Leases

6 Months Ended

Sep. 30, 2019

We lease real estate and equipment for use in our operations. These leases have lease terms of 1 to 10 years, some of which include options to terminate or extend leases for up to 1 to 6 years or on a month-to-month basis. The exercise of lease renewal options is at our sole discretion and our lease ROU assets and liabilities reflect only the options we are reasonably certain that we will exercise.

We determine if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether we have the right to control the identified asset. 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. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.

Variable lease payments, which do not vary based on an index or rate, are excluded from the ROU asset and lease liability determination. Variable lease payments are typically usage-based and are recorded in the period in which the obligation for those payments is incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the implicit rate in our leases is unknown, we used our incremental borrowing rate based on the information available at the date of adoption for existing leases and at the lease commencement date for new leases in determining the present value of future lease payments. We give consideration to our credit risk, term of the lease, total lease payments and adjust for the impacts of collateral, as necessary, when calculating our incremental borrowing rates. Rent expense for our operating leases is recognized on a straight-line basis over the lease term.

For the measurement and classification of our lease agreements, we group lease and non-lease components into a single lease component for all underlying asset classes. We have also elected to exclude any leases within our existing classes of assets with a term of twelve months or less.

The components of lease expense for the three and six months ended September 30, 2019 was as follows:



(In thousands)	Three Months Ended September 30, 2019			Six Months Ended September 30, 2019
Operating lease cost	$	2,242		$	3,458
Short term lease cost	27			50
Variable lease cost	15,696			32,295
Sublease income	(860		)	(1,774		)
Total net lease cost	$	17,105		$	34,029

As of September 30, 2019, the maturities of operating lease liabilities were as follows:



(In thousands)
Year Ending March 31,
2020 (Remaining six months ending March 31, 2020)	$	4,775
2021	7,053
2022	6,529
2023	6,304
2024	6,294
Thereafter	9,095
Total undiscounted lease payments	40,050
Less imputed interest	(5,577		)
Total present value of lease payments	$	34,473

As of September 30, 2019, the weighted average remaining lease term was 5.61 years and the weighted average discount rate used to determine the operating lease liability was 5.27%.

The following table summarizes future minimum lease payments for our operating leases as of March 31, 2019, before adoption of Topic 842:



(In thousands)	Facilities		Equipment		Total
Year Ending March 31,
2020	$	2,828	$	314	$	3,142
2021	2,633		248		2,881
2022	2,265		213		2,478
2023	1,684		105		1,789
2024	1,705		—		1,705
Thereafter	6,780		—		6,780
	$	17,895	$	880	$	18,775

On May 13, 2019, we entered into a Master Logistics Services Agreement with GEODIS Logistics LLC (“GEODIS”), pursuant to which GEODIS serves as a new third party logistics provider. The agreement has an initial term of five years with an option to renew for an additional five year term. Under the Master Logistics Services Agreement, we have authorized GEODIS to lease a facility under a five year term. The lease commenced in July 2019 and the lease and non-lease components are recorded in our second quarter fiscal year 2020 financial statements. The ROU asset and operating lease liability at lease commencement was $18.9 million.