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Leases | 3 Months Ended
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Mar. 31, 2019
Leases [Abstract] |
Leases | Leases Impact of Adoption of ASC 842 We adopted ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) utilizing the modified retrospective transition method through a $2.1 million cumulative-effect adjustment to retained earnings at the beginning of the first quarter of 2019. We will continue to report financial information for fiscal years prior to 2019 under the previous lease accounting standards. We elected the package of practical expedients permitted under the transition guidance in the new standard, which allowed us to carry forward the historical classification of leases that were in place as of January 1, 2019. Under the previous lease accounting standards we were deemed the owner of our Mesa, Arizona building during the construction period. As a result of our adoption of ASC 842, we have de-recognized the estimated fair value of the building shell and the related lease liability as of December 31, 2018 and recorded the difference between the asset and liability as an adjustment to retained earnings at the beginning of the first quarter of 2019. In addition, as a result of our adoption of ASC 842 we recorded operating lease right-of-use assets of $26.7 million, finance lease right-of-use assets of $15.3 million, operating lease liabilities of $40.4 million and finance lease liabilities of $15.9 million at the beginning of the first quarter of 2019, with no material impact to our statement of operations. Information About Our Leases Our corporate headquarters and primary manufacturing facilities are located in San Diego, California. We lease approximately 219,000 square feet of space in San Diego under leases that expire in February and March 2022. We have the option to renew each of these leases for two additional five-year terms. In San Diego we also lease approximately 87,000 square feet of space under a lease that expires in February 2022 with no renewal options and approximately 132,600 square feet of space under a sublease that expires in January 2022. We lease approximately 148,800 square feet of space in Mesa, Arizona under a lease that expires in March 2028. We have the option to renew this lease for four additional five-year terms. We have also entered into other domestic and international operating lease agreements, primarily for office and warehouse space, that expire at various times through July 2026. The components of lease expense for the three months ended March 31, 2019 were as follows:
(In millions) | Three Months Ended March 31, 2019
Finance lease cost: |
Amortization of right-of-use assets | $ | 0.3 |
Interest on lease liabilities | 0.2 |
Operating lease cost | 2.5 |
Short-term lease cost | 1.3 |
Variable lease cost(1) | $ | 0.8 |
Total lease cost | $ | 5.1 |
(1) Variable lease costs represent payments that are dependent on a rate or index, or on usage of our facility leases and are primarily related to common area maintenance charges and property taxes. Other information related to leases was as shown in the table below. All figures include the leases recorded at the beginning of the first quarter of 2019 as a result of our adoption of ASC 842.
(Dollars in millions) | Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 4.6 |
Operating cash flows from finance leases | $ | 0.2 |
Financing cash flows from finance leases | $ | 0.1 |
Right-of-use assets obtained in exchange for lease liabilities: |
Operating leases | $ | 29.9 |
Finance leases | $ | 15.3 |
Weighted average remaining lease term in years: |
Operating leases | 3.3 |
Finance leases | 14.0 |
Weighted average discount rate: |
Operating leases | 5.0 | %
Finance leases | 5.0 | %
Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as shown in the table below. The current portion of finance leases are included in accounts payable and accrued liabilities and the long-term portion of finance leases are included in other long-term liabilities on our balance sheet as of March 31, 2019.
