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Leases

6 Months Ended

Jun. 30, 2021

The Company leases real estate, trucks and other equipment. The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets.

The Company's arrangements include certain non-lease components such as common area and other maintenance for leased real estate, as well as mileage, fuel and maintenance costs related to leased vehicles. For all leased asset classes, the Company has elected to not separate non-lease components from lease components and will account for each separate lease component and non-lease component associated with the lease as a single lease component. The Company does not guarantee any residual value in its lease agreements, and there are no material restrictions or covenants imposed by lease arrangements. Real estate leases typically include one or more options to extend the lease. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For our leased vehicles, the Company uses the interest rate implicit in its leases with the lessor to discount lease payments at the lease commencement date. When the implicit rate is not readily available, as is the case with our real estate leases, the Company uses quoted borrowing rates on our secured debt.

The following table summarizes the lease amounts included in our condensed consolidated balance sheets:


(in thousands)	Classification on the Condensed Consolidated Balance Sheets	June 30, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use assets (a)	$	16,852	$	18,751
Finance	Property and equipment, net (b)	5,251		6,242
Total lease assets		$	22,103	$	24,993

Liabilities
Current
Operating	Current operating lease liabilities	$	4,122	$	3,929
Finance	Current portion of long-term debt	2,454		2,536
Noncurrent
Operating	Long-term operating lease liabilities	13,454		15,459
Finance	Long-term debt	3,022		3,923
Total lease liabilities		$	23,052	$	25,847

(a) Operating lease assets are recorded net of accumulated amortization of $13.9 million at June 30, 2021 and $11.9 million at December 31, 2020.

(b) Finance lease assets are recorded net of accumulated amortization of $5.6 million at June 30, 2021 and $5.3 million at December 31, 2020.

The following table summarizes the lease costs included in our condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020:


		Three months ended June 30,				Six months ended June 30,
(in thousands)	Classification on the Condensed Consolidated Statement of Operations	2021		2020		2021		2020
Operating lease cost	Cost of revenue(a)	$	685	$	893	$	1,375	$	1,777
Operating lease cost	Selling, general and administrative(a)	584		376		1,169		757
Finance lease cost
Amortization	Cost of revenue(b)	652		645		1,327		1,311
Interest	Interest expense, net(b)	78		86		164		179
Total lease cost		$	1,999	$	2,000	$	4,035	$	4,024

(a) Operating lease costs recorded in cost of sales includes $0.1 million and $0.2 million of variable lease costs for the three and six months ended June 30, 2021, respectively, and $0.1 million and $0.4 million for the three and six months ended June 30, 2020, respectively. In addition, $0.1 million and $0.2 million of variable leases costs are included in Selling, general and administrative for the three and six months ended June 30, 2021, respectively, and $0.1 million for both the three and six months ended June 30, 2020. These variable costs consist of our proportionate share of operating expenses, real estate taxes and utilities.

(b) Finance lease costs recorded in cost of revenue include variable lease costs of $0.7 million and $1.3 million for the three and six months ended June 30, 2021, respectively, and $0.5 million and $1.2 million for the three and six months ended June 30, 2020, respectively. These variable lease costs consist of fuel, maintenance, and sales tax charges. No variable lease costs for finance leases were recorded in selling, general and administrative.

Future minimum commitments for finance and operating leases that have non-cancelable lease terms in excess of one year as of June 30, 2021 were as follows:


Year ending (in thousands):	Finance Leases		Operating Leases
Remainder of 2021	$	1,401	$	2,479
2022	2,404		4,616
2023	1,409		3,516
2024	598		2,917
2025	50		2,409
Thereafter	—		4,043
Total minimum lease payments	$	5,862	$	19,980
Amounts representing interest	(386)
Present value of net minimum lease payments	$	5,476

The following is a summary of the lease terms and discount rates:


	June 30, 2021		December 31, 2020
Weighted average lease term (in years):
Operating	5.15		5.48
Finance	2.49		2.78

Weighted average discount rate:
Operating	4.84	%	4.83	%
Finance	5.45	%	5.50	%

The following is a summary of other information and supplemental cash flow information related to finance and operating leases:


	Six months ended June 30,
(in thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,456	$	2,910
Operating cash flows from finance leases	164		179
Financing cash flows from finance leases	1,318		1,285
Right-of-use assets exchanged for lease liabilities:
Operating leases	$	156	$	—
Finance leases	336		1,050
Right-of-use assets disposed or adjusted modifying operating leases liabilities	$	36	$	586
Right-of-use assets disposed or adjusted modifying finance leases liabilities	$	—	$	(64)

Leases