Leases (Notes)

3 Months Ended

Mar. 31, 2020

The Company leases facilities in Ann Arbor, Michigan and Cambridge, Massachusetts. The Ann Arbor facility includes office space, and the Cambridge facility includes clean rooms, laboratories for MACI and Epicel manufacturing and office space. The Company also leases offsite warehouse space, vehicles and computer equipment. Certain of the Company’s lease agreements include lease payments that are adjusted periodically for an index or rate. The leases are initially measured using the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. All operating lease commitments with a lease term greater than 12 months are recognized as right to use assets and liabilities, on a discounted basis on the balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet and for both the three months ended March 31, 2020 and 2019, lease expense of less than $0.1 million was recorded related to short-term leases.

The contribution toward the cost of tenant improvements is recorded as a reduction of the operating lease assets. For the three months ended March 31, 2020 and 2019, the Company recognized $1.4 million and $1.3 million of operating lease expense and less than $0.1 million of financing lease expense for the three months ended March 31, 2020 and 2019, respectively. The Company’s leases contain non-lease components and activities that do not transfer a good or service to the Company. The Company elected not to combine lease and non-lease components and therefore non-lease costs were not included in the net lease assets or lease liabilities.

Total leased assets and liabilities as reassessed under the updated guidance and classified on the balance sheet, as of March 31, 2020 and December 31, 2019 are as follows:



(In thousands)	Classification	March 31, 2020		December 31, 2019
Assets
Operating	Right-of-use assets	$	24,496	$	25,103
Finance	Property and equipment, net	139		148
		$	24,635	$	25,251
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	5,535	$	5,461
Finance	Other liabilities	41		41
		$	5,576	$	5,502
Non-current
Operating	Operating lease liabilities	$	21,597	$	22,242
Finance	Other long-term liabilities	91		110
		$	21,688	$	22,352

Leases

Total leased assets and liabilities as reassessed under the updated guidance and classified on the balance sheet, as of March 31, 2020 and December 31, 2019 are as follows:



(In thousands)	Classification	March 31, 2020		December 31, 2019
Assets
Operating	Right-of-use assets	$	24,496	$	25,103
Finance	Property and equipment, net	139		148
		$	24,635	$	25,251
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	5,535	$	5,461
Finance	Other liabilities	41		41
		$	5,576	$	5,502
Non-current
Operating	Operating lease liabilities	$	21,597	$	22,242
Finance	Other long-term liabilities	91		110
		$	21,688	$	22,352