Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases Leases
The Company is a lessee of corporate office, laboratory space, and equipment throughout the world, nearly all of which are classified as operating leases expiring at various dates. The Company determines if an arrangement qualifies as a lease at lease inception. Leases with an initial term of 12 months or less are not recorded in the balance sheet. Operating lease liabilities are recorded based on the present value of the future lease payments over the lease term, assessed as of the commencement date. The Company’s real estate leases, which are comprised primarily of office and laboratory space, represent the vast majority of our operating lease liabilities and generally have a lease term between 1 and 10 years. The remaining leases consist primarily of machinery and equipment used in the lab and office equipment, each with various lease terms. The vast majority of the Company's leases are comprised of fixed lease payments. Certain real estate leases also include executory costs such as common area maintenance (non-lease component), as well as property insurance and property taxes (non-components). Lease payments, which may include lease components, non-lease components and non-components, are included in the measurement of the Company’s lease liabilities to the extent that such payments are either fixed amounts or variable amounts based on a rate or index (fixed in substance) as stipulated in the lease contract. Any actual costs in excess of such amounts are expensed as incurred as variable lease cost.
Substantially all of our operating lease agreements do not specify an implicit borrowing rate, and as such, the Company utilizes its incremental borrowing rate by lease term in order to calculate the present value of our future lease payments. The discount rate represents a risk-adjusted rate on a secured basis, and is the rate at which the Company would borrow funds to satisfy the scheduled lease liability payment streams commensurate with the lease term. On January 1, 2019, the discount rate used on existing leases at adoption was determined based on the remaining lease term using available data as of that date. For new or renewed leases starting in 2019, the discount rate is determined using available data at lease commencement and based on the lease term.
Some of the Company's lease agreements, primarily related to real estate, include options for the Company to either renew (extend) or early terminate the lease. Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years. Renewal options are reviewed at lease commencement to determine if such options are reasonably certain of being exercised, which could impact the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, or specific characteristics unique to the particular lease that would make it reasonably certain that we would exercise such option. In most cases, the Company has concluded that renewal and early termination options are not reasonably certain of being exercised by the Company (and thus not included in our ROU asset and lease liability) unless there is an economic, financial or business reason to do so.
Operating Leases
For the three months ended March 31, 2019, total operating lease cost was $1.5 million, which includes an immaterial amount of variable lease cost, and is recorded in cost of revenue and general and administrative expenses, depending on the nature of the leased asset. Other than variable lease cost, operating lease cost is recognized on a straight-line basis over the lease term. The following summarizes: (i) the future minimum undiscounted lease payments under non-cancelable leases for the remainder of 2019 as well as each of the next five years and thereafter, incorporating the practical expedient to account for lease and non-lease components as a single lease component for our existing real estate leases, and (ii) a reconciliation of the undiscounted lease payments to the present value of the lease liabilities recognized as of March 31, 2019 (in thousands):

Year Ended December 31, Operating Leases
2019 (excluding the three months ended March 31, 2019) $ 4,043 
2020 2,833 
2021 2,811 
2022 2,121 
2023 2,032 
2024 1,993 
Thereafter 12,377 
Total future minimum lease payments 28,210 
Less imputed interest (7,942)
Total present value of future minimum lease payments $ 20,268 
The following summarizes additional supplemental data related to our operating leases:

Three Months Ended March 31, 2019: (in thousands)
Operating cash flows from operating leases $ 1,257 
Right-of-use assets obtained in exchange for operating lease liabilities $ 11,169 
As of March 31, 2019:
Weighted Average Remaining Lease Term (years) 9.11
Weighted Average Discount Rate 6.4  %

Lease contracts that we have executed but which have not yet commenced as of March 31, 2019 are excluded from the tables above.
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year would have been as follows (in thousands):
Years ending December 31,
2019 $ 5,247 
2020 2,798 
2021 1,082 
2022 453 
2023 92 
Thereafter — 
Total minimum lease payments $ 9,672