014, there was $2.7 million and $3.5 million included in “Deferred government grant obligation” on the consolidated balance sheet, respectively. The deferred liability is classified as current or non-current based on the estimated timing of when the amounts will be recorded as income. At December 31, 2015 and 2014, there was $985,000 and $697,000 classified as a current liability, respectively.

On February 1, 2011, we received financing from the Iowa Economic Development Authority (IEDA) that provides for a grant in the form of a forgivable loan of $2.3 million. The note matures in five years, and in the event of default, bears interest at 6%. Under the terms of the loan, we must complete and maintain the project performance obligation, including the creation of 251 qualified jobs by December 16, 2013, and the retention of six previously created qualified jobs through December 16, 2015. The Company and IEDA also agreed to a $31.6 million development plan that was required to be invested by December 16, 2013. The job creation obligation was met and the $31.6 million development plan was complete as of December 16, 2013. We were required to maintain the jobs through December 16, 2015. In the event that such condition is not met, we must repay $8,799 per job not maintained. The financing is secured by a letter of credit issued pursuant to our credit facility with Silicon Valley Bank. As the project plan was completed in 2013, which included the creation of 251 qualified jobs, and any failure to maintain these qualified jobs during the maintenance period would not give rise to a requirement to accrue or repay interest on the loan, interest expense of $260,000 that had been previously accrued was offset against “Interest expense” on the consolidated statement of operations during the year ended December 31, 2013. Also in connection with this grant agreement, we were awarded a grant that provides for reimbursement of sales tax costs we incurred in connection with the construction of the first phase of the Ames office building. In March 2015, we received proceeds of $313,000 in connection with this grant.

In December 2015, after completing the project close out procedures, IEDA determined that 10 of the 251 positions originally hired under this grant did not meet minimum wage requirements resulting in a repayment of $88,000. The remaining balance under the forgivable loan portion of this government grant of $2.2 million was recognized during the fourth quarter of 2015, with $608,000 recorded as a reduction of our property and equipment and $1.6 million included in “Other income and (expense), net” on the consolidated statement of operations. The $313,000 received in connection with the sales tax grant was recognized as a reduction of our property and equipment in December 2015. At December 31, 2015 and 2014, there was $0 and $2.3 million related to the forgivable loan included in “Deferred government grant obligation” on the consolidated balance sheet.

In October 2013, we received a grant from the IEDA in the form of forgivable loans up to $2.5 million and non-interest bearing loans up to $2.5 million available to us based on qualified job growth. On December 20, 2013, the initial disbursement was awarded consisting of $2.0 million in non-interest bearing and forgivable loans. This disbursement was not received by us until after year end. In connection with our initial public offering, the outstanding balance of the loans became due and payable and were repaid in full during December 2014. Also, in connection with this grant agreement with the Iowa Economic Development Authority, we were awarded a grant that provides for reimbursement of sales tax costs we incurred in connection with the construction of the second phase of the Ames office building. In August 2015, we received proceeds of $235,000, which are included in “Deferred government grant obligation” on the consolidated balance sheet at December 31, 2015. At December 31, 2015, this amount is presented as a non-current liability as all contingencies will not be resolved until October 2020.

Litigation

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of any currently pending legal proceedings to which we are a party will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.