Note 12. Leases

The Company leases real estate, warehouses and certain equipment. The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less ("short-term leases") are not recorded on the consolidated balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company's operating leases do not provide an implicit rate of return, the Company considered its other similar term collateralized financing arrangements, including the Essex sale-leaseback and equipment leases, certain vendor-direct equipment financing and the Deerfield debt facility, as amended, to determine its incremental borrowing rate. Operating lease ROU assets are comprised of the lease liability plus prepaid rents and are reduced by lease incentives and deferred rents. The Company has lease agreements with non-lease components which are not bifurcated.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years. The exercise of a lease renewal option typically occurs at the discretion of both parties. Certain leases also include options to purchase the leased property. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease termination until it is reasonably certain that the Company will exercise that option. Certain of the Company's lease agreements include payments adjusted periodically for fair market value and certain other percentage increases. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease expenses are as follows:


	Year Ended
	December 31, 2019		Statement of Operations Classification
	(in thousands)
Lease cost:
Operating lease cost	$	1,071	Cost of goods sold and operating expenses
Short-term lease cost		37	Cost of goods sold and operating expenses
Variable lease cost		217	Cost of goods sold and operating expenses
Finance lease cost:
Amortization of leased assets		520	Cost of goods sold
Interest on lease liabilities		214	Interest expense
Total net lease cost	$	2,059

Supplemental consolidated balance sheet information related leases is as follows:


	December 31, 2019		Balance Sheet Classification
	(in thousands)
Leases:
Assets:
Operating lease assets	$	3,044	Operating lease right-of-use assets
Finance lease assets		2,580	Property, plant and equipment, net
Total leased assets	$	5,624

Liabilities:
Current:
Operating leases	$	681	Current portion of operating lease liabilities
Finance leases		836	Current portion of long-term debt
Noncurrent:
Operating leases		3,254	Operating lease liabilities
Finance leases		331	Long-term debt, net of current portion
Total lease liabilities	$	5,102


	December 31, 2019
Weighted-Average Remaining Lease Term (years)
Operating lease assets	4.7
Finance lease assets	1.8

Weighted-Average Discount Rate
Operating lease assets	15.0	%
Finance lease assets	11.8	%

Supplemental consolidated cash flow information related to leases is as follows:


	Year Ended
	December 31, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,168
Operating cash flows from finance leases		214
Financing cash flows from finance leases		1,098

ROU assets obtained in exchange for new finance lease liabilities		406
ROU assets obtained in exchange for new operating lease liabilities	$	135

Maturities of lease liabilities are as follows:


	December 31, 2019
	Operating Leases		Finance Leases
	(in thousands)
2020	$	1,226	$	894
2021		1,118		117
2022		1,060		115
2023		1,055		95
2024		1,106		40
Total lease payments	$	5,565	$	1,261
Less amount representing interest		(1,630)		(94)
Total lease obligations	$	3,935	$	1,167

Disclosure related to periods prior to adoption of ASU 2016-02

Future minimum lease payments under non-cancelable rental and leases agreements which had initial or remaining term in excess of one year are as follows:


	December 31, 2018
	Operating Leases		Capital Leases
	(in thousands)
2019	$	1,180	$	1,257
2020		1,195		798
2021		1,062		21
2022		1,055		20
2023		1,055		—
Later years		1,106		—
Minimum lease commitment	$	6,653	$	2,096
Less amount representing interest				(238)
Present value of net minimum lease obligations			$	1,858