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Leases
 9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases Leases
The Company adopted ASC 842 effective January 1, 2019 using the modified retrospective approach. Refer to Note - 2 New Accounting Standards for additional information regarding the adoption of ASC 842.
The Company has operating and finance leases covering primarily warehouse and office facilities and equipment, with the lapse of time as the basis for all rental payments. The Company determines if an arrangement is a lease at inception.
Operating right-of-use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. In determining the estimated present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, with consideration given to the Company's recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating the Company's incremental borrowing rates.
The ROU assets also include any lease payments made and are reduced by any lease incentives received. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized in operating loss on a straight-line basis over the expected lease term.
Real estate leases of warehouse and office facilities are the most significant leases held by the Company. For these leases, the Company has elected the practical expedient permitted under ASC 842 to account for the lease and non-lease components as a single lease component. As a result, non-lease components, such as common area maintenance charges, are accounted for as a single lease element. The Company’s remaining operating leases are primarily comprised of leases of copiers, vehicles, and other warehouse equipment.
Certain of the Company’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. Pass-through charges, payments due to changes in usage of the asset, and payments due to changes in indexation are included within variable rent expense.
As a result of the adoption of ASC 842, the Company's build-to-suit liability recognized under the previous guidance was reclassified to a finance leases liability in the Condensed Consolidated Balance Sheet and is presented as such as of September 30, 2019.
None of the Company's lease agreements contain significant residual value guarantees, restrictions, or covenants.
Lease-related assets and liabilities consisted of the following:
Classification on the Balance SheetSeptember 30, 2019
ASSETS
Operating lease assetsOperating right-of-use assets$30,054  
Finance lease assetsProperty, plant and equipment, net10,555  
Total lease assets40,609  
LIABILITIES
Current
OperatingOperating lease liabilities$6,422  
FinanceCurrent portion of finance leases614  
Noncurrent
OperatingNoncurrent operating lease liabilities23,464  
FinanceFinance leases, less current portion8,347  
Total lease liabilities$38,847  
Weighted average remaining lease term
Operating leases5.8 years
Finance leases11.1 years
Weighted average discount rate
Operating leases5.2 %
Finance leases4.7 %
Lease-related expenses for the three and nine months ended September 30, 2019 were as follows:
Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
Finance lease expense:
Amortization of finance lease assets$261  $784  
Interest on finance lease liabilities105  321  
Operating lease expense2,127  6,444  
Variable lease expense143  474  
Short-term lease expense6  28  
Sublease income (1)
(158) (586) 
Total lease expense$2,484  $7,465  
(1) Relates primarily to one property subleased through September 2020.
Lease-related supplemental cash flow information for the nine months ended September 30, 2019 was as follows:
Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$(6,322) 
Operating cash flows for finance leases(321) 
Financing cash flows for finance leases(454) 
Lease obligations obtained in exchange for right-of-use assets
Operating leases812  
Maturities of lease liabilities as of September 30, 2019 were as follows:
Year ending December 31,Finance LeasesOperating Leases
2019 (excluding the nine months ended September 30, 2019)$260  $1,899  
2020991  7,517  
2021955  6,702  
2022975  5,664  
2023992  4,762  
Later years7,377  8,010  
Total lease payments11,550  34,554  
Less: imputed interest(2,589) (4,668) 
Total lease obligations$8,961  $29,886  
Comparable future minimum rental payments under leases that have initial or remaining non-cancelable lease terms in excess of one year as previously disclosed under Accounting Standards Codification No. 840, (Leases) ("ASC 840") as of December 31, 2018 are as follows:
Year ending December 31,Finance LeasesOperating LeasesBuilt-to-Suit Lease
2019 (full twelve months)$119  $7,882  $915  
202056  7,398  933  
20212  6,414  952  
20222  5,702  971  
20231  4,828  990  
Later years—  8,068  7,461  
Total future minimum rental payments under ASC 840$180  $40,292  $12,222  
Total rental payments charged to expense for operating leases under ASC 840 were $2,118 and $6,258 during the three and nine months ended September 30, 2018, respectively.
