LEASES

12 Months Ended

Mar. 31, 2021

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. Right-of-use (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 10 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 fiscal years ended March 31, 2021 and 2020 were as follows (in thousands):


	Fiscal Year Ended March 31,
	2021		2020
Lease cost under long-term operating leases	$	13,092	$	13,318
Lease cost under short-term operating leases	3,678		4,172
Variable lease cost under short-term and long-term operating leases	3,800		4,259
Total operating lease cost	$	20,570	$	21,749

The table below presents supplemental cash flow information related to leases during the fiscal years ended March 31, 2021 and 2020 (in thousands):


	Fiscal Year Ended March 31,
	2021		2020
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,492	$	11,127

At March 31, 2021 and 2020, the weighted average remaining lease term in years and weighted average discount rate were as follows:


	March 31, 2021		March 31, 2020
Weighted average remaining lease term in years - operating leases	7.70		8.59

Weighted average discount rate - operating leases	4.1	%	4.1	%

Future minimum payments under non-cancellable leases at March 31, 2021 are as follows (in thousands):


Year Ending March 31,
2022	$	14,085
2023	12,890
2024	10,299
2025	10,098
2026	9,087
Thereafter	29,286
Total lease payments	$	85,745
Less imputed interest	(12,124)
Present value of lease liabilities	$	73,621