LEASES

6 Months Ended

Jun. 30, 2020

LEASES

LEASES

NOTE 6 - LEASES

A lease is defined as a contract that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company adopted ASC 842 on January 1, 2019 and recorded an initial right-of-use asset and related lease liability of $12.9 million and $16.6 million, respectively, on the adoption date. There was no cumulative effect upon adoption.

Leases in which the Company is determined to be the lessee are primarily operating leases comprised of real estate property and office space for our corporate headquarters and profit centers with terms that extend to 2025. Certain properties contain portions that are subleased with terms that extend through 2020. In accordance with ASC 842, operating leases are required to be recognized as a right-of-use asset with a corresponding lease liability.

The following table presents the classification of the right-of-use asset and corresponding liability within the condensed consolidated balance sheet. The Company elected to not include short-term leases with initial terms of twelve months or less, on the condensed consolidated balance sheet, (in thousands).

		June 30,		December 31,
		2020		2019
Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Other assets	$	9,427	$	10,308
Lease Liabilities	Classification
Operating lease liabilities	Other liabilities	$	12,290	$	13,480

The Company’s operating lease agreements typically include an option to renew the lease at the Company’s discretion. To the extent the Company is reasonably certain it will exercise the renewal option at the inception of the lease, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. ASC 842 requires the use of the rate implicit in the lease when it is readily determinable. As this rate is typically not readily determinable, at the inception of the lease, the Company uses its collateralized incremental borrowing rate over a similar term. The amount of the right-of-use asset and lease liability are impacted by the discount rate used to calculate the present value of the minimum lease payments over the term of the lease.

	June 30,		December 31,
	2020		2019
Weighted-Average Remaining Lease Term
Operating leases	4.58	years	4.91	years
Weighted-Average Discount Rate
Operating leases	3.65	%	3.71	%

The Company’s operating leases contain fixed and variable lease components and it has elected to account for all classes of underlying assets as a single lease component. Variable lease costs primarily represent common area maintenance and parking. The following table represents the Company’s net lease costs, (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Lease Costs
Operating lease cost	$	814	$	789	$	1,615	$	1,572
Variable lease cost		498		385		959		773
Sublease income		(100)		(100)		(199)		(199)
Lease costs, net	$	1,212	$	1,074	$	2,375	$	2,146

The following table presents a maturity analysis of the Company’s operating lease liabilities on an annual basis for each of the first five years and total amounts thereafter as of June 30, 2020:

Twelve months Ended	Operating Leases
June 30, 2021	$	3,200
June 30, 2022		2,785
June 30, 2023		2,644
June 30, 2024		2,329
June 30, 2025		2,164
Thereafter		230
Total future minimum lease payments	$	13,352
Less: Imputed interest		(1,062)
Present value of net future minimum lease payments	$	12,290