MIME 2017 Annual Report

82 Future minimum payments for our capital leases, operating leases, build-to-suit leases and data centers as of March 31, 2018 are as follows: Year Ending March 31, Capital Leases Operating Leases Data Centers 2019 $ 1,248 $ 9,470 $ 19,707 2020 1,102 7,590 19,626 2021 1,102 5,194 19,331 2022 326 4,270 14,110 2023 — 4,264 3,314 Thereafter — 18,771 119 Total minimum lease payments $ 3,778 $ 49,559 $ 76,207 Less: Amount representing interest (263) Present value of capital lease obligations 3,515 Less: Current portion (1,125) Long-term portion of capital lease obligations $ 2,390 Certain amounts included in the table above relating to co-location leases for the Company’s servers include usage based charges in addition to base rent. Future lease payments in the table above do not include amounts due to the Company for future minimum sublease rental income of $1.1 million under non-cancelable subleases through 2020. The Company has outstanding letters of credit of $3.8 million and $3.8 million related to certain operating leases as of March 31, 2018 and 2017, respectively. Construction financing lease obligations Lexington, MA - U.S. Headquarters In February 2017, the Company entered into a lease agreement for a new U.S. headquarters located in a building (the “Building”) under construction at 191 Spring Street, Lexington, Massachusetts (191 Spring Lease). Under the terms of the 191 Spring Lease, the Company will initially lease approximately 79,145 square feet of office space for 10 years after initial occupancy commencing in January 2018. The Company executed a $1.3 million letter of credit upon signing the 191 Spring Lease. Pursuant to the work agreement entered into in connection with the 191 Spring Lease, the landlord is responsible for all costs associated with Base Building Work as defined under the 191 Spring Lease and will provide an allowance for normal tenant improvements up to an aggregate of $5.5 million. The Company has the option to extend the 191 Spring Lease for two successive five-year terms. During the Company’s first fiscal quarter of 2018, the Company determined that it should have accounted for the 191 Spring Lease as a build-to-suit lease as of March 31, 2017. The Company evaluated the impact of the error on the prior period consolidated financial statements and determined that the effect was not material to the consolidated financial statements as of and for the year ended March 31, 2017 and recorded the effect of the error in the December 31, 2017 interim condensed consolidated financial statements. The correction of the prior period balance sheet error had no impact on the previously reported results of operations or cash flows for the year ended March 31, 2017. Beginning in February 2017 and until construction was completed, the Company recorded certain estimated construction costs incurred and reported to it by the landlord for the Building as an asset and corresponding construction financing lease obligation on the consolidated balance sheets because the Company is deemed to be the owner of the building during the construction period for accounting purposes. Since the Company’s unit of account is related only to its portion of the Building, the Company determined that it does not have a land lease and has not recorded rent expense attributable to the land. Any incremental costs incurred directly by the Company are also capitalized. In each reporting period, the landlord estimates and reports to the Company construction costs incurred to date for the Building and the Company records its portion using allocation estimates. The Company periodically meets with the landlord and its construction manager to review these estimates and observe construction progress before recording such amounts.