Leases

6 Months Ended

Jun. 30, 2019

NOTE 14 - LEASES

Effective January 1, 2019, we adopted ASU 2016-02, ASC 842, “Leases,” the new lease accounting standard, using the optional transition approach resulting in recognition of operating lease right-of-use (“ROU”) assets and lease liabilities of $18.2 million and $18.6 million, respectively, as well as a charge to eliminate previously deferred rent of $0.4 million.

The Company determines whether an arrangement is or contains a lease at the inception of the arrangement. Operating leases are included in other non-current assets, accrued expenses and other non-current liabilities in our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, net, short-term debt and long-term debt (less current portion) in our condensed 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 the lease payments over the lease term. Since we generally do not have access to the interest rate implicit in the lease, the Company uses our incremental borrowing rate (for fully collateralized debt) at the inception of the lease in determining the present value of the lease payments. The implicit rate is, however, used where readily available. Lease expense under operating leases is recognized on a straight-line basis over the term of the lease. Certain of our leases contain both lease and non-lease components, which are accounted for separately.

The Company has operating and finance leases for office facilities, a data center and certain equipment. The remaining terms of our leases range from over one year to just under nine years. Certain leases include options to extend the lease term for up to ten years, as well as options to terminate which have been excluded from the term of the lease since exercise of these options is not reasonably certain.

Lease expense, cash flow, operating and finance lease assets and liabilities, average lease term and average discount rate are as follows:

	June 30, 2019
	Three Months Ended			Six Months Ended
Lease Expense
Finance lease expense:
Amortization of right-of-use assets	$	487		$	1,003
Interest on lease liabilities		17			31
Operating lease expense		861			1,714
Total lease expense	$	1,365		$	2,748

Cash Flow Components
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from finance leases	$	17		$	31
Operating cash outflows from operating leases	$	835			1,663
Financing cash outflows from finance leases	$	329			654
Right-of-use assets obtained in exchange for new finance lease liabilities, net of terminations	$	(45	)		511
Right-of-use assets obtained in exchange for operating lease liabilities (including adoption impact of $18.2 million)	$	56			18,341


	June 30, 2019
Balance Sheet Information
Operating leases:
Other non-current assets	$	16,903
Accrued liabilities	$	(2,760	)
Other non-current liabilities		(14,554	)
Total operating lease liabilities	$	(17,314	)

Finance leases:
Property and equipment gross	$	4,612
Accumulated depreciation		(1,673	)
Property and equipment, net	$	2,939
Current portion of long-term debt	$	(708	)
Long-term debt		(1,626	)
Total finance lease liabilities	$	(2,334	)

Lease Term and Discount Rates
Weighted-average remaining lease term - finance leases (years)		2.6
Weighted-average remaining lease term - operating leases (years)		7.3
Weighted-average discount rate - finance leases		2.8	%
Weighted-average discount rate - operating leases		4.0	%

Summarized future minimum payments under our leases are as follows:

	June 30,
	2019
	Finance Leases			Operating Leases
Lease Maturities (in thousands)
Six remaining months of 2019	$	857		$	1,743
2020		836			3,282
2021		461			2,880
2022		238			2,458
2023		12			2,197
Thereafter		—			7,052
Total		2,404			19,612
Less: Imputed interest		(70	)		(2,298	)
Total lease liabilities, net of interest	$	2,334		$	17,314

	December 31,
	2018
	Operating Leases
Lease Maturities (in thousands)
2019		4,249
2020		3,232
2021		2,870
2022		2,635
2023		2,346
Thereafter		7,647
Total	$	22,979

Note: The 2018 disclosure includes certain non-lease components that have been excluded from our ASC 842 accounting and disclosures for 2019.