7. COMMITMENTS AND CONTINGENCIES

Leasing Activities

The Company leases certain equipment and facilities under long-term non-cancellable operating and finance lease agreements. The leases expire at various dates through 2026. Certain of the lease agreements contain renewal options. For those leases that have renewal options, the Company included these renewal periods in the lease term if the Company determined it was reasonably certain to exercise the renewal option. Lease payments during such renewal periods were also considered in the calculation of right-of-use assets and lease obligations.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Lease obligations are recognized at the commencement date based on the present value of lease payments over the lease term. Right-of-use assets are recognized at the commencement date as the initial measurement of the lease liability, plus payments made prior to lease commencement and any initial direct costs. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Expense is recognized on a straight-line basis over the lease term for operating leases. For finance leases, expense is recognized as the expense from straight-line amortization of the right-of-use asset plus the periodic interest expense from the lease obligation. Short-term leases have a lease term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related right-of-use asset or lease obligation for such contracts.

Right-of-use assets related to finance leases are included as a component of property, plant and equipment, net on the consolidated balance sheets and had the following values at September 30, 2019.


	September 30,
	2019
Finance lease right-of-use assets	$	78
Accumulated amortization		(15)
Finance lease right-of-use assets, net	$	63

A maturity analysis of the undiscounted cash flows of operating and finance lease obligations is as follows:


	Operating Lease Obligation		Finance Lease Obligation
Remaining lease payments to be paid during the year ended December 31,
2019	$	108	$	6
2020		368		23
2021		277		23
2022		260		15
2023		220		—
Thereafter		464		—
Total lease payments		1,697		67
Less Imputed Interest		(293)		(4)
Lease obligation at September 30, 2019	$	1,404	$	63

The lease cost and certain other information during the three and nine months ended September 30, 2019 is as follows:


	Three Months Ended		Nine Months Ended
	September 30		September 30
	2019		2019
Lease Cost
Finance lease cost:
Amortization of right-of-use assets	$	4	$	15
Interest on lease obligation		—		1
Total finance lease cost		4		16
Total operating lease cost		110		495
Short-term lease cost		479		1,049
Total lease cost	$	593	$	1,560

Other Information
Cash paid for amounts included in the measurement of lease obligation:
Operating cash flows from operating leases	$	107	$	492
Financing cash flows from finance leases		5		15

Right-of-use assets obtained in exchange for new finance lease obligations		—		—
Right-of-use assets obtained in exchange for new operating lease obligations		117		117

The weighted average remaining lease term for operating leases and finance leases at September 30, 2019 was 5.6 years and 2.9 years, respectively. The weighted average discount rate for operating leases and finance leases at September 30, 2019 was 3.5% and 4.0%, respectively. The Company’s subsidiary in the United Kingdom leased facilities used for manufacturing and office space from a related party with related lease costs during the three months ended September 30, 2019 and 2018 of $53 and $55, respectively, and related lease costs during the nine months ended September 30, 2019 and 2018 of $170 and $164, respectively. The Company’s French subsidiary leased a fleet of vehicles from a related party with related lease costs during the three months ended September 30, 2019 and 2018 of $26 and $32, respectively, and related lease costs during the nine months ended September 30, 2019 and 2018 of $95 and $105, respectively.

Other Commitments

At September 30, 2019 and December 31, 2018, the Company had commitments of approximately $3,891 and $7,053 for construction and acquisition of property, plant and equipment. The Company is also migrating its enterprise resource planning (ERP) system to a multi-tenant cloud environment which includes global ERP, human capital management, data analytics and the use of artificial intelligence. This migration and upgrade of the existing ERP system will be done in three phases over the next three years. Related to this project, at September 30, 2019, the Company had commitments of approximately $8,869 in software license fees payable in installments through 2025.

Contingencies

The Company has entered into arrangements with third-party lenders where it has agreed, in the event of default by a distributor within the independent distributor network, to repurchase from the third-party lender company products repossessed from the independent distributor customer. These arrangements are typically subject to a maximum repurchase amount. The maximum amount of collateral that the Company could be required to purchase was approximately $73,754 at September 30, 2019, and $49,694 at December 31, 2018, as distributors increased usage of floor plan financing. The Company’s risk under these arrangements is mitigated by the value of the products that would be repurchased as part of the transaction. The Company considered the fair value at inception of its liability under these arrangements and concluded that the liability associated with these potential repurchase obligations was not probable and thus not material at September 30, 2019 or December 31, 2018.

The Company is, from time to time, a party to litigation arising in the normal course of its business. Litigation is subject to various inherent uncertainties, and it is possible that some of these matters could be resolved unfavorably to the Company, which could result in substantial damages against the Company. The Company has established accruals for matters that are probable and reasonably estimable and maintains product liability and other insurance that management believes to be adequate. Management believes that any liability that may ultimately result from the resolution of these matters in excess of available insurance coverage and accruals will not have a material adverse effect on the consolidated financial position or results of operations of the Company.