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Leases And Other Commitments

12 Months Ended

Dec. 31, 2019



6. Leases And Other Commitments



Leases

We lease office, manufacturing and warehouse space facilities under various domestic and international operating leases that expire at various times through August 2026. Certain of our leases have renewal options which allow us to extend the lease term typically between three and five years per option and some of our leases have multiple options to extend. We have one finance lease for our manufacturing facility in Mesa, Arizona under a lease that expires in March 2028 with options to renew this lease for four additional five-year terms. Our facility leases generally provide for periodic rent increases and many contain escalation clauses. Certain leases also require us to pay taxes, insurance, and maintenance.

The remaining lease terms of our leases range from less than one year to approximately thirteen years; and represent the non-cancellable periods of the leases, including extension options that we determined are reasonably certain to be exercised.

We adopted ASC 842 utilizing the modified retrospective transition method through a $2.1 million cumulative-effect adjustment to accumulated deficit 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 and as such prior comparative periods have not been recast. 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 in our consolidated balance sheets at the beginning of the first quarter of 2019, with no material impact to our consolidated statement of operations.

Operating lease right-of-use assets and liabilities are presented separately in our consolidated balance sheets. Finance lease right-of-use assets are included in property and equipment and finance lease liabilities are included in accounts payable and accrued liabilities and in other long-term liabilities in our consolidated balance sheets.

As of December 31, 2019, the maturities of our operating and finance lease liabilities were as shown in the table below:



(In millions)	Operating Leases			Finance Leases
2020	$	17.4		$	1.3
2021	17.4			1.3
2022	14.6			1.4
2023	14.3			1.4
2024	12.5			1.5
Thereafter	23.9			13.9
Total future lease cost ⁽¹⁾	100.1			20.8
Less: Amount representing interest	(14.3		)	(5.8		)
Present value of future payments	85.8			15.0
Less: Short-term leases not recorded as a liability	0.2			—
Revised present value of future lease payments	86.0			15.0
Less: Current portion	(13.6		)	(0.6		)
Long-term portion	$	72.4		$	14.4

⁽¹⁾Total future lease cost excludes $5.5 million of legally binding minimum lease payments for leases signed but not yet commenced.

The components of lease expense for the twelve months ended December 31, 2019 were as follows:



	Twelve Months Ended December 31,
(In millions)	2019
Finance lease cost:
Amortization of right-of-use assets	$	1.1
Interest on lease liabilities	0.8
Operating lease cost	12.2
Short-term lease cost ⁽¹⁾	3.5
Variable lease cost ⁽²⁾	3.9
Total lease cost	$	21.5

⁽¹⁾ Short-term lease cost is primarily related to temporary office space associated with the transition of certain operations to the Philippines.

⁽²⁾ Variable lease costs are primarily related to common area maintenance charges and property taxes.

Prior to January 1, 2019, we recorded operating lease rent expense under ASC 840 on a straight-line basis over the non-cancellable lease term. Rent expense for the twelve months ended December 31, 2018 and 2017 was $12.5 million and $11.1 million, respectively.

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.



	Twelve Months Ended December 31,
(Dollars in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	14.3
Operating cash flows from finance leases	$	0.8
Financing cash flows from finance leases	$	0.5
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	80.6
Finance leases	$	15.5
Weighted average remaining lease term in years:
Operating leases	6.2
Finance leases	13.3
Weighted average discount rate:
Operating leases	5.0		%
Finance leases	5.0		%

Amortization of operating lease right-of-use asset included in cash flows from operating activities in the Consolidated Statements of Cash Flows was $9.1 million for the twelve months ended December 31, 2019.



Purchase Commitments

We are party to various purchase arrangements related to our manufacturing and research and development activities. As of December 31, 2019, we had approximately $165.8 million of open purchase orders and contractual obligations in the ordinary course of business, most of which are due within one year.

Leases And Other Commitments



6. Leases And Other Commitments



Leases