(In millions) | Operating Leases |  | Finance Leases
2019 | $ | 11.3 |  |  | $ | 1.0 |
2020 | 14.2 |  |  | 1.3 |
2021 | 14.5 |  |  | 1.3 |
2022 | 3.7 |  |  | 1.4 |
2023 | 1.6 |  |  | 1.4 |
Thereafter | 1.0 |  |  | 15.4 |
Total future lease cost | 46.3 |  |  | 21.8 |
Less: Amount representing interest | (3.6 | ) |  | (6.1 | )
Present value of future payments | 42.7 |  |  | 15.7 |
Less: Short-term leases not recorded as a liability | (0.9 | ) |  | — |
Revised present value of future lease payments | 41.8 |  | 15.7 |
Less: Current portion | (12.3 | ) |  | (0.5 | )
Long-term portion | $ | 29.5 |  |  | $ | 15.2 |
Leases | Leases Impact of Adoption of ASC 842 We adopted ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02) utilizing the modified retrospective transition method through a $2.1 million cumulative-effect adjustment to retained earnings at the beginning of the first quarter of 2019. We will continue to report financial information for fiscal years prior to 2019 under the previous lease accounting standards. We elected the package of practical expedients permitted under the transition guidance in the new standard, which allowed us to carry forward the historical classification of leases that were in place as of January 1, 2019. Under the previous lease accounting standards we were deemed the owner of our Mesa, Arizona building during the construction period. As a result of our adoption of ASC 842, we have de-recognized the estimated fair value of the building shell and the related lease liability as of December 31, 2018 and recorded the difference between the asset and liability as an adjustment to retained earnings at the beginning of the first quarter of 2019. In addition, as a result of our adoption of ASC 842 we recorded operating lease right-of-use assets of $26.7 million, finance lease right-of-use assets of $15.3 million, operating lease liabilities of $40.4 million and finance lease liabilities of $15.9 million at the beginning of the first quarter of 2019, with no material impact to our statement of operations. Information About Our Leases Our corporate headquarters and primary manufacturing facilities are located in San Diego, California. We lease approximately 219,000 square feet of space in San Diego under leases that expire in February and March 2022. We have the option to renew each of these leases for two additional five-year terms. In San Diego we also lease approximately 87,000 square feet of space under a lease that expires in February 2022 with no renewal options and approximately 132,600 square feet of space under a sublease that expires in January 2022. We lease approximately 148,800 square feet of space in Mesa, Arizona under a lease that expires in March 2028. We have the option to renew this lease for four additional five-year terms. We have also entered into other domestic and international operating lease agreements, primarily for office and warehouse space, that expire at various times through July 2026. The components of lease expense for the three months ended March 31, 2019 were as follows:
(In millions) | Three Months Ended March 31, 2019
Finance lease cost: |
Amortization of right-of-use assets | $ | 0.3 |
Interest on lease liabilities | 0.2 |
Operating lease cost | 2.5 |
Short-term lease cost | 1.3 |
Variable lease cost(1) | $ | 0.8 |
Total lease cost | $ | 5.1 |
(1) Variable lease costs represent payments that are dependent on a rate or index, or on usage of our facility leases and are primarily related to common area maintenance charges and property taxes. Other information related to leases was as shown in the table below. All figures include the leases recorded at the beginning of the first quarter of 2019 as a result of our adoption of ASC 842.
(Dollars in millions) | Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 4.6 |
Operating cash flows from finance leases | $ | 0.2 |
Financing cash flows from finance leases | $ | 0.1 |
Right-of-use assets obtained in exchange for lease liabilities: |
Operating leases | $ | 29.9 |
Finance leases | $ | 15.3 |
Weighted average remaining lease term in years: |
Operating leases | 3.3 |
Finance leases | 14.0 |
Weighted average discount rate: |
Operating leases | 5.0 | %
Finance leases | 5.0 | %
Future minimum lease payments under non-cancellable leases as of March 31, 2019 were as shown in the table below. The current portion of finance leases are included in accounts payable and accrued liabilities and the long-term portion of finance leases are included in other long-term liabilities on our balance sheet as of March 31, 2019.
(In millions) | Operating Leases |  | Finance Leases
2019 | $ | 11.3 |  |  | $ | 1.0 |
2020 | 14.2 |  |  | 1.3 |
2021 | 14.5 |  |  | 1.3 |
2022 | 3.7 |  |  | 1.4 |
2023 | 1.6 |  |  | 1.4 |
Thereafter | 1.0 |  |  | 15.4 |
Total future lease cost | 46.3 |  |  | 21.8 |
Less: Amount representing interest | (3.6 | ) |  | (6.1 | )
Present value of future payments | 42.7 |  |  | 15.7 |
Less: Short-term leases not recorded as a liability | (0.9 | ) |  | — |
Revised present value of future lease payments | 41.8 |  | 15.7 |
Less: Current portion | (12.3 | ) |  | (0.5 | )
Long-term portion | $ | 29.5 |  |  | $ | 15.2 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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