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eqix:GICSingaporeSovereignWealthFundMember srt:ScenarioForecastMember 2020-12-31 iso4217:HKD iso4217:EUR xbrli:shares eqix:renewal_option xbrli:pure iso4217:USD xbrli:shares eqix:letter_of_credit iso4217:GBP iso4217:USD eqix:segment
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 000-31293
  
 
https://cdn.kscope.io/aed8367a6698f39e5da8b1f27cbaa246-logo.jpg
 EQUINIX, INC.
(Exact name of registrant as specified in its charter)
  
 
Delaware
 
77-0487526
(State of incorporation)
 
(I.R.S. Employer Identification No.)
One Lagoon Drive, Redwood City, California 94065
(Address of principal executive offices, including ZIP code)
(650) 598-6000
(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, $0.001
 
EQIX
 
The NASDAQ Stock Market LLC
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the 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  
The number of shares outstanding of the registrant's Common Stock as of May 6, 2020 was 85,927,044.
 



EQUINIX, INC.
INDEX
 
Page
No.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 

3


PART I - FINANCIAL INFORMATION
 
 
 
 
 
Item 1. Condensed Consolidated Financial Statements
EQUINIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
March 31,
2020
 
December 31,
2019
 
(Unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,171,339

 
$
1,869,577

Short-term investments
25,833

 
10,362

Accounts receivable, net of allowance for doubtful accounts of $14,793 and $13,026
687,153

 
689,134

Other current assets
435,784

 
303,543

Total current assets
2,320,109

 
2,872,616

Property, plant and equipment, net
12,177,044

 
12,152,597

Operating lease right-of-use assets
1,414,711

 
1,475,367

Goodwill
4,927,459

 
4,781,858

Intangible assets, net
2,108,539

 
2,102,389

Other assets
642,836

 
580,788

Total assets
$
23,590,698

 
$
23,965,615

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
717,574

 
$
760,718

Accrued property, plant and equipment
317,144

 
301,535

Current portion of operating lease liabilities
140,596

 
145,606

Current portion of finance lease liabilities
89,262

 
75,239

Current portion of mortgage and loans payable
74,473

 
77,603

Current portion of senior notes
300,401

 
643,224

Other current liabilities
199,023

 
153,938

Total current liabilities
1,838,473

 
2,157,863

Operating lease liabilities, less current portion
1,261,964

 
1,315,656

Finance lease liabilities, less current portion
1,489,945

 
1,430,882

Mortgage and loans payable, less current portion
1,469,195

 
1,289,434

Senior notes, less current portion
8,253,745

 
8,309,673

Other liabilities
608,082

 
621,725

Total liabilities
14,921,404

 
15,125,233

Commitments and contingencies (Note 10)

 

Equinix stockholders' equity
 
 
 
Common stock, $0.001 par value per share: 300,000,000 shares authorized; 86,269,033 issued and 85,927,060 outstanding in 2020 and 85,700,953 issued and 85,308,386 outstanding in 2019
86

 
86

Additional paid-in capital
12,893,455

 
12,696,433

Treasury stock, at cost; 341,973 shares in 2020 and 392,567 shares in 2019
(127,298
)
 
(144,256
)
Accumulated dividends
(4,399,527
)
 
(4,168,469
)
Accumulated other comprehensive loss
(1,206,669
)
 
(934,613
)
Retained earnings
1,509,317

 
1,391,425

Total Equinix stockholders' equity
8,669,364

 
8,840,606

Non-controlling interests
(70
)
 
(224
)
Total stockholders' equity
8,669,294

 
8,840,382

Total liabilities and stockholders' equity
$
23,590,698

 
$
23,965,615

See accompanying notes to condensed consolidated financial statements.

4


EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
 
Three Months Ended
March 31,
 
2020
 
2019
 
(Unaudited)
Revenues
$
1,444,542

 
$
1,363,218

Costs and operating expenses:
 
 
 
Cost of revenues
736,282

 
682,030

Sales and marketing
180,450

 
169,715

General and administrative
261,597

 
215,046

Transaction costs
11,530

 
2,471

Impairment charges

 
14,448

Loss on asset sales
1,199

 

Total costs and operating expenses
1,191,058

 
1,083,710

Income from operations
253,484

 
279,508

Interest income
4,273

 
4,202

Interest expense
(107,338
)
 
(122,846
)
Other income (expense)
5,170

 
(166
)
Loss on debt extinguishment
(6,441
)
 
(382
)
Income before income taxes
149,148


160,316

Income tax expense
(30,191
)
 
(42,569
)
Net income
118,957

 
117,747

Net (income) loss attributable to non-controlling interests
(165
)
 
331

Net income attributable to Equinix
$
118,792

 
$
118,078

Earnings per share ("EPS") attributable to Equinix:
 
 
 
Basic EPS
$
1.39

 
$
1.44

Weighted-average shares for basic EPS
85,551

 
81,814

Diluted EPS
$
1.38

 
$
1.44

Weighted-average shares for diluted EPS
86,144

 
82,090

See accompanying notes to condensed consolidated financial statements.

