Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Note 10 – Leases

Finance Leases

We have a finance lease obligation related to our manufacturing facility in Eschenbach, Germany. Under the terms of the lease agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon. Our finance lease obligation related to this facility was $4.5 million and $5.0 million as of December 31, 2019 and 2018, respectively. The finance lease right-of-use asset balance for this facility was $6.3 million and $6.7 million as of December 31, 2019 and 2018, respectively. Accumulated amortization related to our finance lease right-of-use assets was $3.8 million and $3.5 million as of December 31, 2019 and December 31, 2018, respectively. All other finance lease obligations, finance lease right-of-use assets and accumulated amortization were cumulatively immaterial as of December 31, 2019 and 2018.

Amortization expense related to our finance lease right-of-use assets, which is primarily included in the “Cost of sales” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Interest expense related to our finance lease obligations, which is included in the “Interest expense, net” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Payments made on the principal portion of our finance lease obligations were immaterial for each of the years ended December 31, 2019 and 2018.

Operating Leases

We have operating leases primarily related to building space and vehicles. Renewal options are included in the lease term to the extent we are reasonably certain to exercise the option. The exercise of lease renewal options is at our sole discretion. We account for lease components separately from non-lease components. The incremental borrowing rate represents our ability to borrow on a collateralized basis over a similar lease term.

Our expenses and payments for operating leases were as follows:

	Year Ended December 31,
(Dollars in thousands)	2019		2018		2017
Operating leases expense	$	3,119	$	3,850	$	3,819
Short-term leases expense	$	192	$	112	$	236
Payments on operating lease obligations	$	2,967	$	3,850	$	3,819

Our assets and liabilities balances related to finance and operating leases reflected in the consolidated statements of financial position, were as follows:

		As of December 31,
(Dollars in thousands)	Financial Statement Line Item	2019		2018
Finance lease right-of-use assets	Property, plant and equipment, net	$	6,280	$	6,750
Operating lease right-of-use assets	Other long-term assets	$	4,656	$	—
Finance lease obligations, current portion	Other accrued liabilities	$	400	$	420
Finance lease obligations, non-current portion	Other long-term liabilities	$	4,140	$	4,629
Total finance lease obligations		$	4,540	$	5,049
Operating lease obligations, current portion	Other accrued liabilities	$	2,343	$	—
Operating lease obligations, non-current portion	Other long-term liabilities	$	2,334	$	—
Total operating lease obligations		$	4,677	$	—

Net Future Minimum Lease Payments

The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of December 31, 2019:

	Finance			Operating
(Dollars in thousands)	Leases in Effect			Leases Signed			Less: Leases Not Yet Commenced			Leases in Effect
2020	$	532		$	2,570		$	(128	)	$	2,442
2021	4,202			1,649			(128		)	1,521
2022	—			919			(101		)	818
2023	—			332			(101		)	231
2024	—			131			(101		)	30
Thereafter	—			2			—			2
Total lease payments	4,734			5,603			(559		)	5,044
Less: Interest	(194		)	(389		)	22			(367		)
Present Value of Net Future Minimum Lease Payments	$	4,540		$	5,214		$	(537	)	$	4,677

The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments:

	Finance Leases	Operating Leases
Weighted Average Remaining Lease Term	1.5 years	2.5 years
Weighted Average Discount Rate	3.00%	6.07%

Transition

We adopted Accounting Standards Codification (ASC) 842, Leases, in the first quarter of 2019 using the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restatement of comparative periods. The guidance was applied to all leases that were not completed at the date of implementation. The adoption primarily affected our consolidated statements of financial position through the recognition of $6.2 million of operating lease right-of-use assets and $6.2 million of operating lease obligations, as well as an immaterial impact to retained earnings, as of January 1, 2019. We recognized $0.8 million of operating lease right-of-use assets and $0.8 million of operating lease obligations for the year ended December 31, 2019. The total operating lease right-of use assets and operating lease obligations recognized was $7.0 million and $7.0 million, respectively, for the year ended December 31, 2019.

Practical Expedients

We have elected to recognize lease payments in the consolidated statements of operations on a straight-line basis over the term of the lease for short-term leases. We also elected the package of practical expedients that allows us to carry forward the historical lease classification and accounting for indirect costs for any existing leases.

