Company Quick10K Filing
Axcelis
Price18.38 EPS0
Shares34 P/E85
MCap622 P/FCF-1,802
Net Debt-162 EBIT12
TEV459 TEV/EBIT38
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-05
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-11
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-03-14
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-03-14
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-03-04
10-Q 2015-09-30 Filed 2015-11-05
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-03-11
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-03
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-02
10-Q 2013-03-31 Filed 2013-05-06
10-K 2012-12-31 Filed 2013-03-01
10-Q 2012-09-30 Filed 2012-11-05
10-Q 2012-06-30 Filed 2012-08-07
10-Q 2012-03-31 Filed 2012-05-04
10-K 2011-12-31 Filed 2012-02-29
10-Q 2011-09-30 Filed 2011-11-04
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-14
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-15
8-K 2021-02-10 Earnings, Exhibits
8-K 2020-11-05
8-K 2020-07-31
8-K 2020-05-19
8-K 2020-05-05
8-K 2020-02-05
8-K 2019-12-03
8-K 2019-10-31
8-K 2019-09-24
8-K 2019-08-14
8-K 2019-08-06
8-K 2019-05-14
8-K 2019-05-07
8-K 2019-02-06
8-K 2018-11-01
8-K 2018-08-02
8-K 2018-05-16
8-K 2018-05-02
8-K 2018-02-06

ACLS 10Q Quarterly Report

Part 1 - Financial Information
Item 1. Financial Statements.
Note 1. Nature of Business
Note 2. Stock - Based Compensation
Note 3. Leases
Note 4. Revenue
Note 5. Receivables and Allowances for Credit Losses
Note 6. Computation of Net Earnings per Share
Note 7. Accumulated Other Comprehensive Income (Loss)
Note 8. Cash, Cash Equivalents and Restricted Cash
Note 9. Inventories, Net
Note 10. Product Warranty
Note 11. Fair Value Measurements
Note 12. Financing Arrangements
Note 13. Income Taxes
Note 14. Concentration of Risk
Note 15. Share Repurchase
Note 16. Contingencies
Note 17. Recent Accounting Guidance
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.1 acls-20200930xex10d1.htm
EX-10.2 acls-20200930xex10d2.htm
EX-31.1 acls-20200930xex31d1.htm
EX-31.2 acls-20200930xex31d2.htm
EX-32.1 acls-20200930xex32d1.htm
EX-32.2 acls-20200930xex32d2.htm

Axcelis Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
55044033022011002012201420172020
Assets, Equity
12510075502502012201420172020
Rev, G Profit, Net Income
3525155-5-152012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to               

Commission file number 000-30941

AXCELIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

34-1818596

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

108 Cherry Hill Drive

Beverly, Massachusetts 01915

(Address of principal executive offices, including zip code)

(978787-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $.001 par value

ACLS

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No .

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes  No 

As of November 3, 2020 there were 33,496,006 shares of the registrant’s common stock outstanding.

Table of Contents

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

3

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019

4

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

5

Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019

6

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

8

Notes to Consolidated Financial Statements (Unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Overview

20

Critical Accounting Estimates

21

Results of Operations

22

Liquidity and Capital Resources

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II - OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

2

Table of Contents

PART 1—FINANCIAL INFORMATION

Item 1.    Financial Statements.

Axcelis Technologies, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

    

2020

    

2019

    

2020

    

2019

    

Revenue:

Product

$

104,799

$

64,290

$

334,126

$

217,201

Services

 

5,606

 

5,163

 

18,235

 

18,034

Total revenue

 

110,405

 

69,453

 

352,361

 

235,235

Cost of revenue:

Product

 

56,427

 

33,587

 

189,118

 

118,105

Services

 

5,817

 

5,285

 

17,634

 

17,294

Total cost of revenue

 

62,244

 

38,872

 

206,752

 

135,399

Gross profit

 

48,161

 

30,581

 

145,609

 

99,836

Operating expenses:

Research and development

 

14,867

 

12,930

 

45,513

 

40,335

Sales and marketing

 

9,763

 

8,057

 

27,404

 

25,411

General and administrative

 

9,649

 

7,707

 

28,726

 

23,097

Total operating expenses

 

34,279

 

28,694

 

101,643

 

88,843

Income from operations

 

13,882

 

1,887

 

43,966

 

10,993

Other (expense) income:

Interest income

 

106

 

687

 

658

 

2,373

Interest expense

 

(1,296)

 

(1,308)

 

(3,898)

 

(3,849)

Other, net

 

900

 

(890)

 

701

 