5


EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
 
 
Three Months Ended
March 31,
 
2020
 
2019
 
(Unaudited)
Net income
$
118,957

 
$
117,747

Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustment ("CTA") loss, net of tax effects of $0 and $(10)
(413,792
)
 
(81,719
)
Net investment hedge CTA gain, net of tax effect of $0 and $10
144,946

 
76,850

Unrealized gain (loss) on cash flow hedges, net of tax effects of $(6,367) and $(2,741)
(3,256
)
 
8,224

Net actuarial gain (loss) on defined benefit plans, net of tax effects of $9 and $(1)
35

 
(11
)
Total other comprehensive income (loss), net of tax
(272,067
)
 
3,344

Comprehensive income (loss), net of tax
(153,110
)
 
121,091

Net (income) loss attributable to non-controlling interests
(165
)
 
331

Other comprehensive (income) loss attributable to non-controlling interests
11

 
(7
)
Comprehensive income (loss) attributable to Equinix
$
(153,264
)
 
$
121,415


See accompanying notes to condensed consolidated financial statements.

6


EQUINIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
March 31,
 
2020
 
2019
 
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
118,957

 
$
117,747

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
287,378

 
263,643

Stock-based compensation
64,499

 
49,023

Amortization of intangible assets
48,491

 
49,535

Amortization of debt issuance costs and debt discounts and premiums
3,460

 
2,995

Provision for allowance for doubtful accounts
3,934

 
4,594

Impairment charges

 
14,448

Loss on asset sales
1,199

 

Loss on debt extinguishment
6,441

 
382

Other items
4,484

 
5,157

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
15,306

 
(84,350
)
Income taxes, net
3,697

 
15,825

Other assets
(101,882
)
 
(7,833
)
Operating lease right-of-use assets
38,797

 
41,264

Operating lease liabilities
(35,193
)
 
(38,886
)
Accounts payable and accrued expenses
(25,681
)
 
(11,463
)
Other liabilities
82,943

 
(940
)
Net cash provided by operating activities
516,830

 
421,141

Cash flows from investing activities:
 
 
 
Purchases of investments
(44,813
)
 
(9,297
)
Sales of investments
5,873

 
518

Business acquisitions, net of cash and restricted cash acquired
(478,287
)
 

Purchases of real estate
(36,373
)
 
(5,721
)
Purchases of other property, plant and equipment
(400,941
)
 
(363,967
)
Net cash used in investing activities
(954,541
)
 
(378,467
)
Cash flows from financing activities:
 
 
 
Proceeds from employee equity awards
30,391

 
27,593

Payment of dividends and special distribution
(233,479
)
 
(204,603
)
Proceeds from public offering of common stock, net of issuance costs
101,792

 
1,213,434

Proceeds from revolving credit facility
250,000

 

Repayments of finance lease liabilities
(18,977
)
 
(31,158
)
Repayments of mortgage and loans payable
(18,501
)
 
(18,334
)
Repayment of senior notes
(343,711
)
 

Debt extinguishment costs
(4,619
)
 

Net cash provided by (used in) financing activities
(237,104
)
 
986,932

Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash 
(25,287
)
 
(1,695
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(700,102
)
 
1,027,911

Cash, cash equivalents and restricted cash at beginning of period
1,886,613

 
627,604

Cash, cash equivalents and restricted cash at end of period
$
1,186,511

 
$
1,655,515

 
 
 
 
Cash and cash equivalents
$
1,171,339

 
$
1,633,844

Current portion of restricted cash included in other current assets
6,483

 
11,305

Non-current portion of restricted cash included in other assets
8,689

 
10,366

Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows
$
1,186,511

 
$
1,655,515

See accompanying notes to condensed consolidated financial statements.

7


EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Equinix, Inc. ("Equinix" or the "Company") and reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state the financial position and the results of operations for the interim periods presented. The condensed consolidated balance sheet data as of December 31, 2019 has been derived from audited consolidated financial statements as of that date. The condensed consolidated financial statements have been prepared in accordance with the regulations of the Securities and Exchange Commission ("SEC"), but omit certain information and footnote disclosure necessary to present the statements in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For further information, refer to the Consolidated Financial Statements and Notes thereto included in Equinix's Form 10-K as filed with the SEC on February 21, 2020. Results for the interim periods are not necessarily indicative of results for the entire fiscal year.
Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Equinix and its subsidiaries, including the acquisitions of Packet Host, Inc. from March 2, 2020, three data centers in Mexico acquired from Axtel S.A.B. de C.V from January 8, 2020, and Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands from April 18, 2019. All intercompany accounts and transactions have been eliminated in consolidation.
Income Taxes
The Company elected to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with its 2015 taxable year. As a result, the Company may deduct the distributions made to its stockholders from taxable income generated by the Company and its qualified REIT subsidiaries ("QRSs"). The Company's dividends paid deduction generally eliminates the U.S. federal taxable income of the Company and its QRSs, resulting in no U.S. federal income tax due. However, the Company's domestic taxable REIT subsidiaries ("TRSs") are subject to U.S. corporate income taxes on any taxable income generated by them. In addition, the foreign operations of the Company are subject to local income taxes regardless of whether the foreign operations are operated as QRSs or TRSs.
The Company provides for income taxes during interim periods based on the estimated effective tax rate for the year. The effective tax rate is subject to change in the future due to various factors such as the operating performance of the Company, tax law changes and future business acquisitions.
The Company's effective tax rates were 20.2% and 26.6% for the three months ended March 31, 2020 and 2019, respectively.
Coronavirus (COVID-19) Update
In December 2019, a novel strain of coronavirus, referred to as Coronavirus disease 2019, or COVID-19, emerged. On February 29, 2020, the World Health Organization (“WHO”) raised the COVID-19 threat from high to very high, and on March 11, 2020, the WHO characterized COVID-19 as a global pandemic. The extent to which the Company’s operations will be impacted by COVID-19 will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from these estimates.

