M. LEASES

The Company accounts for leases under ASC Topic 842, Leases, which was adopted on January 1, 2019. At the time of adoption, the Company recognized right of use assets and lease liabilities of $3,832,000. The Company’s leasing activities include roles as both lessee and lessor. As lessee, the Company’s primary leasing activities include buildings and structures to support its manufacturing operations at one location in its Defense segment, and warehouse space and equipment to support its distribution center operations in its Housewares/Small Appliances segment. As lessor, the Company’s primary leasing activity is comprised of manufacturing and office space located adjacent to its corporate offices. All of the Company’s leases are classified as operating leases.

The Company’s leases as lessee in its Defense segment provide for variable lease payments that are based on changes in the Consumer Price Index. As lessor, the Company’s primary lease also provides for variable lease payments that are also based on changes in the Consumer Price Index, as well as on increases in costs of insurance, real estate taxes, and utilities related to the leased space. Generally, all of the Company’s lease contracts provide for options to extend and terminate them. The majority of lease terms of the Company’s lease contracts reflect extension options, while none reflect termination options.

The Company has determined that the rates implicit in its leases are not readily determinable and estimates its incremental borrowing rates utilizing quotes from financial institutions for real estate and equipment, as applicable, over periods of time similar to the terms of its leases. The Company has entered into various short-term leases as lessee and has elected a non-recognition accounting policy, as permitted by ASC Topic 842.


	12 Months Ending
Summary of Lease Cost (in thousands)	December 31, 2019
Operating lease cost	$	691
Short-term and variable lease cost		225
Total lease cost	$	916

Rent expense was approximately $1,114,000, $1,050,000, and $994,000 for the years ended December 31, 2019, 2018, and 2017, respectively. Operating cash used for operating leases was $916,000 for the twelve months ended December 31, 2019. The weighted-average remaining lease term was 7.55 years, and the weighted-average discount rate was 5.5% as of December 31, 2019.

Maturities of operating lease liabilities are as follows:


Years ending December 31:	(In thousands)
2020	$	693
2021		648
2022		648
2023		531
2024		439
Thereafter		1,385
Total lease payments	$	4,344
Less: future interest expense		823
Lease liabilities	$	3,521

Lease income from operating lease payments for the year ended December 31, 2019, was $1,788,000. Undiscounted cash flows provided by lease payments are expected as follows:


Years ending December 31:	(In thousands)
2020	$	1,839
2021		1,832
2022		1,832
2023		1,832
2024		1,832
Thereafter		14,656
Total lease payments	$	23,823

The Company considers risk associated with the residual value of its leased real property to be low, given the nature of the long-term lease agreement, the Company’s ability to control the maintenance of the property, and the creditworthiness of the lessee. The residual value risk is further mitigated by the long-lived nature of the property, and the propensity of such assets to hold their value or, in some cases, appreciate in value.