(1,252)

Total other expense

 

(290)

 

(1,511)

 

(2,539)

 

(2,728)

Income before income taxes

 

13,592

 

376

 

41,427

 

8,265

Income tax provision (benefit)

 

2,807

 

(328)

 

6,119

 

943

Net income

$

10,785

$

704

$

35,308

$

7,322

Net income per share:

Basic

$

0.32

$

0.02

$

1.06

$

0.22

Diluted

$

0.32

$

0.02

$

1.04

$

0.22

Shares used in computing net income per share:

Basic weighted average common shares

 

33,477

 

32,344

 

33,159

 

32,584

Diluted weighted average common shares

 

34,174

 

33,323

 

34,070

 

33,821

See accompanying Notes to these Consolidated Financial Statements

3

Table of Contents

Axcelis Technologies, Inc.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

    

2020

    

2019

    

2020

    

2019

    

Net income

$

10,785

$

704

$

35,308

$

7,322

Other comprehensive income (loss):

Foreign currency translation adjustments

 

1,437

 

(1,132)

 

1,161

 

(1,847)

Amortization of actuarial loss and other adjustments from pension plan

 

61

 

29

 

175

 

89

Total other comprehensive income (loss)

1,498

(1,103)

1,336

(1,758)

Comprehensive income (loss)

$

12,283

$

(399)

$

36,644

$

5,564

See accompanying Notes to these Consolidated Financial Statements

4

Table of Contents

Axcelis Technologies, Inc.

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)

    

September 30,

    

December 31,

 

2020

2019

 

ASSETS

Current assets:

Cash and cash equivalents

$

211,967

$

139,881

Accounts receivable, net

 

45,161

 

83,753

Inventories, net

 

159,658

 

140,364

Prepaid expenses and other current assets

 

18,982

 

11,681

Total current assets

 

435,768

 

375,679

Property, plant and equipment, net

 

29,199

 

25,328

Operating lease assets

4,655

5,849

Finance lease assets, net

20,872

21,880

Long-term restricted cash

 

750

 

6,653

Deferred income taxes

58,247

68,060

Other assets

 

41,165

 

44,645

Total assets

$

590,656

$

548,094

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

24,260

$

25,341

Accrued compensation

 

18,856

 

7,631

Warranty

 

4,151

 

2,759

Income taxes

 

328

 

294

Deferred revenue

 

13,118

 

24,601

Current portion of finance lease obligation

 

705

 

399

Other current liabilities

 

7,965

 

7,639

Total current liabilities

 

69,383

 

68,664

Long-term finance lease obligation

 

47,593

 

48,149

Long-term deferred revenue

 

3,851

 

4,650

Other long-term liabilities

 

9,166

 

7,204

Total liabilities

 

129,993

 

128,667

Commitments and contingencies (Note 16)

Stockholders’ equity:

Common stock, $0.001 par value, 75,000 shares authorized; 33,491 shares issued and outstanding at September 30, 2020; 32,585 shares issued and outstanding at December 31, 2019

 

33

 

33

Additional paid-in capital

 

566,195

 

559,878

Accumulated deficit

 

(106,643)

 

(140,226)

Accumulated other comprehensive income (loss)

 

1,078

 

(258)

Total stockholders’ equity

 

460,663

 

419,427

Total liabilities and stockholders’ equity

$

590,656

$

548,094

See accompanying Notes to these Consolidated Financial Statements

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

 

Additional

Other

Total

 

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

 

Balance at December 31, 2018

32,558

$

33

$

565,116

$

(157,260)

$

448

$

408,337

Net income

 

 

 

 

6,062

 

 

6,062

Foreign currency translation adjustments

 

 

 

 

 

(495)

 

(495)

Change in pension obligation

 

 

 

 

 

30

 

30

Exercise of stock options

 

288

 

 

1,828

 

 

 

1,828

Issuance of restricted common shares,
net of shares withheld

 

35

 

 

(281)

 

 

 

(281)

Stock-based compensation expense

 

 

 

1,672

 

 

 

1,672

Balance at March 31, 2019

 

32,881

$

33

$

568,335

$

(151,198)

$

(17)

$

417,153

Net income

 

 

 

 

556

 

 

556

Foreign currency translation adjustments

 

 

 

 

 

(219)

 

(219)

Change in pension obligation

 

 

 

 

 

29

 

29

Exercise of stock options

 

104

 

 

567

 

 

 

567

Issuance of shares under Employee Stock Purchase Plan

 

32

 

 

479

 

 

 

479

Issuance of restricted common shares,
net of shares withheld

 

