5. Leases

The Company has operating leases for certain properties for its offices and showrooms and for copiers. The Company adopted ASU 2016-02 as of January 1, 2019 using the modified retrospective method as of the period of adoption. The Company elected the package of practical expedients upon transition where the Company did not reassess the lease classification and initial direct costs for leases that existed prior to adoption. Additionally, the Company did not reassess contracts entered into prior to adoption to determine whether the arrangement was or contained a lease. At January 1, 2019, the Company did not have any leases that had not yet commenced. The Company also elected the practical expedient to not recognize right-of-use assets or lease liabilities for leases with a term of twelve months or less.

The Company determines if an arrangement contains a lease and the lease term at contract inception based on the terms of each arrangement. The Company’s operating leases contain options to extend and early termination options. The Company will evaluate the terms on a lease-by-lease basis and include options to extend or early termination options when it is reasonably certain that the Company will exercise the option. For arrangements that are identified as leases and are over twelve months the Company records a right-of-use (“ROU”) asset and a lease liability representing the present value of future lease payments. Under ASC 842, the present value of future lease payments must be discounted by using the interest rate implicit in the lease, or if not readily determinable, its incremental borrowing rate. The Company used an average cost of debt of 6.76% as the discount rate for the leases as it is representative of the interest rate that would be charged to borrow an amount equal to the lease payments on a fully collateralized basis.

The operating lease assets and liabilities recorded on the balance sheet as of March 31, 2019 are summarized as follows:


		March 31,
	Classification on Balance Sheet	2019
Assets		(in thousands)
Non-current	Right-of-use assets - operating leases	$	49,317

Liabilities
Current	Current portion of lease liabilities - operating leases	$	2,761
Non-current	Lease liabilities - operating leases		53,623
Total operating lease liabilities		$	56,384

Weighted average remaining lease term (in years)			14.1

Rent expense is recognized on a straight-line basis over the term of the lease. Rent expense for operating leases was $1.6 million and $1.5 million for the three months ended March 31, 2019 and 2018, respectively. Sublease income was immaterial for each of the three months ended March 31, 2019 and 2018.

As of March 31, 2019, the maturities of the Company’s lease liabilities were as follows (in thousands):


	Operating Leases
2019 (remaining nine months)	$	4,864
2020		6,404
2021		6,247
2022		6,262
2023		6,277
Thereafter		58,320
Total minimum lease payments		88,374
Less: imputed interest		31,990
Lease liabilities	$	56,384