Note 9 — Leases

Capital Lease Obligations

The Company previously had a build-to-suit lease for warehouse and office space in Frederick, Colorado with a minimum term through October 31, 2016. The Company had an outstanding letter of credit in the amount of $1.0 million to secure the lease. At the lease inception date, the Company evaluated the provisions of the accounting guidance relating to the effect of a lessee’s involvement in an asset construction and concluded that due to the Company’s collateral to the landlord, in the form of the $1.0 million letter of credit, that it was deemed the owner of the land and building for accounting purposes. As a result, the related costs were capitalized and a corresponding liability was recorded in Capital Lease Obligations, Current and Capital Lease Obligations, Less Current Portion.

In 2012, the Company’s Board of Directors approved a plan to outsource warehouse operations to a third party logistics provider, Ozburn-Hessey Logistics, LLC (“OHL”), and to cease use of this leased facility. As a result of this decision, the Company determined it was more likely than not that the pattern of usage for the warehouse and related assets would change; therefore the Company evaluated the change in accordance with applicable accounting guidance. This evaluation resulted in an impairment to the value of the land, leasehold improvements, and building associated with the Company’s Frederick, Colorado facility and the estimated useful lives of the remaining assets were reduced to match the remaining minimum term of the lease. The remaining asset primarily represents the discounted cash flows expected from estimated sublease receipts. The sublease of the warehouse facility began in July 2012 and had a minimum term through October 2016 with monthly rental payments totaling $0.1 million.

The amount of the depreciation expense associated with the build-to-suit capital assets was $0.5 million and $0.7 million for the years ended December 31, 2015 and 2014, respectively. The gross value of assets leased under the build-to-suit lease of $2.8 million at December 31, 2014 are included in Sublease Asset in Note 3 — Property, Equipment and Software. The accumulated amortization of build-to-suit capital assets was $1.7 million at December 31, 2014.

On October 16, 2015, the Company entered into agreements to terminate its build-to-suit lease and to terminate the related sublease. The Company paid termination fees of approximately $0.2 million related to the early lease termination. The Company recognized a gain of $0.4 million in the fourth quarter of 2015 related to the termination.

Operating Leases

The Company leases certain facilities and equipment for production, selling and administrative purposes under agreements with original lease periods up to 8 years. Leases generally include provisions requiring payment of taxes, insurance, and maintenance on leased property. Some leases may include renewal options, rent escalation clauses, or options to purchase the leased property during or at the end of the lease term.

Rent holidays and rent escalation provisions are considered in determining straight-line rent expense to be recorded over the applicable lease term. The lease term begins on the commencement date as defined in the relevant lease agreement. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term. Operating rent expense was $2.1 million and $2.1 million for the years ended December 31, 2015 and 2014, respectively. Sublease income for existing operating leases was $0.1 million in the year ended December 31, 2014.

Future minimum payments under non-cancelable operating leases are as follows:


(in thousands)	Minimum Operating Lease Payments
2016	$	2,057
2017		1,951
2018		1,754
2019		848
2020		853
Thereafter		—
Total minimum lease payments	$	7,463