Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.21.2
Leases
9 Months Ended
Sep. 30, 2021
Leases [Abstract]  
Leases Leases
We lease certain office facilities and equipment primarily under various operating leases. Our leases have remaining contractual terms up to ten years, some of which include options to extend the leases for up to five years. Our lease agreements do not contain any material residual value guarantees, material restrictive covenants, or material termination options. Our operating lease costs are primarily related to facility leases for administration offices and research and development facilities, and our finance leases are immaterial.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments
made and adjusted for lease incentives and other items as prescribed by ASC Topic 842, Leases. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

In addition to base rent, certain of our operating leases require variable payments, such as insurance and common area maintenance. These variable lease costs, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Operating and Finance Lease Assets and Liabilities (in thousands):

Assets September 30, 2021 December 31, 2020
Operating lease assets $ 12,951  $ 6,892 
Finance lease assets 16,795  15,842 
Total lease assets $ 29,746  $ 22,734 
Liabilities
Current operating lease liabilities $ 2,181  $ 1,885 
Current finance lease liabilities 45  6,593 
2,226  8,478 
Long-term operating lease liabilities 11,467  $ 5,643 
Long-term finance lease liabilities 72  $ 112 
Total lease liabilities $ 13,765  $ 14,233 

During the three and nine months ended September 30, 2021, we entered into several new lease agreements including our Emeryville headquarter expansion and a new Icagen office lease, which resulted an increase in operating lease assets and liabilities of $8.7 million and $9.2 million, respectively, for the portion of the leases with a starting accounting lease commencement date during the period.

Maturity of Operating Lease Liabilities as of September 30, 2021 (in thousands):

Maturity Dates Operating Leases
Remaining three months ending December 31, 2021 $ 690 
2022 357 
2023 2,279 
2024 2,114 
2025 1,990 
Thereafter 9,081 
Total lease payments 16,511 
Less imputed interest (2,864)
Present value of lease liabilities 13,647 
Leases Leases
We lease certain office facilities and equipment primarily under various operating leases. Our leases have remaining contractual terms up to ten years, some of which include options to extend the leases for up to five years. Our lease agreements do not contain any material residual value guarantees, material restrictive covenants, or material termination options. Our operating lease costs are primarily related to facility leases for administration offices and research and development facilities, and our finance leases are immaterial.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease asset, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments
made and adjusted for lease incentives and other items as prescribed by ASC Topic 842, Leases. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

In addition to base rent, certain of our operating leases require variable payments, such as insurance and common area maintenance. These variable lease costs, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Operating and Finance Lease Assets and Liabilities (in thousands):

Assets September 30, 2021 December 31, 2020
Operating lease assets $ 12,951  $ 6,892 
Finance lease assets 16,795  15,842 
Total lease assets $ 29,746  $ 22,734 
Liabilities
Current operating lease liabilities $ 2,181  $ 1,885 
Current finance lease liabilities 45  6,593 
2,226  8,478 
Long-term operating lease liabilities 11,467  $ 5,643 
Long-term finance lease liabilities 72  $ 112 
Total lease liabilities $ 13,765  $ 14,233 

During the three and nine months ended September 30, 2021, we entered into several new lease agreements including our Emeryville headquarter expansion and a new Icagen office lease, which resulted an increase in operating lease assets and liabilities of $8.7 million and $9.2 million, respectively, for the portion of the leases with a starting accounting lease commencement date during the period.

Maturity of Operating Lease Liabilities as of September 30, 2021 (in thousands):

Maturity Dates Operating Leases
Remaining three months ending December 31, 2021 $ 690 
2022 357 
2023 2,279 
2024 2,114 
2025 1,990 
Thereafter 9,081 
Total lease payments 16,511 
Less imputed interest (2,864)
Present value of lease liabilities 13,647