The Company determines if an arrangement is a lease at inception. The Company has leases for distribution centers, warehouses, office space and equipment, with remaining lease terms of one to nine years. Certain of these leases include options to extend the lease for up to five years, and some include options to terminate the lease early. Leases with an initial term of 12 months or less are not recorded on the statement of financial position; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Operating leases are included in right of use asset – operating leases (“ROU assets”), operating lease liability –short term, and operating lease liability – long term in the Condensed Consolidated Statement of Financial Position (Unaudited).

The ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is then applied at the portfolio level, based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The Company has also elected not to separate lease and non-lease components. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense is recognized on a straight-line basis over the lease term.

Amounts included in the Condensed Consolidated Statement of Financial Position (Unaudited) related to leases include:

	June 30, 2019
Right of use asset - operating leases	$	5,983

Operating lease liability - short-term	$	2,000
Operating lease liability - long-term		4,225
Total operating lease liabilities	$	6,225

		Quarter Ended		Six Months Ended
Lease Cost	Classification	June 30, 2019		June 30, 2019
Operating lease cost ⁽¹⁾	Cost of sales	$	442	$	857
Operating lease cost ⁽¹⁾	Selling, general and administrative expenses		426		897
Total lease cost		$	868	$	1,754

(1)

Includes short-term leases and variable lease costs, which are immaterial

	Six Months Ended
Supplemental Cash Flow Information	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,149
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases		1,037

Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases		4.53
Weighted-average discount rate
Operating leases		5.0	%

Maturity of Lease Liabilities - As of June 30, 2019	Operating Leases
2019 ⁽¹⁾	$	1,203
2020		1,805
2021		1,107
2022		1,051
2023		906
After 2023		897
Total lease payments		6,969
Less: Interest		(744	)
Present value of lease liabilities	$	6,225

(1)

Represents amounts due in 2019 after June 30, 2019

Future minimum rental commitments (undiscounted) as of December 31, 2018 under ASC 840 were as follows:

Year Ended December 31,
2019	$	2,492
2020		1,739
2021		982
2022		966
2023		841
Thereafter		811
Total	$	7,831

On February 27, 2018, the Company completed a sale-leaseback transaction for its distribution center in Pomona, California for a net purchase price of $2.3 million. The Company realized a gain on the sale of $2.0 million, of which $0.7 million was recognized during the quarter ended March 31, 2018. The remaining $1.3 million was recognized ratably over the term of the ten-year lease at approximately $0.1 million per year, until January 1, 2019 upon the adoption of ASU 2016-02 as discussed in Note 1. Simultaneous with closing the sale, the Company entered into a ten-year operating lease arrangement with base annual rent of approximately $0.1 million during the first year, followed by annual increases of 3% through the remainder of the lease period. This facility is included in the Company’s Distribution Segment.