Leases

9 Months Ended

Sep. 30, 2019

LEASES

The Company leases certain manufacturing and warehouse facilities, administrative office space, semi-tractors, trailers, forklifts, and other equipment through operating leases with unrelated third parties. The operating leases have remaining terms of up to 12 years and some leases include options to purchase, terminate, or extend for one or more years. The options are included in the lease term when it is reasonably certain the option will be exercised. Leases with an initial term of 12 months or less are recognized in lease expense on a straight-line basis over the lease term and not recorded on the Condensed Consolidated Balance Sheet.

The Company uses its incremental borrowing rate based on information available at lease inception in determining the present value of the lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate based on applicable lease terms and the current economic environment.

Certain of the Company’s lease arrangements contain lease components (such as minimum rent payments) and non-lease components (such as common-area or other maintenance costs and taxes). The Company generally accounts for each component separately based on the estimated standalone price of each component. Some of the Company’s lease arrangements include rental payments that are adjusted periodically for an index rate. These leases are initially measured using the projected payments in effect at the inception of the lease. Certain of the Company’s leased semi-tractors, trailers, and forklifts include variable costs for usage or mileage. Such variable costs are expensed as incurred and included in the variable lease cost item noted in the table below. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. The components of lease cost for the periods ended September 30, 2019 were as follows:


(in thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	5,481	$	16,263
Short-term lease cost	522		1,996
Variable lease cost	501		1,331
Total lease cost	$	6,504	$	19,590

Future minimum lease payments under operating leases as of September 30, 2019 were as follows:


(in thousands)
Year Ending December 31,
2019 (excluding the nine months ended September 30, 2019)	$	5,401
2020	17,384
2021	14,518
2022	10,824
2023	7,817
Thereafter	28,947
Total future minimum lease payments ^(a)	84,891
Less: Interest	(14,358)
Present value of operating lease liabilities	$	70,533

^(a)Refer to the Company’s 2018 Annual Report on Form 10-K for disclosure of future minimum lease payments at December 31, 2018 under ASC Topic 840, the accounting standard applicable to leases prior to the adoption of Topic 842.

At September 30, 2019, the Company’s operating leases had a weighted-average remaining lease term of 6.5 years and a weighted-average discount rate of 5.7 percent.

Cash Flows

The initial right-of-use assets of $66.4 million were recognized as non-cash asset additions upon adoption of Topic 842. Additional right-of use assets of $12.3 million were recognized as non-cash asset additions that resulted from new operating lease obligations during the nine months ended September 30, 2019. Cash paid for amounts included in the present value of operating lease obligations and included in cash flows from operations was $15.4 million for the nine months ended September 30, 2019.

Finance Leases

The Company has various leases classified as finance leases, which are included in fixed assets, net and long-term indebtedness on the Condensed Consolidated Balance Sheets. These leases were not material to the Condensed Consolidated Financial Statements as of September 30, 2019.

Lessor

The Company has various lease arrangements to lease office space and other real estate under which the Company is the lessor. These leases are classified as operating leases and income associated with these leases is not material.