165

 

 

(1,310)

 

 

 

(1,310)

Stock-based compensation expense

 

 

2,246

 

 

 

2,246

Repurchase of common stock

 

(885)

 

(1)

 

(14,034)

 

 

 

(14,035)

Balance at June 30, 2019

 

32,297

$

32

$

556,283

$

(150,642)

$

(207)

$

405,466

Net income

 

 

 

 

704

 

 

704

Foreign currency translation adjustments

 

 

 

 

 

(1,132)

 

(1,132)

Change in pension obligation

 

 

 

 

 

29

 

29

Exercise of stock options

 

97

 

 

642

 

 

 

642

Issuance of restricted common shares,
net of shares withheld

 

3

 

 

(11)

 

 

 

(11)

Stock-based compensation expense

 

 

 

2,149

 

 

 

2,149

Balance at September 30, 2019

 

32,397

$

32

$

559,063

$

(149,938)

$

(1,310)

$

407,847

See accompanying Notes to these Consolidated Financial Statements

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Axcelis Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

Balance at December 31, 2019

32,585

$

33

$

559,878

$

(140,226)

$

(258)

$

419,427

Net income

 

 

 

 

11,221

 

 

11,221

Foreign currency translation adjustments

 

 

 

 

 

(1,112)

 

(1,112)

Change in pension obligation

 

 

 

 

 

57

 

57

Exercise of stock options

 

540

 

1

 

4,498

 

 

 

4,499

Issuance of shares under Employee Stock Purchase Plan

 

1

 

 

19

 

 

 

19

Issuance of restricted common shares,
net of shares withheld

 

69

 

 

(1,162)

 

 

 

(1,162)

Stock-based compensation expense

 

 

1,724

 

 

 

1,724

Repurchase of common stock

 

(358)

 

(1)

 

(5,775)

 

(1,725)

 

 

(7,501)

Balance at March 31, 2020

 

32,837

$

33

$

559,182

$

(130,730)

$

(1,313)

$

427,172

Net income

 

 

 

 

13,302

 

 

13,302

Foreign currency translation adjustments

 

 

 

 

 

836

 

836

Change in pension obligation

 

 

 

 

 

57

 

57

Exercise of stock options

 

343

 

 

2,783

 

 

 

2,783

Issuance of shares under Employee Stock Purchase Plan

 

21

 

 

490

 

 

 

490

Issuance of restricted common shares,
net of shares withheld

 

232

 

 

(2,698)

 

 

 

(2,698)

Stock-based compensation expense

3,082

3,082

Balance at June 30, 2020

 

33,433

$

33

$

562,839

$

(117,428)

$

(420)

$

445,024

Net income

 

 

 

 

10,785

 

 

10,785

Foreign currency translation adjustments

 

 

 

 

 

1,437

 

1,437

Change in pension obligation

 

 

 

 

 

61

 

61

Exercise of stock options

 

53

 

 

458

 

 

 

458

Issuance of restricted common shares,
net of shares withheld

 

5

 

 

(28)

 

 

 

(28)

Stock-based compensation expense

 

 

 

2,926

 

 

 

2,926

Balance at September 30, 2020

 

33,491

$

33

$

566,195

$

(106,643)

$

1,078

$

460,663

See accompanying Notes to these Consolidated Financial Statements

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Axcelis Technologies, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended

September 30,

    

2020

    

2019

    

Cash flows from operating activities

Net income

$

35,308

$

7,322

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

 

7,346

 

5,583

Deferred income taxes

 

5,399

 

818

Stock-based compensation expense

 

7,727

 

6,140

Provision for excess and obsolete inventory

 

2,736

 

1,961

Changes in operating assets & liabilities:

Accounts receivable

 

39,109

 

29,232

Inventories

 

(18,611)

 

(16,602)

Prepaid expenses and other current assets

 

(2,704)

 

(155)

Accounts payable and other current liabilities

 

10,540

 

(22,887)

Deferred revenue

 

(12,292)

 

4,864

Income taxes

 

29

 

(185)

Other assets and liabilities

 

1,080

 

(16,436)

Net cash provided by (used in) operating activities

 

75,667

 

(345)

Cash flows from investing activities

Expenditures for property, plant and equipment and capitalized software

 

(5,567)

 

(11,064)

Net cash used in investing activities

 

(5,567)

 

(11,064)

Cash flows from financing activities

Net settlement on restricted stock grants

 

(3,888)

 

(1,602)

Repurchase of common stock

 

(7,501)

 

(14,035)