8

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In December 2019, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes. The ASU simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The ASU also improves consistent application of and simplifies generally accepted accounting principles ("GAAP") for other areas of Topic 740 by clarifying and amending existing guidance. For public entities, the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted including adoption in any interim period for periods for which financial statements have not yet been issued. The Company is currently evaluating the extent of the impact that the adoption of this standard will have on its condensed consolidated financial statements.
Accounting Standards Adopted
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform ("Topic 848"): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company adopted the ASU upon its issuance and there was no impact on the Company's condensed consolidated financial statements for the three months ended March 31, 2020 as a result of adopting this standard. The Company will evaluate its debt, derivative and lease contracts that are eligible for modification relief and may apply the elections prospectively as needed.
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("Topic 326"): Measurement of Credit Losses on Financial Instruments. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU requires enhanced qualitative and quantitative disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this new ASU on January 1, 2020 using the modified retrospective approach and recorded a net decrease to retained earnings of $0.9 million and a corresponding increase to allowance for doubtful accounts. The adoption did not have any significant impact on other financial assets within the scope of ASC 326, such as contract asset.
Accounts Receivable
Accounts receivables are recorded at invoice amount and are generally due in less than one year. Allowance for doubtful accounts are estimated losses resulting from the inability of customers making payments. An estimate of uncollectible amounts is made based on historical bad debts, age of customer receivable balances, customers' financial conditions and current economic trends. As of March 31, 2020, our allowance for doubtful accounts considered the current and potential future impacts caused by the COVID-19 pandemic based on information available to such date.
Accounts receivable, net, consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):
 
March 31,
2020
 
December 31,
2019
Accounts receivable
$
701,946

 
$
702,160

Allowance for doubtful accounts
(14,793
)
 
(13,026
)
Accounts receivable, net
$
687,153

 
$
689,134



9

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

The following table summarizes the activity of the Company's allowance for doubtful accounts (in thousands):
Balance at December 31, 2019
$
13,026

Adjustments due to adoption of ASU 2016-13
900

Provision for allowance for doubtful accounts
3,934

Net write-offs and recoveries
(2,688
)
Impact of foreign currency exchange and others
(379
)
Balance at March 31, 2020
$
14,793


2.    Revenue
Contract Balances
The following table summarizes the opening and closing balances of the Company's accounts receivable, net; contract asset, current; contract asset, non-current; deferred revenue, current; and deferred revenue, non-current (in thousands):
 
Accounts receivable, net
 
Contract asset, current
 
Contract asset, non-current
 
Deferred revenue, current
 
Deferred revenue, non-current
Beginning balances as of January 1, 2020
$
689,134

 
$
10,033

 
$
31,521

 
$
76,193

 
$
46,555

Closing balances as of March 31, 2020
687,153

 
10,457

 
33,619

 
79,575

 
48,107

Increase/(decrease)
$
(1,981
)
 
$
424

 
$
2,098

 
$
3,382

 
$
1,552

The difference between the opening and closing balances of the Company's accounts receivable, net, contract assets and deferred revenues primarily results from revenue growth and the timing difference between the satisfaction of the Company's performance obligation and the customer's payment, as well as business combinations closed during the three months ended March 31, 2020. The amounts of revenue recognized during the three months ended March 31, 2020 from the opening deferred revenue balance as of January 1, 2020 was $38.1 million.
Remaining performance obligations
As of March 31, 2020, approximately $7.2 billion of total revenues including deferred installation revenues are expected to be recognized in future periods, the majority of which will be recognized over the next 24 months. While initial contract terms vary in length, substantially all contracts thereafter automatically renew in one-year increments. Included in the remaining performance obligations is either 1) remaining performance obligations under the initial contract terms or 2) remaining performance obligations related to contracts in the renewal period once the initial terms have lapsed. The remaining performance obligations do not include variable consideration related to unsatisfied performance obligations such as the usage of metered power, service fees from xScaleTM data centers, which are calculated based on future events or actual costs incurred in the future, or any contracts that could be terminated without any significant penalties such as the majority of interconnection revenues. The remaining performance obligations above include revenues to be recognized in the future related to arrangements where the Company is considered the lessor.

