Effective January 1, 2019, we adopted ASU 2016-02, “Leases” (Topic 842), and elected the package of practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. We adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. The impact of the adoption of ASC 842, as of January 1, 2019, was approximately $5.5 million to our assets, approximately $1.6 million to our current liability and approximately $3.9 million to our long-term liability.

Under the transition method selected by the Company, leases expiring at, or entered into after, January 1, 2019 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with the Company's historical accounting under ASC 840. The adoption of this standard resulted in the recording of operating lease assets and operating lease liabilities as of January 1, 2019, with no related impact on the Company’s Consolidated Statement of Stockholders’ Equity or Consolidated Statement of Income (Loss). Short-term leases have not been recorded on the balance sheet.

We lease facilities related to sales and service, manufacturing, reconditioning, certain office spaces, apartments and warehouse, all of which we classify as operating leases. In addition, we also lease certain office equipment and vehicles, which we classify as financing leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; short-term lease expense for the three and nine months ended September 30, 2019 was approximately $0.5 million and $1.6 million, respectively.

Most leases include one or more options to renew, with renewal terms that can extend the lease term on a monthly, annual or longer basis. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option that is reasonably certain of being exercised.

Certain lease agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.


		September 30, 2019
	Classification	(In thousands)
Assets
Operating	Operating lease right of use assets	$	5,328
Finance	Other assets		419
Total lease assets		$	5,747

Liabilities
Current
Operating	Operating lease liabilities	$	1,295
Finance	Other accrued liabilities		254

Noncurrent
Operating	Operating lease liabilities, long-term		4,011
Finance	Other long-term liabilities		183
Total lease liabilities		$	5,743

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is based on our rate for the ABL Credit Facility (as defined herein).

Our lease cost for the three and nine months ended September 30, 2019 is as follows:

		Three months ended		Nine months ended
		September 30, 2019
		(In thousands)
	Classification
Operating lease cost	Selling, general and administrative	$	474	$	1,219
Short-term lease costs	Selling, general and administrative		512		1,630
Amortization of leased assets	Selling, general and administrative		89		273
Interest on lease liabilities	Net interest expense		5		20
Total lease cost		$	1,080	$	3,142

	Nine months ended
	September 30, 2019
	Operating		Finance
	Leases		Leases		Total
	(In thousands)
2019	$	408	$	92	$	500
2020		1,399		216		1,615
2021		695		116		811
2022		446		31		477
2023		351		4		355
After 2023		3,738		-		3,738
Total lease payments	$	7,037	$	459	$	7,496
Less: interest		1,794		23		1,817
Present value of lease liabilities	$	5,243	$	436	$	5,679

The lease term and discount rate for our operating and finance leases is as follows:

	September 30, 2019
Weighted average remaining lease term (years)
Operating leases		12.4
Finance leases		2.0

Weighted average discount rate
Operating leases		4.8	%
Finance leases		4.3	%

We had no material non-cash financing leases entered into during the three months ended September 30, 2019.


	September 30, 2019
	(In thousands)
Other Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	472
Operating cash flows from finance leases		6
Financing cash flows from finance leases		93

The Company leases certain offices, shop and warehouse facilities, automobiles and equipment. Future annual minimum lease commitments at December 31, 2018 are as follows: 2019 - $2.0 million; 2020 - $1.5 million; 2021 - $0.8 million; 2022 - $0.5 million; 2023 - $0.4 million; and thereafter - $4.2 million.