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Leases | 3 Months Ended
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Mar. 31, 2019
Leases [Abstract] |
Leases | 12. LEASES Operating Lease Arrangements We have operating leases for office space, automobiles, and other equipment in the United States and in various international locations in which we do business. We also have other contracts such as, manufacturing agreements and service agreements, which we review to determine if they contain an embedded lease. We specifically review these other contracts to determine whether we have the right to substantially all of the economic benefit from the use of any specified assets or the right to direct the use of any specified assets, either of which would indicate the existence of a lease. As of March 31, 2019, our leases have remaining lease terms of one month to six years, some of which include options to extend the leases for up to 3 years, and some of which include options to terminate the leases within 3 months. For those leases that are reasonably assured to be renewed, we have included the option to extend as part of our right of use asset and right of use liability included on the Consolidated Balance Sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expense for these leases is recognized on a straight-line basis over the lease term. Lease expense related to these short-term leases was $0.2 million for the three months ended March 31, 2019, and is included in selling, general and administrative expenses on the Consolidated Statement of Income. For lease agreements entered into or reassessed after the adoption of Topic 842, we elected the practical expedient which allows us to not separate lease and non-lease components. None of our lease agreements contain any material residual value guarantees or material restrictive covenants. Supplemental balance sheet information related to operating leases is as follows:
|  |  |  | March 31, |  |  | January 1, |
(In thousands) |  | Classification |  | 2019 |  |  | 2019 |
Assets |  |  |  |  |  |  |  |  |  |
Operating lease asset |  | Other assets |  | $ | 9,502 |  |  | $ | 10,322 |
Total lease assets |  |  |  | $ | 9,502 |  |  | $ | 10,322 |
Liabilities |  |  |  |  |  |  |  |  |  |
Current operating lease liability |  | Accrued expenses |  | $ | 2,718 |  |  | $ | 2,948 |
Non-current operating lease liability |  | Other non-current liabilities |  |  | 6,801 |  |  |  | 7,374 |
Total lease liability |  |  |  | $ | 9,519 |  |  | $ | 10,322 |
The components of lease expense included in the Consolidated Statement of Income for the three months ended March 31, 2019 are as follows:
(In thousands) |  | Classification |  | Three Months Ended March 31, 2019 |
Operating lease expense |  | Selling, general and administrative expenses |  | $ | 349 |
Operating lease expense |  | Research and development expenses |  |  | 454 |
Operating lease expense |  | Cost of sales |  |  | 16 |
Total lease expense |  |  |  | $ | 819 |
As of March 31, 2019, the maturity of lease liabilities included on the Consolidated Balance Sheet are as follows:
(In thousands) |  | Amount |
Remainder of 2019 |  | $ | 2,363 |
2020 |  |  | 2,185 |
2021 |  |  | 2,032 |
2022 |  |  | 1,544 |
2023 |  |  | 1,163 |
Thereafter |  |  | 747 |
Total lease payments |  |  | 10,034 |
Less: Interest |  |  | (515 | )
Present value of lease liabilities |  | $ | 9,519 |
Operating lease payments include $1.2 million related to options to extend lease terms that are reasonably certain of being exercised and there are no legally binding leases that have not yet commenced. As of December 31, 2018, future minimum rental payments under non-cancelable operating leases, including renewals determined to be reasonably assured as of December 31, 2018, with original maturities of greater than 12 months are as follows:
(In thousands) |  | Amount (1) |
2019 |  | $ | 3,873 |
2020 |  |  | 3,580 |
2021 |  |  | 2,771 |
2022 |  |  | 2,053 |
2023 |  |  | 1,317 |
Thereafter |  |  | 762 |
Total |  | $ | 14,356 |
| (1) | Certain renewal options were subsequently determined to not be reasonably assured of renewal upon adoption of the new lease standard.
Our leases do not provide an implicit borrowing rate and therefore we use an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We used the incremental borrowing rate on January 1, 2019, for operating leases that commenced on or prior to that date. The incremental borrowing rate was determined on a portfolio basis by grouping leases with similar terms as well as grouping leases based on a U.S. dollar or Euro functional currency. The actual rate is then determined based on a credit spread over LIBOR as well as the Bloomberg Curve Matrix for the U.S. Communications section.
|  | As of March 31, 2019 |
Weighted average remaining lease term (years) |  |  |  |
Operating leases with USD functional currency |  |  | 3.0 |
Operating leases with Euro functional currency |  |  | 5.1 |
Weighted average discount rate |  |  |  |
Operating leases with USD functional currency |  |  | 4.61 | %
Operating leases with Euro functional currency |  |  | 1.85 | %
Supplemental cash flow information related to leases were as follows:
(In thousands) |  | As of March 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities / assets |  |  |  |
Cash used in operating activities related to operating leases |  |  | $ (811 | )
Right-of-use assets obtained in exchange for lease obligations |  |  | $ 10,387 |
Sales-Type Lease Arrangements We are the lessor in sales-type lease arrangements for network equipment, which have initial terms of up to five years. Our sales-type lease arrangements contain either a provision whereby the network equipment reverts back to us upon the expiration of the lease or a provision that allows the lessee to purchase the network equipment at a bargain purchase amount. In addition, our sales-type lease arrangements do not contain any residual value guarantees or material restrictive covenants. The allocation of the consideration between lease and non-lease components is determined by standalone sales price by component. The net investment in sales-type leases consists of lease receivables less unearned income. Collectability of sales-type leases is evaluated periodically at an individual customer level. At March 31, 2019 and December 31, 2018, we had no allowance for credit losses for our net investment in sales-type leases. As of March 31, 2019 and December 31, 2018, the components of the net investment in sales-type leases were as follows:
|  | March 31, |  |  | December 31, |
(In thousands) |  | 2019 |  |  | 2018 |
Current minimum lease payments receivable (included in other receivables) |  | $ | 9,349 |  |  | $ | 11,339 |
Non-current minimum lease payments receivable (included in other assets) |  |  | 1,494 |  |  |  | 1,670 |
Total minimum lease payments receivable |  |  | 10,843 |  |  |  | 13,009 |
Less: Current unearned revenue |  |  | 573 |  |  |  | 631 |
Less: Non-current unearned revenue |  |  | 343 |  |  |  | 473 |
Net investment in sales-type leases |  | $ | 9,927 |  |  | $ | 11,905 |
The components of sales-type lease gross profit recognized at the lease commencement date and interest income, included in the Consolidated Statement of Income for the three months ended March 31, 2019 are as follows:
(In thousands) |  | Classification |  | Three Months Ended March 31, 2019 |
Sales type leases |  | Sales - products |  | $ | 1,512 |
Sales type leases |  | Cost of sales - products |  |  | 591 |
Sales type leases |  | Gross profit |  | $ | 921 |
Sales type leases |  | Interest and dividend income |  | $ | 87 |
Future minimum lease payments to be received from sales-type leases as of March 31, 2019 are as follows:
(In thousands) |  | Amount (1) |
Remainder of 2019 |  | $ | 9,005 |
2020 |  |  | 1,056 |
2021 |  |  | 493 |
2022 |  |  | 209 |
2023 |  |  | 78 |
Thereafter |  |  | 2 |
Total |  | $ | 10,843 |
| (1) | A significant portion of these future minimum lease payments relates to one of our customers who filed for Chapter 11 bankruptcy in February 2019. In March 2019, we reached an agreement with this customer and they continue to make payments as outlined in the lease agreements. Therefore, we believe there is no potential risk of uncollectibility related to these outstanding balances.

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