LEASES

3 Months Ended

Jun. 30, 2019

In February 2016, the FASB issued ASC 842 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the guidance on April 1, 2019 using the modified retrospective method and as a result did not adjust comparative periods or modify disclosures in those comparative periods.

The new guidance provides a number of optional practical expedients in transition. The Company elected the package of practical expedients, which does not require the reassessment of prior conclusions about lease identification, lease classification and initial direct costs. Further, the Company elected the practical expedients to combine lease and non-lease components, and to not recognize right-of-use (ROU) assets and lease liabilities for short-term leases. Leases with an initial term of 12 months or less are classified as short-term leases. The Company did not elect the hindsight practical expedient to determine the lease term for existing leases.

The adoption of ASC 842 on April 1, 2019 resulted in the recognition of operating lease ROU assets of approximately $68.2 million, operating lease liabilities of approximately $83.2 million and the elimination of deferred rent of approximately $15.0 million. Operating leases are included in operating lease ROU assets and lease liabilities on the Company’s balance sheets. The adoption of ASC 842 did not have a material impact on the Company’s consolidated statement of operations, consolidated statement of stockholders' equity, consolidated statement of comprehensive income (loss) or consolidated

statement of cash flows. The new standard had no material impact on liquidity and had no impact on the Company’s debt-covenant compliance under its current debt agreements.

The Company determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the duration of the lease term. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. ROU assets are recorded and recognized at commencement for the lease liability amount, plus initial direct costs incurred less lease incentives received. Lease liabilities are recorded at the present value of future lease payments over the lease term at commencement. The discount rate used is generally the Company’s estimated incremental borrowing rate unless the lessor’s implicit rate is readily determinable. Incremental borrowing rates are calculated periodically to estimate the rate the Company would pay to borrow the funds necessary to obtain an asset of similar value over a similar term. Lease expenses relating to operating leases are recognized on a straight-line basis over the lease term.

The Company has operating leases for administrative, research and development, sales and marketing and manufacturing facilities and equipment under various non-cancelable lease agreements. The Company’s leases have remaining lease terms ranging from 1 year to 11 years. The Company’s lease terms may include options to extend or terminate the lease where it is reasonably certain that the Company will exercise those options. The Company considers several economic factors when making this determination, including but not limited to, the significance of leasehold improvements incurred in the office space, the difficulty in replacing the asset, underlying contractual obligations, or specific characteristics unique to a particular lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Most of the Company’s lease agreements contain variable payments, primarily for common area maintenance (CAM), which are expensed as incurred and not included in the measurement of the ROU assets and lease liabilities.

The components of operating lease cost for the three months ended June 30, 2019 were as follows (in thousands):



Lease cost under long-term operating leases	$	3,245
Lease cost under short-term operating leases	852
Variable lease cost under short-term and long-term operating leases	1,212
Total operating lease cost	$	5,309

The table below presents supplemental cash flow information related to leases during the three months ended June 30, 2019 (in thousands):



Cash paid for amounts included in the measurement of lease liabilities	$	3,425

Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,827

Weighted average remaining lease term in years and weighted average discount rate are as follows:



Weighted average remaining lease term in years - operating leases	9.28

Weighted average discount rate - operating leases	4.2	%

Future minimum payments under non-cancellable leases at June 30, 2019 are as follows (in thousands):



Year ending March 31:
2020 (remaining nine months)	$	10,249
2021	12,275
2022	11,454
2023	9,928
2024	9,049
Thereafter	45,483
Total lease payments	$	98,438
Less imputed interest	(16,790		)
Present value of lease liabilities	$	81,648

As previously disclosed in the Company’s fiscal year Form 10-K and under the previous lease accounting standard, ASC 840, Leases, the following table summarizes the future non-cancelable minimum lease commitments (including office space, copiers, and automobiles) at March 31, 2019 (in thousands):



Year ending March 31:
2020	$	16,102
2021	11,059
2022	9,804
2023	8,807
2024	8,500
Thereafter	43,997
Total	$	98,269