Lease Obligation

6 Months Ended

Jun. 30, 2015

Leases [Abstract]

Lease Obligation

Lease Obligation

In the fourth quarter of 2013, the Company entered into a lease for approximately 30,000 square feet of office space and moved the executive and administrative functions into this facility in the second quarter of 2014. The lease expires in 2022 with options to extend the lease for two additional five-year periods. This operating lease included a lease incentive for tenant improvements of $1.7 million, which has been included as a leasehold improvement in property, plant and equipment and as deferred rent. At June 30, 2015, the total deferred rent included in other current liabilities and other non-current liabilities was $0.2 million and $2.3 million, respectively.

During 1999, the Company completed a sale and leaseback transaction of its San Diego McKellar facility. The facility was sold for $15.0 million, of which $3.8 million was capital contributed by the Company. The sale was an all cash transaction, netting the Company approximately $7.0 million. The Company is a 25% limited partner in the partnership that acquired the facility. The transaction was deemed a financing transaction under the guidance in ASC Topic 840-40, Accounting for Sales of Real Estate. The assets sold remain on the books of the Company and will continue to be depreciated over the estimated useful life. In December 2009, the Company amended the terms of its lease agreement. The amended terms include a new ten-year lease term through December 2019, with options to extend the lease for up to three additional five-year periods. The Company is amortizing the lease obligation over the new lease term. The amount of the monthly rental payments remains the same under the amendment. In May 2015, the lease agreement was amended to extend the timing to exercise the option to purchase the general partner’s interest in the partnership to September 1, 2015 for a fixed price. The Company has determined that the partnership is a variable interest entity (VIE). The Company is not, however, the primary beneficiary of the VIE as it does not absorb the majority of the partnership’s expected losses or receive a majority of the partnership’s residual returns. The Company made lease payments to the partnership of approximately $0.3 million for each of the three months ended June 30, 2015 and 2014 and $0.6 million for each of the six months ended June 30, 2015 and 2014.