LEASES LEASES (Notes)

9 Months Ended

Sep. 30, 2020

We have entered into a number of facility leases to support our research and development activities, sales operations, and other corporate and administrative functions in North America, Europe, and Asia, which qualify as operating leases under U.S. GAAP. We also have a limited number of equipment leases that qualify as either operating or finance leases. We determine if contracts with vendors represent a lease or have a lease component under U.S. GAAP at contract inception. Our leases have remaining terms ranging from less than one year to eight years. Some of our leases include options to extend or terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Operating lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. As our leases generally do not provide an implicit rate, we

use an estimated incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular location and currency environment. We used an average incremental borrowing rate of 6% as of January 1, 2019, the adoption date of ASC 842, for our leases that commenced prior to that date. The operating leases are included in “Right of use assets,” “Accrued expenses and other current liabilities,” and “Long-term lease liabilities” on our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019.

Finance lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. Each lease agreement provides an implicit discount rate used to determine the present value of future payments. The weighted-average discount rate is 2.3% as of September 30, 2020, the commencement date for our leases. The finance leases are included in “Other assets” and “Other long-term liabilities” on our condensed consolidated balance sheet as of September 30, 2020.

The weighted-average remaining lease term of our operating leases is 6.6 years as of September 30, 2020. Lease costs for minimum lease payments is recognized on a straight-line basis over the lease term. Our total operating lease costs were $2.2 million and $2.4 million for the three months ended September 30, 2020 and September 30, 2019, respectively. Our total operating lease costs were $7.2 million and $7.2 million for the nine months ended September 30, 2020 and September 30, 2019 respectively. Related cash payments were $2.0 million and $2.4 million for the three months ended September 30, 2020 and September 30, 2019, respectively. Related cash payments were $6.9 million and $7.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. For the nine months ended September 30, 2020, right of use assets obtained in exchange for new operating lease liabilities was $5.7 million. Operating lease costs are included within research and development, marketing and selling, and general and administrative lines on the condensed consolidated statements of operations, and the related cash payments are included in the operating cash flows on the condensed consolidated statements of cash flows. Finance lease costs, short-term lease costs, variable lease costs, and sublease income are not material.

The table below reconciles the undiscounted future minimum lease payments for operating and finance leases under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheets as of September 30, 2020 (in thousands):


Year Ending December 31,	Operating Leases		Finance Leases
2020 (excluding nine months ended September 30, 2020)	$	2,067	$	12
2021	7,590		289
2022	6,472		255
2023	5,579		226
2024	4,875		—
Thereafter	16,637		—
Total future minimum lease payments	$	43,220	$	782
Less effects of discounting	(7,837)		(27)
Total lease liabilities	$	35,383	$	755

Supplemental balance sheet information related to leases was as follows (in thousands):


Operating Leases	September 30, 2020
Right of use assets	$	30,408

Accrued expenses and other current liabilities	(5,910)
Operating lease liabilities (LT)	(29,473)
Total lease liabilities	$	(35,383)


Finance Leases	September 30, 2020
Other assets	$	737

Accrued expenses and other current liabilities	(220)
Other long-term liabilities	(535)
Total lease liabilities	$	(755)