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Leases
6 Months Ended
Jun. 30, 2019
Leases
5.
Leases
On January 1, 2019, the Company adopted ASC 842 using the optional transition method which allows entities to initially apply the lease accounting transition requirements at the adoption date and recognize a cumulative effect adjustment to the opening balance sheet of retained earnings in the period of adoption without restating comparative prior periods presented. The Company recorded operating lease right of use assets of $17.0 million and operating lease liabilities of $21.0 million as of January 1, 2019. The difference between the right of use assets and the lease liabilities was due to $4.0 million of unamortized lease incentives and deferred rent at the Company’s Waltham and Marlborough facilities as of December 31, 2018.
The Company is a lessee under leases of manufacturing facilities, office spaces, machinery, certain office equipment, vehicles and information technology equipment. A majority of the Company’s leases are operating leases with remaining lease terms between three months and 11 years. Finance leases are immaterial to our consolidated financial statements. The Company determines if an arrangement qualifies as a lease and what type of lease it is at inception. The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard, which among other things, allowed it to continue to account for existing leases based on the historical lease classification. The Company also elected the practical expedients to combine lease and
non-lease
components and to exclude right of use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet.
Some of the lease agreements the Company enters into include Company options to either extend and/or early terminate the lease, the costs of which are included in our operating lease liabilities to the extent that such options are reasonably certain of being exercised. Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years per option, some of its leases have multiple options to extend. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such options.
As of June 30, 2019, operating lease right of use assets 
were $
19.5
 
million and operating lease liabilities were 
$
23.5
 million. 
During the second quarter of 2019 we added leases related to our acquisition of C Technologies on May 31, 2019 which resulted in an increase of right of use assets and lease liabilities of $3.8 million as of June 30, 2019. Amounts related to financing leases were immaterial. The maturity of the Company’s operating lease liabilities as of June 30, 2019 are as follows (amounts in thousands):
As of June 30, 2019
 
Amount
 
2019 (remaining six months)
  $
2,010
 
2020
   
4,657
 
2021
   
4,572
 
2022
   
3,620
 
2023
   
2,654
 
2024 and thereafter
   
10,945
 
         
Total future minimum lease payments
   
28,458
 
Less amount of lease payment representing interest
   
4,962
 
         
Total operating lease liabilities
  $
23,496
 
         
Total operating lease liabilities is included on the Company’s consolidated balance sheet as of June 30, 2019 as follows (amounts in thousands):
         
 
As of June 30, 2019
 
Operating lease liability
  $
3,287
 
Operating lease liability, long-term
   
20,209
 
         
Minimum operating lease payments
  $
23,496
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. For the three and six months ended June 30, 2019, total lease cost is comprised of the following:
                 
 
Three Months Ended
   
Six Months Ended
 
Lease Cost
 
June 30, 2019
   
June 30, 2019
 
 
(Amounts in thousands)
 
Operating lease cost
  $
982
    $
1,912
 
Variable operating lease cost
   
379
     
660
 
                 
Lease cost
  $
1,361
    $
2,572
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following information represents supplemental disclosure for the consolidated statements of cash flows related to operating leases (amounts in thousands):
         
 
Six Months Ended
 
 
June 30, 2019
 
Operating cash flows from operating leases
  $
(1,978
)
 
 
 
 
 
 
Most of the leases do not provide implicit interest rates and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and currency in which the lease payments are made.
The weighted average remaining lease term and the weighted average discount rate used to measure our operating lease liabilities as of June 30, 2019 were:
         
Weighted average remaining lease term (years)
   
7.46
 
Weighted average discount rate
   
4.74
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As previously disclosed in the Company’s 2018 Annual Report on Form
10-K
and under the previous lease accounting standard, ASC 840,
“Leases,”
the total commitment for
non-cancelable
operating leases was $18.0 million as of December 31, 2018 (amounts in thousands):
         
For the Years Ended December 31,
 
Amount
 
2019
  $
4,021
 
2020
   
3,599
 
2021
   
3,263
 
2022
   
2,213
 
2023
   
1,316
 
2024 and thereafter
   
3,622
 
         
Minimum operating lease payments
  $
18,034