Operating Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Operating Leases

14. OPERATING LEASES: 

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long-term operating lease liabilities in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The operating lease ROU excludes lease incentives. As our leases do not provide an implicit rate, we use our incremental borrowing rate to determine the present value of lease payments. Our leases may include renewal options to extend the lease term, the exercise of which are at our sole discretion. Our lease terms do not include any option to extend the lease, because it is not reasonably certain that we will exercise the option. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components (e.g., common-area or other maintenance costs) which are generally accounted for separately and expensed monthly. We do not recognize a ROU asset and lease liability for leases having a term of 12 months or less at the effective date.

We lease a 61,208 square foot mixed office and warehouse facility in Golden Valley, Minnesota. The lease has a term of 91 months and expires on July 31, 2026. The lease contains a rent escalation clause, one three year renewal option and incentives. Rental expense, including the effects of lease incentives, is recognized on a straight-line basis over the term of the lease. We are also required to pay insurance, property taxes and other operating expenses related to the leased facility which are not fixed or tied to an index. 

We lease a 19,805 square foot mixed office and warehouse facility in Singapore. The lease expires in July 2020, contains a rent escalation clause and one three year renewal option. We also have operating leases in the United Kingdom and China, which expire May 2023 and November 2020, respectively. We did not enter into any new leases in the three months ended March 31, 2019.

The components of our costs for operating leases in the three months ended March 31, 2019 are as follows: 

Component	(In thousands)
Operating lease cost	$	180
Variable lease cost	67
Short-term lease cost	2
Total	$	249

Variable lease costs generally consists of real estate taxes and insurance for leased facilities which are paid based on actual costs incurred by the lessor.

At March 31, 2019, the future maturities of lease liabilities are as follows: 

Twelve months ending March 31,	(In thousands)
2020	$	688
2021	711
2022	615
2023	630
2024	646
2025 & Thereafter	1,571
Total lease payments		4,861
Less: amount representing interest	1,016
Present value of operating lease liabilities	$	3,845

At March 31, 2019, the weighted average remaining term for our operating leases is 6.56 years, and the weighted average discount rate applied to our operating leases was 5.73%.

Cash paid for amounts included in the measurement of operating lease liabilities in the three months ended March 31, 2019 was $98,000. Incentives recorded as leasehold improvements in the three months ended March 31, 2019 were $691,000.