Leases Leases

12 Months Ended

Dec. 31, 2019

Leases of Lessee Disclosure [Text Block]

Leases

Adoption of Topic 842

On January 1, 2019, the Company adopted Topic 842 by applying the guidance at adoption date. As a result, the comparative information as of December 31, 2018 and for the years ended December 31, 2018 and 2017 has not been adjusted and continues to be reported under ASC 840, Leases (“ASC 840”). The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward its identification of contracts that are or contain leases, its historical lease classification and its accounting for initial direct costs for existing leases. The impact of adopting Topic 842 was not material to the Company’s results of operations or cash flows for the year ended December 31, 2019.

Beginning January 1, 2019, the Company recognized ROU assets and lease liabilities for the Company’s operating leases on its consolidated balance sheets. ROU assets for the Company’s operating leases are presented within operating lease right-of-use assets on the Company’s consolidated balance sheets, while the lease liabilities for the Company’s operating leases are presented within operating lease liabilities, with a current and long-term portion. Upon adoption of Topic 842, the balances at the adoption date of prepaid and accrued rent, lease incentives and unamortized assets and liabilities related to favorable and unfavorable leases were reclassified and are now presented within operating lease right-of-use assets on the Company’s consolidated balance sheets. Refer to Note 2 for further discussion of the Company’s ROU assets and lease liabilities. The Company’s accounting for its historical capital leases, which are now presented as finance leases under Topic 842, remained substantially unchanged.

Leases

The components of lease cost for the year ended December 31, 2019 were as follows:



(in thousands)	Classification	Year Ended December 31, 2019
Operating lease cost (a)	Selling, general and administrative expenses or Cost of sales (b)	$	39,243

Finance lease cost
Amortization of ROU assets	Depreciation expense or Cost of sales (b)	$	6,534
Interest on lease liabilities	Interest expense	613
Total finance lease cost		$	7,147

(a) Includes short-term leases and variable lease costs, which are not material.

(b) A portion of the operating lease cost and amortization of ROU assets held under finance leases is included within cost of sales on the consolidated statements of operations, depending on the type of operations undertaken by the related facility or asset.

The Company subleases certain facilities to third parties. Income from sublease rentals for the year ended December 31, 2019 was not material.

The following table presents the Company’s right-of-use assets and lease liabilities as of December 31, 2019 and 2018:



(in thousands)	Classification	December 31, 2019		December 31, 2018
Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	$	139,907	$	—
Finance lease right-of-use assets (a)	Property and equipment, net of accumulated depreciation	14,444		17,159
Total leased right-of-use assets		$	154,351	$	17,159
Liabilities
Current portion
Operating lease liabilities	Current portion of operating lease liabilities	$	26,147	$	—
Finance lease liabilities	Current portion of long-term debt and finance lease obligations	5,577		6,661
Noncurrent portion
Operating lease liabilities	Long-term portion of operating lease liabilities	120,832		—
Finance lease liabilities	Long-term portion of finance lease obligations	6,959		8,845
Total lease liabilities		$	159,515	$	15,506

(a) Finance lease right-of-use assets are presented net of accumulated amortization of $43.7 million and $42.5 million as of December 31, 2019 and 2018, respectively.

The following table presents the weighted average remaining lease term and weighted average discount rate for the Company’s leases as of December 31, 2019:



	December 31, 2019
Weighted average remaining lease term (years)
Operating leases	6.0
Finance leases	4.0
Weighted average discount rate
Operating leases	6.1	%
Finance leases	4.7	%

Future maturities of lease liabilities as of December 31, 2019 were as follows:



(in thousands)	Operating Leases			Finance Leases			Total
2020	$	34,103		$	6,037		$	40,140
2021	32,672			2,825			35,497
2022	30,667			1,338			32,005
2023	27,467			1,120			28,587
2024	21,996			466			22,462
Thereafter	29,796			2,010			31,806
Total lease payments	176,701			13,796			190,497
Less: Interest	(29,722		)	(1,260		)	(30,982		)
Present value of lease liabilities	$	146,979		$	12,536		$	159,515

As of December 31, 2019, the Company had an additional lease for office space that has not yet commenced, as the office space has not yet been made available to the Company. The office space lease is expected to commence in 2020 and contains undiscounted lease payments of $12.3 million over the 8 year term of the lease. These payments are not included in the table above.

Cash paid for amounts included in the measurement of lease liabilities and right-of-use assets obtained in exchange for lease obligations during the year ended December 31, 2019 were as follows:



(in thousands)	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	32,518
Operating cash flows from finance leases	608
Financing cash flows from finance leases	6,697
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	56,318
Finance leases	3,727

Disclosures related to periods prior to adoption of Topic 842

As previously discussed, the Company adopted Topic 842 by applying the guidance at the adoption date, January 1, 2019. As required, the following disclosures are provided for periods prior to adoption, which continue to be presented in accordance with ASC 840.

Total rent expense under operating leases, excluding short-term rentals, for the years ended December 31, 2018 and 2017 was $32.2 million and $30.5 million, respectively, which are included in either cost of sales or selling, general and administrative expenses on the consolidated statements of operations, depending on the type of operations undertaken by the related facility or asset.

Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 are as follows:



(in thousands)	Capital Leases			Operating Leases
2019	$	7,245		$	30,431
2020	5,599			24,210
2021	2,356			21,551
2022	873			17,908
2023	660			14,607
Thereafter	—			34,279
	16,733			$	142,986	(a)
Less: Amounts representing interest	(1,227		)
Total obligation under capital leases	15,506
Less: Current portion of capital lease obligation	(6,661		)
Long-term capital lease obligation	$	8,845

(a) Minimum operating lease payments have not been reduced by minimum sublease rentals of $0.1 million due in the future under noncancellable subleases.