Proceeds from Employee Stock Purchase Plan

 

509

 

407

Principal payments on finance lease obligation

(252)

Proceeds from exercise of stock options

7,740

3,039

Net cash used in financing activities

 

(3,392)

 

(12,191)

Effect of exchange rate changes on cash and cash equivalents

 

(525)

 

871

Net increase (decrease) in cash, cash equivalents and restricted cash

 

66,183

 

(22,729)

Cash, cash equivalents and restricted cash at beginning of period

 

146,534

 

184,902

Cash, cash equivalents and restricted cash at end of period

$

212,717

$

162,173

See accompanying Notes to these Consolidated Financial Statements

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Axcelis Technologies, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1.  Nature of Business

Axcelis Technologies, Inc. (“Axcelis” or the “Company”) was incorporated in Delaware in 1995, and is a producer of ion implantation equipment used in the fabrication of semiconductor chips in the United States, Europe and Asia. In addition, we provide extensive worldwide aftermarket service and support, including spare parts, equipment upgrades, used equipment and maintenance services to the semiconductor industry.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for a fair presentation of these financial statements have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for other interim periods or for the year as a whole.

The balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Axcelis Technologies, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.

Note 2.  Stock-Based Compensation

We maintain the Axcelis Technologies, Inc. 2012 Equity Incentive Plan (the “2012 Equity Plan”), which became effective on May 2, 2012, and permits the issuance of options, restricted stock, restricted stock units (“RSUs”) and performance awards to selected employees, directors and consultants of the Company. Our 2000 Stock Plan (the “2000 Stock Plan”) expired on May 1, 2012 and no new grants may be made under that plan after that date. However, unexpired options granted under the 2000 Stock Plan, which have a 10-year term, remain outstanding and subject to the terms of the 2000 Stock Plan. We also maintain the Axcelis Technologies, Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”), an Internal Revenue Code Section 423 plan.

The 2012 Equity Plan is more fully described in Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019. Note 13 also describes our prior Employee Stock Purchase Plan which expired on June 30, 2020 (the “Prior ESPP”). No shares have yet been issued under the 2020 ESPP, but its terms are substantially the same as those of the Prior ESPP.

We recognized stock-based compensation expense of $2.9 million and $2.1 million for the three month periods ended September 30, 2020 and 2019, respectively. We recognized stock-based compensation expense of $7.7 million and $6.1 million for the nine month periods ended September 30, 2020 and 2019, respectively. These amounts include compensation expense related to RSUs, non-qualified stock options and stock issued to participants under the Prior ESPP.

In both the three month periods ended September 30, 2020 and 2019, we issued 0.1 million shares of common stock, respectively, upon stock option exercises and vesting of RSUs. In the three month periods ended September 30, 2020 and 2019, we received proceeds of $0.5 million and $0.6 million, respectively, in connection with the exercise of stock options and Prior ESPP purchases.

In the nine month periods ended September 30, 2020 and 2019, we issued 1.3 million and 0.7 million shares of common stock, respectively, upon stock option exercises, purchases under the Prior ESPP and vesting of RSUs. In the nine month periods ended September 30, 2020 and 2019, we received proceeds of $8.3 million and $3.4 million, respectively, in connection with the exercise of stock options and Prior ESPP purchases.

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Note 3.  Leases

We have operating leases for office space, warehouse space, computer and office equipment and vehicles used in our business operations. We have a finance lease as a result of the 2015 sale-leaseback of our corporate headquarters in Beverly, Massachusetts. All new agreements are reviewed to determine if they contain a lease component. A lease is a contract or part of a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We recognize the lease obligation on a discounted basis using the explicit or implicit discount rate stated within the agreement. We recognize a corresponding right-of-use asset, which is initially determined based upon the net present value of the associated liability and is adjusted for deferred costs and possible impairment, if any. For those lease agreements that do not indicate the applicable discount rate, we use our incremental borrowing rate. We have made the following policy elections: (i) operating leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; (ii) we recognize lease expense for operating leases on a straight-line basis over the lease term; and (iii) we account for lease components and non-lease components that are fixed payments as one component. Some of our operating leases include one or more options to renew, with renewal terms that can extend the respective lease term 1 to 3 years. The exercise of lease renewal options are at our sole discretion. For lease extensions that are reasonably certain to occur, we have included these renewal periods in our calculation of the net present value of the lease obligation and related right-of-use asset. Certain leases also include options to purchase the leased property. The depreciable life of certain 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. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The amounts of operating and finance lease right-of-use assets and related lease obligations recorded within our consolidated balance sheets are as follows: