Leases and Service Commitments

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases and Service Commitments

Leases and Service Commitments

Subsequent to adoption of ASC 842:

Effective January 1, 2019, the Company adopted ASC 842 and recognized lease obligations and associated ROU assets for its existing non-cancelable operating leases. The Company has non-cancelable operating leases primarily associated with office space, related office equipment and other facilities.

The leases expire in various years and generally provide for renewal options. In the normal course of business, management expects that these leases will be renewed or replaced by leases on other properties.

Certain operating leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Several of these lease agreements contain provisions for periods in which rent payments are reduced. The total amount of rental payments due over the lease term is recorded as rent expense on a straight-line basis over the term of the lease.

To determine whether a contract contained a lease, the Company evaluated its contracts and verified that there was an identified asset and that the Company, or the tenant, had the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract was determined to contain a lease and the Company was a lessee, the lease was evaluated to determine whether it was an operating or financing lease.

The discount rate used for each lease was determined by estimating an appropriate incremental borrowing rate. In estimating an incremental borrowing rate, the Company considered the debt information, credit rating, and interest rate on the revolving credit facility, which is collateralized by the Company's assets. Accordingly, the Company continued discounting its remaining operating lease payments for calculating its lease liability using a rate of 5.25%. The Company applied this rate to its entire portfolio of leases on the basis that any adjustments to the rate for lease term or asset classification would not affect the interest rate charged under the debt or have a material effect on the discounted lease liability.

A summary of all lease classifications in our condensed consolidated balance sheet is as follows:

Leases	Classification	December 31, 2019
Assets
Operating lease assets	Operating lease ROU assets	$	20,095
Finance lease assets	Property and equipment, net (1)	555
Total leased assets		$	20,650
Liabilities
Current:
Operating	Current portion of operating lease liabilities	$	6,730
Finance	Current portion of long-term obligations	308
Long-term:
Operating	Operating lease liabilities, less current portion	14,502
Finance	Long-term obligations, less current portion	45
Total lease liabilities		$	21,585

⁽¹⁾ Finance leased assets have an accumulated amortization of $385.

As of December 31, 2019, maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases		Total
2020	$	7,586	308		$	7,894
2021	5,845		45		5,890
2022	4,869		—		4,869
2023	2,890		—		2,890
2024	1,330		—		1,330
Thereafter	830		—		830
Total lease payments	$	23,350	$	353	$	23,703
Less: interest and accretion	(2,118)		—		(2,118)
Present value of minimum lease payments	$	21,232	$	353	$	21,585
Less: current portion	(6,730)		(308)		(7,038)
Long-term portion	$	14,502	$	45	$	14,547

As of December 31, 2018, maturities of lease liabilities were as follows:

	Operating Leases		Finance Leases		Total
2019	$	8,825	$	718	$	9,543
2020	6,452		308		6,760
2021	4,594		45		4,639
2022	3,801		—		3,801
2023	1,767		—		1,767
Thereafter	1,600		—		1,600
Total lease payments	$	27,039	$	1,071	$	28,110

Lease terms and discount rates are as follows:

	December 31, 2019
Weighted-average remaining lease term (years):
Operating lease costs	3.68
Finance lease cost	1.34
Weighted-average discount rate:
Operating lease costs	5.25	%
Finance lease cost	3.28	%

For the year ended December 31, 2019, our operating lease cost was $10,560 and is primarily included in "Service expense” on our accompanying consolidated statements of operations. A summary of other lease information is as follows:

	Year Ended December 31, 2019
Financing cash flows from finance leases	$	(718)
Operating cash flows from operating leases	(10,919)
Amortization of operating leased ROU assets to the operating lease liability	10,133
ROU assets obtained through operating lease liabilities	6,787

Prior to adoption of ASC 842:

In 2018, the Company had non-cancelable contractual obligations in the form of operating leases for office space, related office equipment and other facilities. The leases expired in various years and generally provided for renewal options. In the normal course of business, it was expected that these leases would be renewed or replaced by leases on other properties.

Certain operating leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Several of these lease agreements contained provisions for periods in which rent payments were reduced. The total amount of rental payments due over the lease term was being charged to rent expense on a straight-line basis over the term of the lease. The cumulative difference between rent expense recorded and the amount paid, for continuing operations, as of December 31, 2018 and 2017 was $2,115 and $2,209, respectively, and was included in “Accrued expenses” for the short-term obligations and “Other long-term liabilities” for the long-term obligations in the consolidated balance sheets.

Prior to the adoption of ASC 842, future minimum payments under non-cancelable operating leases for equipment and property with initial terms of one year or more consisted of the following at December 31, 2018:

	Operating
	Leases
2019	$	8,825
2020	6,452
2021	4,594
2022	3,801
2023	1,767
Thereafter	1,600
Total future minimum lease payments	$	27,039

Rent expense for continuing operations related to operating leases was $10,960 and $10,250 for the years ended December 31, 2018 and 2017, respectively. Also, the lease agreements generally required the Company to pay executory costs such as real estate taxes, insurance, and repairs, which were recorded to expense as incurred.

Service Commitments

The Company entered into a contract related to transportation services that includes a minimum volume requirement. If the Company does not utilize the minimum level of services specified in the agreement, a penalty provision applies. Future minimum payments under the service commitments consisted of the following at December 31, 2019:

	Service
	Commitment
2020	4,782
2021 - 2022	3,539
Total future minimum payments	$	8,321

Leases and Service Commitments

Leases and Service Commitments

Subsequent to adoption of ASC 842:

Effective January 1, 2019, the Company adopted ASC 842 and recognized lease obligations and associated ROU assets for its existing non-cancelable operating leases. The Company has non-cancelable operating leases primarily associated with office space, related office equipment and other facilities.

The leases expire in various years and generally provide for renewal options. In the normal course of business, management expects that these leases will be renewed or replaced by leases on other properties.

Certain operating leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Several of these lease agreements contain provisions for periods in which rent payments are reduced. The total amount of rental payments due over the lease term is recorded as rent expense on a straight-line basis over the term of the lease.

To determine whether a contract contained a lease, the Company evaluated its contracts and verified that there was an identified asset and that the Company, or the tenant, had the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract was determined to contain a lease and the Company was a lessee, the lease was evaluated to determine whether it was an operating or financing lease.

The discount rate used for each lease was determined by estimating an appropriate incremental borrowing rate. In estimating an incremental borrowing rate, the Company considered the debt information, credit rating, and interest rate on the revolving credit facility, which is collateralized by the Company's assets. Accordingly, the Company continued discounting its remaining operating lease payments for calculating its lease liability using a rate of 5.25%. The Company applied this rate to its entire portfolio of leases on the basis that any adjustments to the rate for lease term or asset classification would not affect the interest rate charged under the debt or have a material effect on the discounted lease liability.

A summary of all lease classifications in our condensed consolidated balance sheet is as follows:

Leases	Classification	December 31, 2019
Assets
Operating lease assets	Operating lease ROU assets	$	20,095
Finance lease assets	Property and equipment, net (1)	555
Total leased assets		$	20,650
Liabilities
Current:
Operating	Current portion of operating lease liabilities	$	6,730
Finance	Current portion of long-term obligations	308
Long-term:
Operating	Operating lease liabilities, less current portion	14,502
Finance	Long-term obligations, less current portion	45
Total lease liabilities		$	21,585

⁽¹⁾ Finance leased assets have an accumulated amortization of $385.

As of December 31, 2019, maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases		Total
2020	$	7,586	308		$	7,894
2021	5,845		45		5,890
2022	4,869		—		4,869
2023	2,890		—		2,890
2024	1,330		—		1,330
Thereafter	830		—		830
Total lease payments	$	23,350	$	353	$	23,703
Less: interest and accretion	(2,118)		—		(2,118)
Present value of minimum lease payments	$	21,232	$	353	$	21,585
Less: current portion	(6,730)		(308)		(7,038)
Long-term portion	$	14,502	$	45	$	14,547

As of December 31, 2018, maturities of lease liabilities were as follows:

	Operating Leases		Finance Leases		Total
2019	$	8,825	$	718	$	9,543
2020	6,452		308		6,760
2021	4,594		45		4,639
2022	3,801		—		3,801
2023	1,767		—		1,767
Thereafter	1,600		—		1,600
Total lease payments	$	27,039	$	1,071	$	28,110

Lease terms and discount rates are as follows:

	December 31, 2019
Weighted-average remaining lease term (years):
Operating lease costs	3.68
Finance lease cost	1.34
Weighted-average discount rate:
Operating lease costs	5.25	%
Finance lease cost	3.28	%

For the year ended December 31, 2019, our operating lease cost was $10,560 and is primarily included in "Service expense” on our accompanying consolidated statements of operations. A summary of other lease information is as follows:

	Year Ended December 31, 2019
Financing cash flows from finance leases	$	(718)
Operating cash flows from operating leases	(10,919)
Amortization of operating leased ROU assets to the operating lease liability	10,133
ROU assets obtained through operating lease liabilities	6,787

Prior to adoption of ASC 842:

In 2018, the Company had non-cancelable contractual obligations in the form of operating leases for office space, related office equipment and other facilities. The leases expired in various years and generally provided for renewal options. In the normal course of business, it was expected that these leases would be renewed or replaced by leases on other properties.

Certain operating leases provide for increases in future minimum annual rental payments based on defined increases in the Consumer Price Index, subject to certain minimum increases. Several of these lease agreements contained provisions for periods in which rent payments were reduced. The total amount of rental payments due over the lease term was being charged to rent expense on a straight-line basis over the term of the lease. The cumulative difference between rent expense recorded and the amount paid, for continuing operations, as of December 31, 2018 and 2017 was $2,115 and $2,209, respectively, and was included in “Accrued expenses” for the short-term obligations and “Other long-term liabilities” for the long-term obligations in the consolidated balance sheets.

Prior to the adoption of ASC 842, future minimum payments under non-cancelable operating leases for equipment and property with initial terms of one year or more consisted of the following at December 31, 2018:

	Operating
	Leases
2019	$	8,825
2020	6,452
2021	4,594
2022	3,801
2023	1,767
Thereafter	1,600
Total future minimum lease payments	$	27,039

Rent expense for continuing operations related to operating leases was $10,960 and $10,250 for the years ended December 31, 2018 and 2017, respectively. Also, the lease agreements generally required the Company to pay executory costs such as real estate taxes, insurance, and repairs, which were recorded to expense as incurred.

Service Commitments

The Company entered into a contract related to transportation services that includes a minimum volume requirement. If the Company does not utilize the minimum level of services specified in the agreement, a penalty provision applies. Future minimum payments under the service commitments consisted of the following at December 31, 2019:

	Service
	Commitment
2020	4,782
2021 - 2022	3,539
Total future minimum payments	$	8,321