Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases of Lessee Disclosure [Text Block]

LEASES

Adoption of ASC Topic 842, "Lease Accounting"

We adopted ASU No. 2016-02, Leases (ASC Topic 842), effective January 1, 2019 on a modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019. We elected the 'package of practical expedients', which permitted us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize right-of-use ("ROU") assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. Furthermore, we elected the practical expedient to not separate lease and non-lease components for all of our leases, non-lease components are primarily common area maintenance charges that we combine with the lease component when applying this ASU.

The impact of adopting this standard was the recognition of ROU assets and lease liabilities for our operating leases of $40.4 million as of January 1, 2019. The adoption of ASC 842 did not have a material impact on our consolidated earnings or on our cash flows.

Leases

We determine if an arrangement is a lease at inception. Our operating leases with a term greater than one year are included in operating lease ROU assets, accrued liabilities, and other long-term liabilities on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Most of our leases do not provide an implicit rate, therefore we use our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term based on the information available at commencement date. The operating lease ROU asset excludes initial direct costs incurred. Our lease terms include options to extend when it is reasonably certain that we will exercise that option. All of our operating leases have stated lease payments, which may include fixed rental increases. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have operating leases for corporate, R&D and sales and support offices, device service centers, distribution warehouses and certain equipment. Our leases have original lease terms of one year to fifteen years, some of which include options to extend the leases for up to an additional five years. For all of our leases, we do not include optional periods of extension in our current lease terms for the exercise of options to extend is not reasonably certain.

The following table presents the components of our lease cost (in thousands):



	For the year ended December 31, 2019
Operating lease cost	$	10,011

Short-term lease cost	322

Total lease cost	$	10,333

The following table presents the supplemental cash flow information related to our leases (in thousands):



	For the year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,344

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	3,230

The following table presents the supplemental balance sheet information related to our leases (in thousands, except lease term and discount rate):



	As of December 31, 2019
Operating leases
Operating lease right-of-use assets	$	34,465

Accrued liabilities	$	7,362
Other long-term liabilities	28,896
Total operating lease liabilities	$	36,258

Weighted Average Remaining Lease Term
Operating leases	6 years

Weighted Average Discount Rate
Operating leases	5.57		%

As of December 31, 2019, the maturities of our lease liabilities for each of the next five years are approximately (in thousands):



	Operating Leases
2020	$	8,850
2021	7,412
2022	6,621
2023	6,204
2024	5,896
Thereafter	7,765
Total Lease Payments	42,748
Less imputed interest	(6,490		)
Total	$	36,258

As of December 31, 2018, the maturities of our operating lease liabilities for each of the next five years were approximately (in thousands):



	Operating Leases
2019	$	8,326
2020	8,572
2021	6,489
2022	5,914
2023	5,615
Thereafter	13,235
Total Lease Payments⁽¹⁾	$	48,151

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⁽¹⁾The lease payment maturities as of December 31, 2018 are not calculated at present value.

During the third quarter 2019, we signed a ten-year lease for a 610,806 square foot warehouse. The commencement of the lease is not expected until the first quarter of 2020 subject to the completion of landlord build-outs which will make the space available for use. Over the ten-year lease term, we expect the lease payments to total at least $21.8 million.