The Company leases property used for distribution centers, office space, and Bolt branch locations throughout the US and Canada, along with various equipment located in distribution centers and corporate headquarters. The Company is also a lessor of its Decatur, Alabama property previously used in conjunction with a discontinued operation.

Lawson MRO primarily has two types of leases: leases for real estate and leases for equipment. Operating real estate leases that have a material impact on the operations of the Company are related to the Company's distribution network and headquarters. The Company possesses several additional property leases that are month to month basis and are not material in nature. Lawson MRO does not possess any leases that have residual value guarantees. Several property leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use assets and associated lease liabilities when the Company is reasonably certain it will renew a lease.

The value of the Right Of Use ("ROU") assets and associated lease liabilities is calculated using the total cash payments over the course of the lease, discounted to the present value using the appropriate incremental borrowing rate. The right of use asset will be amortized over its useful life. The lease liability is reduced in conjunction with the lease payments made, with adjustments made to the lease liability in order to account for non-straight line cash payments through the life of the lease.

Bolt primarily leases the real estate for its branch locations as well as its distribution center in Calgary, Alberta. Bolt possesses additional property leases that are month to month and not material in nature. Bolt property leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use asset and associated lease liability when the Company is reasonably certain it will renew a lease.

The Company is required to determine a discount rate for the present value of lease payments. If the rate is not included in the lease or cannot be readily determined, the Company must estimate the incremental borrowing rate to be used for the discount rate. The discount rate of Lawson MRO and Bolt will be reviewed on a periodic basis and updated as needed.

The expenses and income generated by the leasing activity of Lawson as lessee for the three months ended June 30, 2020 and June 30, 2019 are as follows (Dollars in thousands):


Lease Type	Classification	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019

Consolidated Operating Lease Expense ⁽¹⁾	Operating expenses	$	1,183	$	1,227

Consolidated Financing Lease Amortization	Operating expenses	50		$	51

Consolidated Financing Lease Interest	Interest expense	7		7

Consolidated Financing Lease Expense		57		58

Sublease Income ⁽²⁾	Operating expenses	—		(80)
Net Lease Cost		$	1,240	$	1,205

⁽²⁾ Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases.

The expenses and income generated by the leasing activity of Lawson as lessee for the six months ended June 30, 2020 and June 30, 2019 are as follows (Dollars in thousands):


Lease Type	Classification	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
Consolidated Operating Lease Expense ⁽¹⁾	Operating expenses	$	2,369	$	2,502

Consolidated Financing Lease Amortization	Operating expenses	102		99

Consolidated Financing Lease Interest	Interest expense	14		13

Consolidated Financing Lease Expense		116		112

Sublease Income ⁽²⁾	Operating expenses	—		(160)
Net Lease Cost		$	2,485	$	2,454

⁽²⁾ Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases.

The value of the net assets and liabilities generated by the leasing activity of Lawson as lessee as of June 30, 2020 and December 31, 2019 are as follows (Dollars in thousands):


Lease Type	June 30, 2020		December 31, 2019

Total ROU operating lease assets ⁽¹⁾	$	8,944	$	10,592
Total ROU financing lease assets ⁽²⁾	563		654
Total lease assets	$	9,507	$	11,246

Total current operating lease obligation	$	3,678	$	3,591
Total current financing lease obligation	243		239
Total current lease obligations	$	3,921	$	3,830

Total long term operating lease obligation	$	7,166	$	9,133
Total long term financing lease obligation	261		371
Total long term lease obligation	$	7,427	$	9,504

⁽¹⁾ Operating lease assets are recorded net of accumulated amortization of $4.5 million and $2.4 million as of June 30, 2020 and December 31, 2019, respectively

⁽²⁾ Financing lease assets are recorded net of accumulated amortization of $0.3 million and $0.2 million as of June 30, 2020 and December 31, 2019, respectively

The value of the lease liabilities generated by the leasing activities of Lawson as lessee as of June 30, 2020 were as follows (Dollars in thousands):


Maturity Date of Lease Liabilities	Operating Leases		Financing Leases		Total

Year one	$	4,126	$	263	$	4,389
Year two	4,056		145		4,201
Year three	1,955		98		2,053
Year four	951		30		981
Year five	151		2		153
Subsequent years	498		—		498
Total lease payments	11,737		538		12,275
Less: Interest	893		34		927
Present value of lease liabilities	$	10,844	$	504	$	11,348

Cash Flow Source

Classification

Amount

Operating cash flows from operating leases

Operating activities

2,021

Operating cash flows from financing leases

Operating activities

Financing cash flows from financing leases

Financing activities

135