OPKO Health, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

3 Months Ended

Mar. 31, 2020

We have operating leases for office space, laboratory operations, research and development facilities, manufacturing locations, warehouses and certain equipment. We determine if a contract contains a lease at inception or modification of a contract. Our leases generally do not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. Many of our leases contain rental escalation, renewal options and/or termination options that are factored into our determination of lease payments as appropriate. Variable lease payment amounts that cannot be determined at the commencement of the lease are not included in the right-to-use assets or liabilities.

The following table presents the lease balances within the Condensed Consolidated Balance Sheet as of March 31, 2020:



(in thousands)	Classification on the Balance Sheet	March 31, 2020			December 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	39,793		$	39,380
Finance lease assets	Property, plant and equipment, net	6,087			6,789

Liabilities
Current
Operating lease liabilities	Current maturities of operating leases	11,480			12,038
Accrued expenses	Current maturities of finance leases	2,598			2,743
Long-term
Operating lease liabilities	Operating lease liabilities	28,669			27,665
Other long-term liabilities	Finance lease liabilities	$	3,489		$	4,046

Weighted average remaining lease term
Operating leases		5.6 years			5.6 years
Finance leases		2.4 years			2.6 years
Weighted average discount rate
Operating leases		6.3		%	6.3		%
Finance leases		3.6		%	3.0		%

The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on our Condensed Consolidated Balance Sheet as of March 31, 2020:



(in thousands)	Operating		Finance
April 1, 2020 through December 31, 2020	$	9,601	$	2,122
2021	7,079		2,186
2022	6,108		1,171
2023	5,457		586
2024	4,297		242
Thereafter	17,189		—
Total undiscounted future minimum lease payments	49,731		6,307
Less: Difference between lease payments and discounted lease liabilities	9,582		220
Total lease liabilities	$	40,149	$	6,087

Expense under operating leases and finance leases was $4.6 million and $0.7 million, respectively, for the three months ended March 31, 2020, which includes $0.8 million of variable lease costs. Expense under operating leases and finance leases was $5.7 million and $1.7 million, respectively, for the three months ended March 31, 2019, which includes $1.7 million of variable lease costs. Operating lease costs and finance lease costs are included within Operating loss in the Condensed Consolidated Statement of Operations. Short-term lease costs were not material.

Supplemental cash flow information is as follows:



(in thousands)	For the three months ended March 31,
	2020		2019
Operating cash out flows from operating leases	$	4,698	$	5,742
Operating cash out flows from finance leases	45		191
Financing cash out flows from finance leases	493		660
Total	$	5,236	$	6,593