As discussed in Note 3, the Company adopted ASU No. 2016-02—Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. Adoption of the new standard resulted in the recognition of operating lease assets and lease liabilities of $20.2 million and $20.5 million, respectively, as of January 1, 2019. The difference between the lease assets and lease liabilities, net of the deferred tax impact, and the elimination of historical prepaid or deferred rent, was recorded as an adjustment to retained earnings. The standard did not have a material impact to the Company’s consolidated statements of operations and comprehensive income (loss) or cash flows.

The Company determines if an arrangement is a lease at inception. The Company’s leases primarily relate to facilities, vehicles, and equipment. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent

the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company does not recognize lease liabilities or lease assets on the balance sheet for short-term (leases with a lease term of twelve months or less as of the commencement date). Rather, any short-term lease payments are recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

For all classifications of leases, the Company combines lease and nonlease components to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

In 2019, the Company entered into an amendment for its corporate headquarters lease. As a result, the classification of this lease changed from an operating lease to a finance lease, resulting in an increase to both the lease liability and lease asset of approximately $8.0 million.

A summary of the Company’s lease portfolio as of December 31, 2020 and 2019 is presented in the table below:

(U.S. Dollars, in thousands, except lease term and discount rate)	Classification	December 31, 2020			December 31, 2019
Assets
Operating leases	Other long-term assets	$	4,840		$	5,798
Finance leases	Property, plant and equipment, net		20,552			20,207
Total lease assets		$	25,392		$	26,005
Liabilities
Current
Operating leases	Other current liabilities	$	2,092		$	1,875
Finance leases	Current portion of finance lease liability		510			323
Long-term
Operating leases	Other long-term liabilities		2,946			4,084
Finance leases	Long-term portion of finance lease liability		22,338			20,648
Total lease liabilities		$	27,886		$	26,930

Weighted Average Remaining Lease Term
Operating leases		3.6 years			4.2 years
Finance leases		18.1 years			20.7 years

Weighted Average Discount Rate
Operating leases			2.4	%		2.3	%
Finance leases			4.2	%		4.4	%

(U.S. Dollars, in thousands)	For the Year Ended December 31, 2020		For the Year Ended December 31, 2019
Finance lease costs:
Amortization of right-of-use assets	$	1,766	$	972
Interest on finance lease liabilities		940		919
Operating lease costs		2,235		2,161
Short-term lease costs		230		255
Variable lease costs		673		749
Total lease costs	$	5,844	$	5,056

Rent expense for operating leases in 2018 totaled $4.5 million, which were accounted for under Topic 840.

(U.S. Dollars, in thousands)	For the Year Ended December 31, 2020		For the Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,299	$	4,075
Operating cash flows from finance leases		689		919
Financing cash flows from finance leases		323		365
Right-of-use assets obtained in exchange for lease obligations
Operating leases		959		878
Finance leases		1,949		21,179

In March 2020, the Company entered into a CMSA with Wittenstein for an initial term of two years to manufacture the FITBONE product line. As consideration, the Company will pay $2.0 million to Wittenstein at the conclusion of the CMSA if certain conditions are met in relation to the prompt delivery of manufactured products. The Company is accounting for the CMSA as a finance lease as the Company has the right to direct the use of and to obtain substantially all of the economic benefits of the dedicated equipment used to manufacture the products and has the option to obtain title and possession of the equipment at the conclusion of the CMSA. As a result, the Company recognized both a finance lease liability and a related ROU asset of $1.9 million as of the commencement date of the CMSA.

A summary of the Company’s remaining lease liabilities as of December 31, 2020 is included below:

(U.S. Dollars, in thousands)	Operating Leases			Finance Leases
2021	$	2,197		$	1,414
2022		1,773			3,442
2023		467			1,471
2024		161			1,501
2025		195			1,531
Thereafter		524			24,175
Total undiscounted value of lease liabilities		5,317			33,534
Less: Interest		(279	)		(10,686	)
Present value of lease liabilities	$	5,038		$	22,848

Current portion of lease liabilities	$	2,092		$	510
Long-term portion of lease liabilities		2,946			22,338
Total lease liabilities	$	5,038		$	22,848