10

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

3.    Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share ("EPS") for the periods presented (in thousands, except per share amounts):
 
Three Months Ended
March 31,
 
2020
 
2019
Net income
$
118,957

 
$
117,747

Net (income) loss attributable to non-controlling interests
(165
)
 
331

Net income attributable to Equinix
$
118,792

 
$
118,078

 
 
 
 
Weighted-average shares used to calculate basic EPS
85,551

 
81,814

Effect of dilutive securities:
 
 
 
Employee equity awards
593

 
276

Weighted-average shares used to calculate diluted EPS
86,144

 
82,090

 
 
 
 
EPS attributable to Equinix:
 
 
 
Basic EPS
$
1.39

 
$
1.44

Diluted EPS
$
1.38

 
$
1.44


The Company has excluded common stock related to employee equity awards in the diluted EPS calculation above of approximately 45,000 shares and 469,000 shares for the three months ended March 31, 2020 and 2019, respectively, because their effect would be anti-dilutive.
4.    Acquisitions
2020 Acquisitions
On March 2, 2020, the Company acquired all outstanding shares and equity awards of Packet Host, Inc. (“Packet”), a leading bare metal automation platform for a total purchase consideration of approximately $290.3 million in cash. In addition, the Company paid $16.1 million in cash to accelerate the vesting of unvested Packet equity awards for certain Packet employees, which was recorded as stock-based compensation expense during the three months ended March 31, 2020. In connection with the acquisition, the Company also issued restricted stock awards with an aggregated fair value of $30.2 million and a three-year vesting period, which will be recognized as stock-based compensation costs over the vesting period. The acquisition, combined with the Company’s own organic bare metal service in development, is expected to accelerate Equinix's strategy to help enterprises deploy hybrid multicloud architectures on Equinix's data center platform.
On January 8, 2020, the Company completed the acquisition of three data centers in Mexico from Axtel S.A.B. de C.V. (“Axtel”) for a total purchase consideration of approximately $189.0 million, including $175.0 million in cash and $14.0 million the Company paid to the seller for recoverable value-added taxes ("VAT") incurred prior to the acquisition, which related to a corresponding VAT receivable acquired upon acquisition. The acquisition supports the Company’s ongoing expansion to meet customer demand in the Americas region.
Both acquisitions constitute a business under the accounting standard for business combinations and, therefore, were accounted for as business combinations using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed measured at fair value on the date of acquisition. As of March 31, 2020, the Company had not completed the detailed valuation analysis to derive the fair value of assets acquired and liabilities assumed, including property, plant and equipment, intangible assets and the related tax impacts; therefore, the purchase price allocation is based on provisional estimates and subject to continuing management analysis.

11

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

A summary of the preliminary allocation of total purchase consideration is presented as follows (in thousands):
 
Packet
 
Axtel
Cash and cash equivalents
$
1,029

 
$

Accounts receivable
5,148

 

Other current assets
108

 
14,048

Property, plant and equipment
28,980

 
76,407

Operating lease right-of-use assets
1,445

 
1,646

Intangible assets
68,600

 
22,750

Goodwill
223,117

 
78,902

Other assets
138

 

Total assets acquired
328,565

 
193,753

Accounts payable and accrued liabilities
(987
)
 
(238
)
Other current liabilities
(826
)
 

Operating lease liabilities
(1,445
)
 
(1,586
)
Finance lease liabilities
(28,980
)
 

Other liabilities

 
(162
)
Deferred tax liabilities
(6,029
)
 
(2,749
)
Net assets acquired
$
290,298

 
$
189,018


The following table presents certain information on the acquired intangible assets (in thousands):
Intangible Assets
 
Fair Value
 
Estimated Useful Lives (Years)
 
Weighted-average Estimated Useful Lives (Years)
Packet:
 
 
 
 
 
 
Trade names
 
$
1,600

 
3.0
 
3.0
Existing technology
 
5,100

 
3.0
 
3.0
Customer relationships
 
61,900

 
10.0
 
10.0
Axtel:
 
 
 
 
 
 
Customer relationships
 
22,750

 
15.0
 
15.0

The fair value of the Packet trade name was estimated using the relief from royalty method under the income approach. The Company applied a relief from royalty rate of 1.0% and a discount rate of 8.0%. The fair value of existing technology was estimated under the cost approach by projecting the cost to recreate a new asset with an equivalent utility of the existing technology. The key assumptions of the cost approach include total cost, time to recreate and functional obsolescence.
The fair value of customer relationships acquired from Packet and Axtel was estimated by applying an income approach, by calculating the present value of estimated future operating cash flows generated from existing customers less costs to realize the revenue. The Company applied a discount rate of 8.0% for Packet and 13.3% for Axtel, which reflects the nature of the assets as they relate to the risk and uncertainty of the estimated future operating cash flows, as well as the risk of the country within which the acquired business operates.
The fair value of property, plant and equipment was estimated by applying the cost approach, with the exception of land, which was estimated by applying the market approach. The key assumptions of the cost approach include replacement cost new, physical deterioration, functional and economic obsolescence, economic useful life, remaining useful life, age and effective age.

