Lease Financing Obligation

12 Months Ended

Dec. 31, 2017

Lease Financing Obligation

Note 14. Lease Financing Obligation

Sale-leaseback of San Diego Office Complex:

In 2015, the Company sold its San Diego office complex consisting of land and buildings with a net book value of $71.0 million, for total consideration of $85.5 million. The Company concurrently entered into a leaseback arrangement for two buildings on the San Diego campus (“Building 1” and “Building 2”) with an initial leaseback term of ten years for Building 1 and a maximum term of one year for Building 2. The Company determined that the sale-leaseback of Building 1 did not qualify for sale-leaseback accounting due to continuing involvement that will exist for the 10-year lease term. Accordingly, the carrying amount of Building 1 will remain on the Company’s balance sheet and will be depreciated over its remaining useful life with the proceeds reflected as a financing obligation.

The Company concluded that Building 2 qualified for sale-leaseback accounting with the subsequent leaseback classified as an operating lease. A loss of $5.3 million was recorded in Other expense (income), net on the Consolidated Statements of Income at the closing of the transaction in 2015.

At December 31, 2017, the minimum lease payments required on the financing obligation were as follows (in thousands):

2018	$	4,260
2019		4,388
2020		4,520
2021		4,655
2022		4,795
Thereafter through 2025		11,307
Total minimum lease payments	$	33,925