Leases

6 Months Ended

Jun. 30, 2019

Note 10. Leases

The Company leases certain real estate, computer systems, material handling equipment, offices, automobiles and other equipment. The Company determines if a contract is a lease (or contains an embedded lease) at the inception of the agreement. The Company adopted ASU No. 2016-02, Leases, on January 1, 2019 using the effective date method. Upon adoption, right-of-use (“ROU”) assets totaling $4,993 were recorded on the Company’s balance sheet. Incremental borrowing rates used in the calculation of the ROU asset, when not apparent in the lease agreements, were estimated based upon secured borrowing rates quoted by the Company’s banks for loans of various lengths ranging from one to 20 years. Operating leases with original maturities less than one year in duration were excluded. The calculation of the ROU asset considered lease agreement provisions concerning termination, extensions, end of lease purchase and whether or not those provisions were reasonably certain of being exercised. Certain agreements contain lease and non-lease components, which are accounted for separately. The financial results for periods prior to January 1, 2019 are unchanged from results previously reported. No cumulative effect adjustment was necessary at the time of adoption. Based upon a contract review and related calculations, none of the Company’s leases were deemed to be financing leases. Lease expense recorded in the three and six-month periods ended June 30, 2019 under ASC 842 was not materially different from lease expense that would have been recorded under the previous lease accounting standard. Other transitional practical expedients allowed under ASU No. 2016-02 were adopted.

Other information concerning the Company’s operating leases accounted for under ASC 842 guidelines and the related expense, assets and liabilities follow:

	Three Months Ended June 30, 2019
Operating lease expense	$	651
Cash paid for operating leases included in operating cash flows		696

	Six Months Ended June 30, 2019
Operating lease expense	$	1,252
Cash paid for operating leases included in operating cash flows		1,341

	As of June 30, 2019
Operating lease right-of-use asset	$	4,075
Operating lease short-term liability included in other current liabilities		1,742
Operating lease long-term liability included in other long-term liabilities		2,349
Weighted average remaining lease term (in years)		4.73
Weighted average discount rate used in calculating right-of-use asset		4.12	%

Future annual minimum lease payments as of June 30, 2019 are as follows:

	Amount
2019 (six months remaining)	$	1,116
2020		1,321
2021		683
2022		382
2023		219
2024 and thereafter		911
Total		4,632
Less interest		(541	)
Present value of lease liabilities	$	4,091

The Company adopted ASU No. 2016-02 on January 1, 2019 as noted above. As required by the ASU, the following table discloses the minimum rental commitments for all non-cancelable operating leases at December 31, 2018 as reported in the Company’s 2018 10-K under previous ASC 840 guidance:

	Amount
2019	$	1,992
2020		1,100
2021		388
2022		144
2023		66
2024 and thereafter		12
Total	$	3,702