12

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is attributable to the workforce of the acquired business and the projected revenue increase expected to arise from future customers after the Packet and Axtel acquisitions. Goodwill from both acquisitions is not amortizable for local tax purposes and is attributable to the Company's Americas region.
The Company incurred transaction costs of approximately $9.6 million during the three months ended March 31, 2020 for both acquisitions combined. The operating results of both acquisitions are reported in the Americas region following the date of acquisition. During the three months ended March 31, 2020, the Company's results of operations include $8.1 million of revenues and $13.6 million of net loss from operations from the combined operations of Packet and Axtel. The net loss was primarily attributable to the $16.1 million stock-based compensation expense incurred to accelerate the vesting of certain Packet employees’ unvested Packet equity awards at the close of the Packet acquisition.
2019 Acquisition
On April 18, 2019, the Company completed the acquisition of Switch Datacenters' AMS1 data center business in Amsterdam, Netherlands, for a cash purchase price of approximately 30.6 million or approximately $34.3 million, at the exchange rate in effect on April 18, 2019. As of September 30, 2019, the Company had completed the detailed valuation analysis to derive the fair value of assets acquired and liabilities assumed and updated the final allocation of purchase price.
5.
Equity Method Investments
On October 8, 2019, the Company entered into a joint venture in the form of a limited liability partnership with GIC, Singapore's sovereign wealth fund (the "EMEA Joint Venture"), to develop and operate xScaleTM data centers in Europe.  xScale data centers are engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments and also offer access to Equinix's comprehensive suite of interconnection and edge services.
Upon closing, GIC contributed 152.6 million in cash, or $167.4 million at the exchange rate in effect on October 8, 2019, for an 80% partnership interest in the EMEA Joint Venture. Equinix sold certain xScale data center facilities to the EMEA Joint Venture in exchange for net cash proceeds of $351.8 million, as well as a 20% partnership interest in the EMEA Joint Venture with a fair value of $41.9 million. The Company accounts for its investments in the EMEA Joint Venture using the equity method of accounting, whereby the investments were recorded initially at fair value, which equals to the cost of the Company's initial equity contribution, and subsequently adjusted for cash contributions and the Company's share of the income and losses of the investees.
During the three months ended March 31, 2020, the Company made an additional equity contribution of $5.1 million to the EMEA Joint Venture. As of March 31, 2020 and December 31, 2019, the Company's equity method investments were $72.7 million and $59.7 million, respectively, and were included within other assets on the consolidated balance sheet. The Company's share of the income and losses of the equity method investments was not significant for the three months ended March 31, 2020, and was included in other income on the condensed consolidated statement of operations.
As part of the sale of its xScale data center facilities to the EMEA Joint Venture, the Company also received a contingent consideration receivable upon completion of certain performance milestones. The milestone payments are primarily contingent on the receipt of local regulatory approval for certain sites. The contingent consideration is considered a derivative and is remeasured at its fair value each reporting period using inputs such as probabilities of payment, discount rates, foreign currency forward rates and projected payment dates. The fair value measurements were based on significant inputs that are not observable in the market and thus represent Level 3 measurements. As of March 31, 2020 and December 31, 2019, the fair value of the contingent consideration was $38.9 million and $40.1 million, respectively, which was included in other current assets and other assets on the condensed consolidated balance sheet. Changes in the fair value of the contingent consideration were recorded in gain (loss) on asset sales on the condensed consolidated statement of operations.

13

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

6.    Derivatives and Hedging Activities
Derivatives Designated as Hedging Instruments
Net Investment Hedges. The Company is exposed to the impact of foreign exchange rate fluctuations on the value of investments in its foreign subsidiaries whose functional currencies are other than the U.S. Dollar. In order to mitigate the impact of foreign currency exchange rates, the Company has entered into various foreign currency debt obligations, which are designated as hedges against the Company's net investments in foreign subsidiaries. As of March 31, 2020 and December 31, 2019, the total principal amounts of foreign currency debt obligations designated as net investment hedges were $4,245.1 million and $4,078.7 million, respectively.
The Company also uses cross-currency interest rate swaps to hedge a portion of its net investment in its European operations. As of both March 31, 2020 and December 31, 2019, U.S. Dollar to Euro cross-currency interest rate swap contracts with a total notional amount of $750.0 million were outstanding, with maturity dates in April 2022, January 2024 and January 2025. At maturity of each outstanding contract, the Company will receive U.S. Dollars from and pay Euros to the contract counterparty. During the term of each contract, the Company receives interest payments in U.S. Dollars and makes interest payments in Euros based on a notional amount and fixed interest rates determined at contract inception.
The effect of net investment hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
Amount of gain or (loss) recognized in accumulated other comprehensive income:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
2019
Foreign currency debt
 
$
99,102

 
$
63,914

Cross-currency interest rate swaps (included component) (1)
 
14,140

 
15,515

Cross-currency interest rate swaps (excluded component) (2)
 
31,704

 
(2,590
)
Total
 
$
144,946

 
$
76,839

 
 
 
 
 
 
Amount of gain or (loss) recognized in earnings:
 
Location of gain or (loss)
 
