Leases

6 Months Ended

Jun. 30, 2020

Leases

Leases

(7) Leases

The Company retroactively adopted ASC 842 effective January 1, 2019, using the modified retrospective transition method. The Company elected to account for lease and nonlease components in a lease arrangement as a combined lease component for all classes of leased assets. Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for further discussion.  

The Company’s leases consist primarily of real estate and personal property leases throughout the markets in which the Company operates. At contract inception, the Company determines whether an arrangement is or contains a lease, and for each identified lease, evaluates the classification as operating or financing. The Company has no finance leases as of June 30, 2020 and December 31, 2019. Leased assets and obligations are recognized at the lease commencement date based on the present value of fixed lease payments to be made over the term of the lease. Renewal and termination options are factored into determination of the lease term only if the option is reasonably certain to be exercised. The weighted-average remaining lease term was 7.06 years and 7.79 years at June 30, 2020 and December 31, 2019, respectively. The Company has no significant short-term leases as of June 30, 2020 and December 31, 2019.

The Company’s leases do not provide a readily determinable implicit interest rate and the Company uses its incremental borrowing rate to measure the lease liability and corresponding right-of-use asset. The incremental borrowing rates were determined based on a portfolio approach considering the Company’s current secured borrowing rate adjusted for market conditions and the length of the lease term. The weighted-average discount rates used in the measurement of the lease liabilities were 6.46% and 6.67% as of June 30, 2020 and December 31, 2019, respectively.

Operating lease cost is recognized on a straight-line basis over the lease term. Operating lease costs for the three months ended June 30, 2020 and 2019 were $2.8 million in each period, and are included in selling, general and administrative expenses in the unaudited condensed consolidated statement of operations and comprehensive income (loss). Operating lease costs for the six months ended June 30, 2020 and 2019 were $5.8 million and $5.6 million, respectively. Total lease costs include variable lease costs of approximately $0.6 million and $0.5 million for the three months ended June 30, 2020 and 2019, respectively, which are primarily comprised of costs of maintenance and utilities, and are determined based on the actual costs incurred during the period. Total lease costs include variable lease costs of approximately $1.1 million and $0.9 million for the six months ended June 30, 2020

and 2019, respectively. Variable payments are expensed in the period incurred and not included in the measurement of lease assets and liabilities.

Cash paid for amounts included in the measurement of operating lease liabilities for the six months ended June 30, 2020 and 2019 was $5.6 million and $5.1 million, respectively, which is included as a component of cash provided by operating activities in the consolidated statement of cash flows.

As of June 30, 2020, maturities of lease liabilities are as follows:

	(In thousands)
Years ending:
2020 (remainder of the year)	$	4,109
2021		8,415
2022		8,085
2023		6,011
2024		5,213
2025 and thereafter		16,736
Total future minimum lease payments (undiscounted)		48,569
Less: present value discount		(10,120)
Present value of lease liability	$	38,449