XML 37 R26.htm IDEA: XBRL DOCUMENT v3.20.2
LEASES
 9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
LEASES LEASES
The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the ROU asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from September 30, 2020. In addition, the Company has historically not been exercising purchase options with equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with a new lease. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.
The Company did not identify any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates upon implementation: (1) 1-2 years, 3.45% (2) 3-4 years, 4.04% (3) 5-9 years, 4.38% and (4) 10+ years, 5.10%.
In connection with the acquisition of Zumbro, the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023. At September 30, 2020, the Company had a finance lease liability of $2,682, which was recorded under lease liabilities (current and non-current) in the consolidated balance sheet.
ROU assets and lease liabilities at September 30, 2020 and December 31, 2019 are summarized as follows:
Right of use assetsSeptember 30, 2020December 31, 2019
Operating leases$5,546 $7,338 
Finance leases2,642 — 
Total$8,188 $7,338 
Lease liabilities - currentSeptember 30, 2020December 31, 2019
Operating leases$1,718 $2,475 
Finance leases156 — 
Total$1,874 $2,475 

Lease liabilities - non-currentSeptember 30, 2020December 31, 2019
Operating leases$3,500 $4,827 
Finance leases2,526 — 
Total$6,026 $4,827 
For the three and nine months ended September 30, 2020 and 2019, the Company's total lease costs were as follows, which included both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Lease Cost
Operating lease cost$702 $817 $2,179 $2,381 
Finance Lease cost
Amortization of ROU asset157 — 157 — 
Interest on lease liabilities104 — 104 — 
Total lease cost$963 $817 $2,440 $2,381 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$710 $823 $2,193 $2,395 
Operating cash flows from finance leases104 — 104 — 
Financing cash flows from finance leases112 — 112 — 
$926 $823 $2,409 $2,395 
ROU assets obtained in exchange for new operating lease liabilities, net of ROU assets disposals$— $(240)$(98)$8,485 
ROU assets obtained in exchange for new finance lease liabilities, net of ROU assets disposals$2,782 $— $2,782 $— 
Weighted-average remaining lease term - operating leases5.11 years4.97 years5.11 years4.97 years
Weighted-average remaining lease term - finance leases12.50 yearsn/a12.50 yearsn/a
Weighted-average discount rate - operating leases4.7 %4.6 %4.7 %4.6 %
Weighted-average discount rate - finance leases5.1 %n/a5.1 %n/a
Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2020 aggregated to approximately $702 and $2,179, respectively, and $817 and $2,381 for the three and nine months ended September 30, 2019, respectively.
LEASES LEASES
The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the ROU asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from September 30, 2020. In addition, the Company has historically not been exercising purchase options with equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with a new lease. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.
The Company did not identify any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates upon implementation: (1) 1-2 years, 3.45% (2) 3-4 years, 4.04% (3) 5-9 years, 4.38% and (4) 10+ years, 5.10%.
In connection with the acquisition of Zumbro, the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023. At September 30, 2020, the Company had a finance lease liability of $2,682, which was recorded under lease liabilities (current and non-current) in the consolidated balance sheet.
ROU assets and lease liabilities at September 30, 2020 and December 31, 2019 are summarized as follows:
Right of use assetsSeptember 30, 2020December 31, 2019
Operating leases$5,546 $7,338 
Finance leases2,642 — 
Total$8,188 $7,338 
Lease liabilities - currentSeptember 30, 2020December 31, 2019
Operating leases$1,718 $2,475 
Finance leases156 — 
Total$1,874 $2,475 

Lease liabilities - non-currentSeptember 30, 2020December 31, 2019
Operating leases$3,500 $4,827 
Finance leases2,526 — 
Total$6,026 $4,827 
For the three and nine months ended September 30, 2020 and 2019, the Company's total lease costs were as follows, which included both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Lease Cost
Operating lease cost$702 $817 $2,179 $2,381 
Finance Lease cost
Amortization of ROU asset157 — 157 — 
Interest on lease liabilities104 — 104 — 
Total lease cost$963 $817 $2,440 $2,381 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$710 $823 $2,193 $2,395 
Operating cash flows from finance leases104 — 104 — 
Financing cash flows from finance leases112 — 112 — 
$926 $823 $2,409 $2,395 
ROU assets obtained in exchange for new operating lease liabilities, net of ROU assets disposals$— $(240)$(98)$8,485 
ROU assets obtained in exchange for new finance lease liabilities, net of ROU assets disposals$2,782 $— $2,782 $— 
Weighted-average remaining lease term - operating leases5.11 years4.97 years5.11 years4.97 years
Weighted-average remaining lease term - finance leases12.50 yearsn/a12.50 yearsn/a
Weighted-average discount rate - operating leases4.7 %4.6 %4.7 %4.6 %
Weighted-average discount rate - finance leases5.1 %n/a5.1 %n/a
Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2020 aggregated to approximately $702 and $2,179, respectively, and $817 and $2,381 for the three and nine months ended September 30, 2019, respectively.