Three Months Ended
March 31,
 
 
2020
 
2019
Cross-currency interest rate swaps (excluded component) (2)
Interest expense
 
$
5,089

 
$
4,163

Total
 
 
$
5,089

 
$
4,163


(1) 
Included component represents foreign exchange spot rates.
(2) 
Excluded component represents cross-currency basis spread and interest rates.
Cash Flow Hedges. The Company hedges its foreign currency translation exposure for forecasted revenues and expenses in its EMEA region between the U.S. Dollar and the British Pound, Euro, Swedish Krona and Swiss Franc. The foreign currency forward and option contracts that the Company uses to hedge this exposure are designated as cash flow hedges. As of March 31, 2020 and December 31, 2019, the total notional amounts of these foreign exchange contracts were $985.7 million and $824.8 million, respectively. As of March 31, 2020, the Company's foreign exchange contracts had maturity dates ranging from April 2020 to March 2022 and the Company recorded a net gain of $33.0 million within accumulated other comprehensive income (loss) relating to cash flow hedges that will be reclassified to revenues and expenses as they mature in the next 12 months. As of December 31, 2019, the Company's foreign exchange contracts had maturity dates ranging from January 2020 to December 2021 and the Company recorded a net gain of $16.3 million within accumulated other comprehensive income (loss) relating to cash flow hedges that will be reclassified to revenues and expenses as they mature in the next 12 months.

14

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

The Company hedges the interest rate exposure created by anticipated fixed rate debt issuances through the use of treasury locks and forward starting swaps (collectively, interest rate locks), which are designated as cash flow hedges. As of March 31, 2020, the total notional amount of interest rate locks was approximately $1.2 billion. As of December 31, 2019, the Company had no interest rate cash flow hedges outstanding. When interest rate locks are settled, any accumulated gain or loss included as a component of other comprehensive income (loss) will be amortized to interest expense over the life of the related debt. As of March 31, 2020 and December 31, 2019, the net loss and gain in accumulated other comprehensive income (loss) to be reclassified to interest expense in the next 12 months for interest rate locks is not significant.
The Company enters into intercompany hedging instruments ("intercompany derivatives") with wholly-owned subsidiaries of the Company in order to hedge certain forecasted revenues and expenses denominated in currencies other than the U.S. Dollar. Simultaneously, the Company enters into derivative contracts with unrelated third parties to externally hedge the net exposure created by such intercompany derivatives.
The effect of cash flow hedges on accumulated other comprehensive income and the condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 was as follows (in thousands):
Amount of gain or (loss) recognized in accumulated other comprehensive income:
 
 
 
Three Months Ended
March 31,
 
 
 
2020
 
2019
Foreign currency forward and option contracts (included component) (1)
 
$
28,025

 
$
10,965

Foreign currency option contracts (excluded component) (2)
 
1,318

 

Interest rate locks
 
(26,232
)
 

Total
 
$
3,111

 
$
10,965

 
Amount of gain or (loss) reclassified from accumulated other comprehensive income to income:
 
 
 
Three Months Ended
March 31,
 
Location of gain or (loss)
 
2020
 
2019
Foreign currency forward contracts
Revenues
 
$
21,219

 
$
9,861

Foreign currency forward contracts
Costs and operating expenses
 
(11,000
)
 
(5,329
)
Interest rate locks
Interest Expense
 
168

 

Total
 
 
$
10,387

 
$
4,532

 
 
 
 
 
 
Amount of gain or (loss) excluded from effectiveness testing included in income:
 
 
 
Three Months Ended
March 31,
 
Location of gain or (loss)
 
2020
 
2019
Foreign currency forward contracts
Other income (expense)
 
$

 
$
88

Foreign currency option contracts (excluded component) (2)
Revenues
 
(521
)
 

Total
 
 
$
(521
)
 
$
88



(1) 
Included component represents foreign exchange spot rates.
(2) 
Excluded component represents option's time value.


15

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. The Company is deemed to have foreign currency forward contracts embedded in certain of the Company's customer agreements that are priced in currencies different from the functional or local currencies of the parties involved. These embedded derivatives are separated from their host contracts and carried on the Company's balance sheet at their fair value. The majority of these embedded derivatives arise as a result of the Company's foreign subsidiaries pricing their customer contracts in U.S. Dollars.
Economic Hedges of Embedded Derivatives. The Company uses foreign currency forward contracts to manage the foreign exchange risk associated with the Company's customer agreements that are priced in currencies different from the functional or local currencies of the parties involved ("economic hedges of embedded derivatives"). Foreign currency forward contracts represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date.
Foreign Currency Forward Contracts. The Company also uses foreign currency forward contracts to manage the foreign exchange risk associated with certain foreign currency-denominated monetary assets and liabilities. As a result of foreign currency fluctuations, the U.S. Dollar equivalent values of its foreign currency-denominated monetary assets and liabilities change. Gains and losses on these contracts are included in other income (expense), on a net basis, along with the foreign currency gains and losses of the related foreign currency-denominated monetary assets and liabilities associated with these foreign currency forward contracts. As of March 31, 2020 and December 31, 2019, the total notional amounts of these foreign currency contracts were $4.2 billion and $2.5 billion, respectively.
The following table presents the effect of derivatives not designated as hedging instruments in the Company's condensed consolidated statements of operations (in thousands):
Amount of gain or (loss) recognized in earnings:
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
Location of gain or (loss)
 