Leases Leases
The Company adopted ASC 842 effective January 1, 2019 using the modified retrospective approach. Refer to Note - 2 New Accounting Standards for additional information regarding the adoption of ASC 842.
The Company has operating and finance leases covering primarily warehouse and office facilities and equipment, with the lapse of time as the basis for all rental payments. The Company determines if an arrangement is a lease at inception.
Operating right-of-use ("ROU") assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. In determining the estimated present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, with consideration given to the Company's recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating the Company's incremental borrowing rates.
The ROU assets also include any lease payments made and are reduced by any lease incentives received. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized in operating loss on a straight-line basis over the expected lease term.
Real estate leases of warehouse and office facilities are the most significant leases held by the Company. For these leases, the Company has elected the practical expedient permitted under ASC 842 to account for the lease and non-lease components as a single lease component. As a result, non-lease components, such as common area maintenance charges, are accounted for as a single lease element. The Company’s remaining operating leases are primarily comprised of leases of copiers, vehicles, and other warehouse equipment.
Certain of the Company’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. Pass-through charges, payments due to changes in usage of the asset, and payments due to changes in indexation are included within variable rent expense.
As a result of the adoption of ASC 842, the Company's build-to-suit liability recognized under the previous guidance was reclassified to a finance leases liability in the Condensed Consolidated Balance Sheet and is presented as such as of September 30, 2019.
None of the Company's lease agreements contain significant residual value guarantees, restrictions, or covenants.
Lease-related assets and liabilities consisted of the following:
Classification on the Balance SheetSeptember 30, 2019
ASSETS
Operating lease assetsOperating right-of-use assets$30,054  
Finance lease assetsProperty, plant and equipment, net10,555  
Total lease assets40,609  
LIABILITIES
Current
OperatingOperating lease liabilities$6,422  
FinanceCurrent portion of finance leases614  
Noncurrent
OperatingNoncurrent operating lease liabilities23,464  
FinanceFinance leases, less current portion8,347  
Total lease liabilities$38,847  
Weighted average remaining lease term
Operating leases5.8 years
Finance leases11.1 years
Weighted average discount rate
Operating leases5.2 %
Finance leases4.7 %
Lease-related expenses for the three and nine months ended September 30, 2019 were as follows:
Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
Finance lease expense:
Amortization of finance lease assets$261  $784  
Interest on finance lease liabilities105  321  
Operating lease expense2,127  6,444  
Variable lease expense143  474  
Short-term lease expense6  28  
Sublease income (1)
(158) (586) 
Total lease expense$2,484  $7,465  
(1) Relates primarily to one property subleased through September 2020.
Lease-related supplemental cash flow information for the nine months ended September 30, 2019 was as follows:
Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$(6,322) 
Operating cash flows for finance leases(321) 
Financing cash flows for finance leases(454) 
Lease obligations obtained in exchange for right-of-use assets
Operating leases812  
Maturities of lease liabilities as of September 30, 2019 were as follows:
Year ending December 31,Finance LeasesOperating Leases
2019 (excluding the nine months ended September 30, 2019)$260  $1,899  
2020991  7,517  
2021955  6,702  
2022975  5,664  
2023992  4,762  
Later years7,377  8,010  
Total lease payments11,550  34,554  
Less: imputed interest(2,589) (4,668) 
Total lease obligations$8,961  $29,886  
Comparable future minimum rental payments under leases that have initial or remaining non-cancelable lease terms in excess of one year as previously disclosed under Accounting Standards Codification No. 840, (Leases) ("ASC 840") as of December 31, 2018 are as follows:
Year ending December 31,Finance LeasesOperating LeasesBuilt-to-Suit Lease
2019 (full twelve months)$119  $7,882  $915  
202056  7,398  933  
20212  6,414  952  
20222  5,702  971  
20231  4,828  990  
Later years—  8,068  7,461  
Total future minimum rental payments under ASC 840$180  $40,292  $12,222  
Total rental payments charged to expense for operating leases under ASC 840 were $2,118 and $6,258 during the three and nine months ended September 30, 2018, respectively.