Leases

On January 1, 2019, the Company adopted the ASU 842 using the modified retrospective transition approach and elected the transition option to recognize the adjustment in the period of adoption rather than in the earliest period presented. The adoption resulted in the initial recognition of operating lease right-of-use assets of $5,046 and operating lease liabilities of $5,131. At December 31, 2019, the balances of the operating lease right-of-use asset and total operating lease liability were $3,612 and $2,964, respectively, of which $645 of the operating lease liability is classified as a current liability.

The Company leases certain office facilities, comprising approximately 81% of the total lease population at December 31, 2019. All leased facilities are classified as operating leases with remaining lease terms between one and five years. The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and will include these options in the lease term when they are reasonably certain of being exercised. For all of the Company’s leases, lease and non-lease components are accounted for as a single lease component, as all non-lease components are immaterial to break out separately.

The components of lease costs, which are included in selling, general and administrative expenses in the consolidated statements of (loss) income of year ended December 31, 2019 were as follows:



Lease cost:	2019

Operating lease costs ⁽¹⁾	$	1,515
Sublease income ⁽²⁾	(276		)
Total lease cost	$	1,239

⁽¹⁾Variable lease costs were immaterial for the year ended December 31, 2019.

⁽²⁾ Represents sublease income received for the vacated office facility in Charlotte, North Carolina, which was acquired with the FSC acquisition in February 2016. The lease and sublease agreements terminate in December 2020. The Company also vacated portions of its office facility in St. Louis, Missouri during May 2019 and August 2019 and started receiving sublease income starting in May 2019 and August 2019 from two different tenants. The lease agreement ends in April 2025 and the sublease agreement that started in May 2019 ends in May 2021 and the sublease agreement that started in August 2019 ends in July 2020 and can continue thereafter on a month-to-month basis.

During the year ended December 31, 2019, the Company reduced its operating lease liabilities by $1,480 for cash paid. The remainder of the decrease is related to the exit of certain leases discussed below. In addition, during the year ended December 31, 2019, one new operating lease commenced resulting in the recognition of an operating lease right-of-use asset and liability of $1,000 and $0, respectively, as the entire lease payment was paid on March 31, 2019. As of December 31, 2019, the Company is aware of one additional potential embedded lease that has not yet commenced and will not commence until certain conditions are met. If these conditions are met and the start date is determined, annual fees would commence and at that time an operating lease right-of-use asset and corresponding operating lease liability will be recorded.

In connection with the 2019 Corporate Restructuring plan discussed in Note 18: Restructuring Costs, during the year ended December 31, 2019, the Company came to an agreement with the landlord of the leased office space in Ireland, to surrender the lease by December 31, 2019 with an early termination payment of approximately $288. This amount was recorded as a restructuring cost in the consolidated statements of (loss) income.

In connection with the 2019 French Restructuring plan discussed in Note 18: Restructuring Costs, during the year ended December 31, 2019, the Company came to an agreement with the landlord of the leased office space in France, to surrender the lease by December 31, 2019 with an early termination payment of approximately $820. The Company accounted for this change in the lease term as a modification of the original lease. As a result of this modification, the right-of-use asset and liability related to the French office lease was remeasured, and the asset was subsequently tested for impairment as the fair value was less than the book value. Since the fair value was determined to be less than the book value, the Company recorded an impairment to the right of use asset of $826, which is recorded as a restructuring cost in the consolidated statements of loss.

As of December 31, 2019, our operating leases have a weighted-average remaining lease term of 5.0 years and a weighted-average discount rate of 5.3%. Nearly all of Avadel’s lease contracts do not provide a readily determinable implicit rate. For these contracts, Avadel’s estimated incremental borrowing rate is based on information available at the inception of the lease.

Maturities of the Company’s operating lease liabilities were as follows:



Maturities:	Operating Leases

2020	$	779
2021	578
2022	590
2023	602
2024	614
Thereafter	201
Total lease payments	3,364
Less: interest	400
Present value of lease liabilities	$	2,964

Under the prior lease guidance, minimum rental commitments for non-cancelable leases as of December 31, 2019 were:



Lease Commitment:	Operating Leases

2020	$	779
2021	578
2022	590
2023	602
2024	614
Thereafter	201
Total minimum lease payments	$	3,364