2020
 
2019
Embedded derivatives
Revenues
 
$
7,451

 
$
907

Economic hedge of embedded derivatives
Revenues
 
(7,902
)
 
(57
)
Foreign currency forward contracts
Other income (expense)
 
133,824

 
8,351

    Total
 
 
$
133,373

 
$
9,201



16

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Fair Value of Derivative Instruments
The following table presents the fair value of derivative instruments recognized in the Company's condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019 (in thousands):
 
March 31, 2020
 
December 31, 2019
 
Assets (1)
 
Liabilities (2)
 
Assets (1)
 
Liabilities (2)
Designated as hedging instruments:
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
Foreign currency forward and option contracts
$
46,544

 
$
19

 
$
24,853

 
$
5,898

Interest rate locks
4,373

 
21,295

 

 

Net investment hedges
 
 
 
 
 
 
 
Cross-currency interest rate swaps
72,095

 

 
26,251

 

Total designated as hedging
123,012

 
21,314

 
51,104

 
5,898

 
 
 
 
 
 
 
 
Not designated as hedging instruments:
 
 
 
 
 
 
 
Embedded derivatives
10,733

 
1,102

 
4,595

 
2,268

Economic hedges of embedded derivatives
4,507

 
23

 
1,367

 

Foreign currency forward contracts
73,939

 
59,751

 
641

 
27,446

Total not designated as hedging
89,179

 
60,876

 
6,603

 
29,714

Total Derivatives
$
212,191

 
$
82,190

 
$
57,707

 
$
35,612


(1) 
As presented in the Company's condensed consolidated balance sheets within other current assets and other assets.
(2) 
As presented in the Company's condensed consolidated balance sheets within other current liabilities and other liabilities.
Offsetting Derivative Assets and Liabilities
The Company presents its derivative instruments and the accrued interest related to cross-currency interest rate swaps at gross fair values in the condensed consolidated balance sheets. The Company enters into master netting agreements with its counterparties for transactions other than embedded derivatives to mitigate credit risk exposure to any single counterparty. Master netting agreements allow for individual derivative contracts with a single counterparty to offset in the event of default. For presentation on the condensed consolidated balance sheets, the Company does not offset fair value amounts recognized for derivative instruments or the accrued interest related to cross-currency interest rate swaps under master netting arrangements. The following table presents information related to these offsetting arrangements as of March 31, 2020 and December 31, 2019 (in thousands):
 
Gross Amounts Offset in
Consolidated Balance Sheet
 
 
 
 
 
Gross Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts
 
Gross Amounts not Offset in the Balance Sheet
 
Net
March 31, 2020
 
 
 
 
 
 
 
 
 
Derivative assets
$
224,453

 
$

 
$
224,453

 
$
(85,190
)
 
$
139,263

Derivative liabilities
88,477

 

 
88,477

 
(85,190
)
 
3,287

 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
Derivative assets
$
76,640

 
$

 
$
76,640

 
$
(37,820
)
 
$
38,820

Derivative liabilities
45,832

 

 
45,832

 
(37,820
)
 
8,012



17

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

7.    Fair Value Measurements
Valuation Methods
Fair value estimates are made as of a specific point in time based on methods using the market approach valuation method which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities or other valuation techniques. These techniques involve uncertainties and are affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.
Cash Equivalents and Investments. The fair value of the Company's investments in money market funds approximates their face value. Such instruments are included in cash equivalents. The Company's money market funds and publicly traded equity securities are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets. The fair value of the Company's other investments, including certificates of deposit, approximates their face value. The fair value of these investments is priced based on the quoted market price for similar instruments or nonbinding market prices that are corroborated by observable market data. Such instruments are classified within Level 2 of the fair value hierarchy. The Company determines the fair values of its Level 2 investments by using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data, which are obtained from quoted market prices, custody bank, third-party pricing vendors or other sources. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs. The Company is responsible for its consolidated financial statements and underlying estimates.
The Company uses the specific identification method in computing realized gains and losses. Realized gains and losses from the sale of investments are included within other income (expense) in the Company's consolidated statements of operations. The Company's investments in publicly traded equity securities are carried at fair value. Unrealized gains and losses on publicly traded equity securities are reported within other income (expense) in the Company's consolidated statements of operations.
Derivative Assets and Liabilities. Inputs used for valuations of derivatives are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data. The significant inputs used include spot currency rates and forward points, interest rate curves, and published credit default swap rates of its foreign exchange trading counterparties and other comparable companies. The Company has determined that the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, therefore the derivatives are categorized as Level 2.
The Company did not have any nonfinancial assets or liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.

