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Leases

3 Months Ended

Mar. 31, 2019

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our condensed consolidated balance sheets. Leases with an initial term greater than 12 months are recognized in our condensed consolidated balance sheets based on lease classification as either operating or financing. Operating leases are included in operating lease assets, accrued liabilities and operating lease liabilities. Finance leases are included in property and equipment, current portion of long-term debt, and long-term debt. Some of our lease agreements include lease and non-lease components for which we have elected to not separate for all classes of underlying assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We sublease certain real estate to third parties when we have no future use for the property.

Our lease portfolio primarily consists of operating leases for certain manufacturing facilities, warehouses, service facilities, office spaces, equipment and vehicles. Operating lease Right of Use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments at the commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our leases have remaining terms of 1 year to 15 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease ROU asset also includes any upfront lease payments

made and excludes lease incentives and initial direct costs incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The following table summarizes the supplemental balance sheet information related to lease as of March 31, 2019 (in thousands, unaudited):



		As of
	Classification	March 31, 2019
Assets
Operating lease assets	Operating lease assets	55,408
Finance lease assets	Property and equipment, net of accumulated depreciation	903
Total lease assets		56,311
Liabilities
Current
Operating	Accrued liabilities	13,670
Finance	Current portion of long-term debt	108
Noncurrent
Operating	Operating lease liabilities	55,952
Finance	Long-term debt, net of current portion	687
Total lease liabilities		70,417

The following table summarizes the components of lease expenses for the three months ended March 31, 2019 (in thousands, unaudited):



Lease Cost	Classification	Three Months Ended March 31, 2019
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	4,140
Finance lease cost
Amortization of leased assets	Selling, general and administrative expenses	72
Interest on lease liabilities	Interest expense	16
Sublease income	Cost of sales and Selling, general and administrative expenses	(209		)
Net lease cost		$	4,019

The maturities of lease liabilities as of March 31, 2019 are as follows (in thousands, unaudited):



	Operating Leases			Finance Leases			Total
Remainder of 2019	$	13,352		$	316		$	13,668
2020	15,614			349			15,963
2021	13,278			349			13,627
2022	9,428			53			9,481
2023	6,266			7			6,273
2024	5,388			—			5,388
Thereafter	24,341			—			24,341
Total lease payments	87,667			1,074			88,741
Less: present value discount	(18,045		)	(279		)	(18,324		)
Present value of lease liabilities	$	69,622		$	795		$	70,417

The following table summarizes the weighted-average remaining lease term and weighted average discount rates related to leases as of March 31, 2019:



Lease Term and Discount Rate	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases	7.07 years
Financing leases	3.20 years
Weighted-average discount rate
Operating leases	6.58	%
Financing leases	6.58	%

The following table summarizes the supplemental cash flow information related to leases as of March 31, 2019:



	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,755
Operating cash flows from finance leases	16
Financing cash flows from finance leases	1,063
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases	6,568
Finance leases	453
Noncash activities from adoption of ASC 842 as of January 1, 2019
Prepaid expenses and other current assets	$	(884	)
Operating lease assets	$	54,069
Operating lease liabilities	$	64,506
Accrued liabilities	$	(11,321	)

Leases