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Leases
 6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases Leases
The Company's lease portfolio consists primarily of office space, manufacturing facilities and fleet vehicles. All of the Company's leases are classified as operating leases, except for the Company's corporate headquarters lease, which is classified as a finance lease. The terms of the Company's lease agreements that have commenced range from less than one year to ten years, ten months. In its assessment of the term of each such lease, the Company has not included any options to extend or terminate the lease due to the absence of economic incentives in its lease agreements. Leases that qualify for treatment as a short-term lease are expensed as incurred. These short-term leases are not material to the Company's financial position. Furthermore, the Company does not separate lease and non-lease components for all classes of underlying assets. The Company's leases do not contain residual value guarantees and it does not sublease any of its leased assets.

The Company outsources its manufacturing operations to CMOs. Upon review of the agreements with its CMOs, the Company determined that these contracts contain embedded leases for dedicated manufacturing facilities. The Company obtains substantially all of the economic benefits from the use of the manufacturing facilities, has the right to direct how and for what purpose the facility is used throughout the period of use, and the supplier does not have the right to change the operating
instructions of the facility. The operating lease right-of-use assets and corresponding lease liabilities associated with the manufacturing facilities is the sum of the minimum guarantees over the life of the production contracts.

The table below summarizes the Company's total lease costs included in its consolidated financial statements, as well as other required quantitative disclosures (in thousands).
Three Months EndedSix Months Ended
June 30, 2020June 30, 2020
Finance lease cost
Amortization of right-of-use assets$361  $720  
Interest on lease liabilities432  871  
Total finance lease cost$793  $1,591  
Operating lease cost4,079  6,886  
Total lease cost$4,872  $8,477  
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases$432  $871  
Operating cash flows for operating leases$4,075  $6,913  
Financing cash flows from finance leases$298  $590  
Weighted average remaining lease term - finance leases10.1 years
Weighted average remaining lease term - operating leases4.7 years
Weighted average discount rate - finance leases8.6 %
Weighted average discount rate - operating leases7.4 %

In addition to the operating lease costs disclosed above, the Company also records variable consideration for variable lease payments in excess of fixed fees or minimum guarantees. Variable consideration related to the Company's leasing arrangements was $1.0 million and $1.1 million for the three and six months ended June 30, 2020, respectively. Variable costs related to CMO manufacturing agreements have been classified within inventory in the Company's consolidated balance sheet, while the variable costs related to other leasing arrangements have been classified within operating expenses in the Company's consolidated statements of comprehensive loss.

The table below summarizes the supplemental noncash disclosures of the Company's leases included in its consolidated financial statements (in thousands).
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Finance right-of-use assets obtained in exchange for lease obligations$—  $—  $—  $—  
Operating right-of-use assets obtained in exchange for lease $183  $—  $205  $47,396  
In addition to the Company's lease agreements that have previously commenced and are reflected in the consolidated financial statements, the Company has entered into additional lease agreements that have not yet commenced. The Company entered into certain agreements with Patheon related to increasing its long-term production capacity for ARIKAYCE commercial inventory. The Company has determined that these agreements with Patheon contain an embedded lease for the manufacturing facility and the specialized equipment contained therein. Costs incurred by the Company under these additional agreements of $22.1 million have been classified within other assets in the Company's consolidated balance sheet. Upon the commencement date, prepaid costs and minimum guarantees specified in the agreement will be combined to establish an operating lease ROU asset and operating lease liability.
Leases Leases
The Company's lease portfolio consists primarily of office space, manufacturing facilities and fleet vehicles. All of the Company's leases are classified as operating leases, except for the Company's corporate headquarters lease, which is classified as a finance lease. The terms of the Company's lease agreements that have commenced range from less than one year to ten years, ten months. In its assessment of the term of each such lease, the Company has not included any options to extend or terminate the lease due to the absence of economic incentives in its lease agreements. Leases that qualify for treatment as a short-term lease are expensed as incurred. These short-term leases are not material to the Company's financial position. Furthermore, the Company does not separate lease and non-lease components for all classes of underlying assets. The Company's leases do not contain residual value guarantees and it does not sublease any of its leased assets.

The Company outsources its manufacturing operations to CMOs. Upon review of the agreements with its CMOs, the Company determined that these contracts contain embedded leases for dedicated manufacturing facilities. The Company obtains substantially all of the economic benefits from the use of the manufacturing facilities, has the right to direct how and for what purpose the facility is used throughout the period of use, and the supplier does not have the right to change the operating
instructions of the facility. The operating lease right-of-use assets and corresponding lease liabilities associated with the manufacturing facilities is the sum of the minimum guarantees over the life of the production contracts.

The table below summarizes the Company's total lease costs included in its consolidated financial statements, as well as other required quantitative disclosures (in thousands).
Three Months EndedSix Months Ended
June 30, 2020June 30, 2020
Finance lease cost
Amortization of right-of-use assets$361  $720  
Interest on lease liabilities432  871  
Total finance lease cost$793  $1,591  
Operating lease cost4,079  6,886  
Total lease cost$4,872  $8,477  
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for finance leases$432  $871  
Operating cash flows for operating leases$4,075  $6,913  
Financing cash flows from finance leases$298  $590  
Weighted average remaining lease term - finance leases10.1 years
Weighted average remaining lease term - operating leases4.7 years
Weighted average discount rate - finance leases8.6 %
Weighted average discount rate - operating leases7.4 %

In addition to the operating lease costs disclosed above, the Company also records variable consideration for variable lease payments in excess of fixed fees or minimum guarantees. Variable consideration related to the Company's leasing arrangements was $1.0 million and $1.1 million for the three and six months ended June 30, 2020, respectively. Variable costs related to CMO manufacturing agreements have been classified within inventory in the Company's consolidated balance sheet, while the variable costs related to other leasing arrangements have been classified within operating expenses in the Company's consolidated statements of comprehensive loss.

The table below summarizes the supplemental noncash disclosures of the Company's leases included in its consolidated financial statements (in thousands).
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Finance right-of-use assets obtained in exchange for lease obligations$—  $—  $—  $—  
Operating right-of-use assets obtained in exchange for lease $183  $—  $205  $47,396  
In addition to the Company's lease agreements that have previously commenced and are reflected in the consolidated financial statements, the Company has entered into additional lease agreements that have not yet commenced. The Company entered into certain agreements with Patheon related to increasing its long-term production capacity for ARIKAYCE commercial inventory. The Company has determined that these agreements with Patheon contain an embedded lease for the manufacturing facility and the specialized equipment contained therein. Costs incurred by the Company under these additional agreements of $22.1 million have been classified within other assets in the Company's consolidated balance sheet. Upon the commencement date, prepaid costs and minimum guarantees specified in the agreement will be combined to establish an operating lease ROU asset and operating lease liability.