18

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

The Company's financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 were as follows (in thousands):
 
Fair Value at
March 31,
2020
 
Fair Value
Measurement Using
 
Level 1
 
Level 2
Assets:
 
 
 
 
 
Money market and deposit accounts
$
453,349

 
$
453,349

 
$

Publicly traded equity securities
2,664

 
2,664

 

Certificates of deposit
23,169

 

 
23,169

Derivative instruments (1)
212,191

 

 
212,191

Total
$
691,373

 
$
456,013

 
$
235,360

Liabilities:
 
 
 
 
 
Derivative instruments (1)
$
82,190

 
$

 
$
82,190

 
(1) 
Amounts are included within other current assets, other assets, others current liabilities and other liabilities in the Company's accompanying condensed consolidated balance sheet.
The Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands):
 
Fair Value at
December 31,
2019
 
Fair Value
Measurement Using
 
Level 1
 
Level 2
Assets:
 
 
 
 
 
Money market and deposit accounts
$
886,547

 
$
886,547

 
$

Publicly traded equity securities
2,779

 
2,779

 

Certificates of deposit
7,583

 

 
7,583

Derivative instruments (1)
57,707

 

 
57,707

Total
$
954,616

 
$
889,326

 
$
65,290

Liabilities:
 
 
 
 
 
Derivative instruments (1)
$
35,612

 
$

 
$
35,612


(1) 
Amounts are included within other current assets, other assets, other current liabilities and other liabilities in the Company's accompanying condensed consolidated balance sheet.
The Company did not have any Level 3 financial assets or financial liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019.
8.    Leases
Significant Lease Transactions
Silicon Valley 4 ("SV4") Data Center
In February 2020, the Company exercised its first renewal option available to extend the lease term for the SV4 Data Center for 5 years. After exercising the first renewal option, there are two renewal options of 5 years each remaining. The Company concluded that the two remaining renewal options of 5 years each are reasonably certain to be exercised after considering all relevant factors that create an economic incentive for the Company. Therefore, the concluded lease term is 15 years and 7 months with the lease ending on September 30, 2035. The Company assessed the lease classification of the SV4 lease at the modification date and determined the lease should be accounted for as a finance lease. During the three months ended March 31, 2020, the Company recorded finance lease ROU asset and liability of $62.8 million and $63.3 million, respectively.

19

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Hong Kong 1 ("HK1") Data Center
In March 2020, the Company entered into several lease agreements with the landlord to lease several premises in the HK1 Data Center. One of the premises commenced in March 2020 with an initial term of 18 years. The Company assessed the lease classification of that premises at the commencement date and determined the lease should be accounted for as a finance lease. The Company will assess the remaining premises when the leases commence. During the three months ended March 31, 2020, the Company recorded finance lease ROU asset and liability of 163.0 million Hong Kong dollars or $21.0 million at the exchange rate in effect on March 31, 2020.
Lease Expenses
The components of lease expenses are as follows (in thousands):
 
Three Months Ended
March 31, 2020
 
Three Months Ended
March 31, 2019
Finance lease cost
 
 
 
Amortization of right-of-use assets (1)
$
25,166

 
$
20,086

Interest on lease liabilities
27,825

 
27,523

Total finance lease cost
52,991

 
47,609

 
 
 
 
Operating lease cost
53,791

 
51,639

Total lease cost
$
106,782

 
$
99,248

 
 
(1) Amortization of right-of-use assets is included with depreciation expense, and is recorded within cost of revenues, sales and marketing and general and administrative expenses in the condensed consolidated statements of operations.

20

EQUINIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Other Information
Other information related to leases is as follows (in thousands):
 
Three Months Ended
March 31, 2020
 
Three Months Ended
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:


 
 
Operating cash flows from finance leases
$
26,967

 
$
26,604

Operating cash flows from operating leases
51,985

 
49,262

Financing cash flows from finance leases
18,977

 
31,158

 
 
 
 
Right-of-use assets obtained in exchange for lease obligations: (1)

 
 
Finance leases
$
115,274

 
$
16,307

Operating leases
6,612

 
28,987

 
 
 
 
 
As of March 31, 2020
 
As of December 31, 2019
Weighted-average remaining lease term - finance leases (2)
15 years

 
15 years

Weighted-average remaining lease term - operating leases (2)
13 years

 
13 years

Weighted-average discount rate - finance leases
8
%
 
9
%
Weighted-average discount rate - operating leases
4
%
 
4
%
Finance lease assets (3)
$
1,343,406

 
$
1,277,614

 
(1) Represents all non-cash changes in ROU assets.
(2) Includes lease renewal options that are reasonably certain to be exercised.
(3) As of March 31, 2020 and December 31, 2019, the Company recorded accumulated amortization of finance lease assets of $498.1 million and $474.8 million, respectively. Finance lease assets are recorded within property, plant and equipment, net on the condensed consolidated balance sheets.
Maturities of Lease Liabilities
Maturities of lease liabilities as of March 31, 2020 are as follows (in thousands):
 
Operating Leases
 
Finance Leases
 
Total
2020 (9 months remaining)
$
137,567

 
$
141,162

 
$
278,729

2021
190,031

 
191,679

 
381,710

2022
182,747

 
188,362

 
371,109

2023
167,266

 
183,177

 
350,443

2024
155,392

 
181,116

 
336,508

Thereafter
1,080,313

 
1,796,773

 
2,877,086

Total lease payments
1,913,316

 
2,682,269

 
4,595,585

Plus amount representing residual property value

 
17,639

 
17,639

Less imputed interest
(510,756
)
 
(1,120,701
)
 
(1,631,457