Leases

Note 10 – Leases

Finance Leases

We have a finance lease obligation related to our manufacturing facility in Eschenbach, Germany. Under the terms of the lease agreement, we have an option to purchase the property upon the expiration of the lease in 2021 at a price which is the greater of (i) the then-current market value or (ii) the residual book value of the land including the buildings and installations thereon. Our finance lease obligation related to this facility was $4.5 million and $5.0 million as of December 31, 2019 and 2018, respectively. The finance lease right-of-use asset balance for this facility was $6.3 million and $6.7 million as of December 31, 2019 and 2018, respectively. Accumulated amortization related to our finance lease right-of-use assets was $3.8 million and $3.5 million as of December 31, 2019 and December 31, 2018, respectively. All other finance lease obligations, finance lease right-of-use assets and accumulated amortization were cumulatively immaterial as of December 31, 2019 and 2018.

Amortization expense related to our finance lease right-of-use assets, which is primarily included in the “Cost of sales” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Interest expense related to our finance lease obligations, which is included in the “Interest expense, net” line item of the consolidated statements of operations, was immaterial for each of the years ended December 31, 2019 and 2018. Payments made on the principal portion of our finance lease obligations were immaterial for each of the years ended December 31, 2019 and 2018.

Operating Leases

We have operating leases primarily related to building space and vehicles. Renewal options are included in the lease term to the extent we are reasonably certain to exercise the option. The exercise of lease renewal options is at our sole discretion. We account for lease components separately from non-lease components. The incremental borrowing rate represents our ability to borrow on a collateralized basis over a similar lease term.

Our expenses and payments for operating leases were as follows:

	Year Ended December 31,
(Dollars in thousands)	2019		2018		2017
Operating leases expense	$	3,119	$	3,850	$	3,819
Short-term leases expense	$	192	$	112	$	236
Payments on operating lease obligations	$	2,967	$	3,850	$	3,819

Our assets and liabilities balances related to finance and operating leases reflected in the consolidated statements of financial position, were as follows:

		As of December 31,
(Dollars in thousands)	Financial Statement Line Item	2019		2018
Finance lease right-of-use assets	Property, plant and equipment, net	$	6,280	$	6,750
Operating lease right-of-use assets	Other long-term assets	$	4,656	$	—
Finance lease obligations, current portion	Other accrued liabilities	$	400	$	420
Finance lease obligations, non-current portion	Other long-term liabilities	$	4,140	$	4,629
Total finance lease obligations		$	4,540	$	5,049
Operating lease obligations, current portion	Other accrued liabilities	$	2,343	$	—
Operating lease obligations, non-current portion	Other long-term liabilities	$	2,334	$	—
Total operating lease obligations		$	4,677	$	—

Net Future Minimum Lease Payments

The following table includes future minimum lease payments under finance and operating leases together with the present value of the net future minimum lease payments as of December 31, 2019:

	Finance			Operating
(Dollars in thousands)	Leases in Effect			Leases Signed			Less: Leases Not Yet Commenced			Leases in Effect
2020	$	532		$	2,570		$	(128	)	$	2,442
2021	4,202			1,649			(128		)	1,521
2022	—			919			(101		)	818
2023	—			332			(101		)	231
2024	—			131			(101		)	30
Thereafter	—			2			—			2
Total lease payments	4,734			5,603			(559		)	5,044
Less: Interest	(194		)	(389		)	22			(367		)
Present Value of Net Future Minimum Lease Payments	$	4,540		$	5,214		$	(537	)	$	4,677

The following table includes information regarding the lease term and discount rates utilized in the calculation of the present value of net future minimum lease payments:

	Finance Leases	Operating Leases
Weighted Average Remaining Lease Term	1.5 years	2.5 years
Weighted Average Discount Rate	3.00%	6.07%

Transition

We adopted Accounting Standards Codification (ASC) 842, Leases, in the first quarter of 2019 using the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restatement of comparative periods. The guidance was applied to all leases that were not completed at the date of implementation. The adoption primarily affected our consolidated statements of financial position through the recognition of $6.2 million of operating lease right-of-use assets and $6.2 million of operating lease obligations, as well as an immaterial impact to retained earnings, as of January 1, 2019. We recognized $0.8 million of operating lease right-of-use assets and $0.8 million of operating lease obligations for the year ended December 31, 2019. The total operating lease right-of use assets and operating lease obligations recognized was $7.0 million and $7.0 million, respectively, for the year ended December 31, 2019.

Practical Expedients

We have elected to recognize lease payments in the consolidated statements of operations on a straight-line basis over the term of the lease for short-term leases. We also elected the package of practical expedients that allows us to carry forward the historical lease classification and accounting for indirect costs for any existing leases.