Leases

On January 1, 2019, the Company adopted ASU 2016-02, "Leases" (Topic 842). This ASU requires all companies to record their operating and finance leases that meet certain criteria under the standard as Right of Use ("ROU") assets with the corresponding lease obligations recorded as short term and long term liabilities. The Company adopted this standard utilizing the modified retrospective transition method that allows for a cumulative-effect adjustment in the period of adoption of the new leasing standard without restating prior periods. There was no cumulative-effect adjustment made to opening retained earnings upon adoption of this ASU. Additionally, the Company elected to adopt the available package of practical expedients under the transition guidance.

The Company has operating and finance leases for office and warehouse facilities, headquarters and call centers and certain computer, communications equipment and machinery and equipment which provide the right to use the underlying assets in exchange for agreed upon lease payments, determined by the payment schedule contained in each lease. The Company determines if an arrangement is an operating or finance lease at the inception of the lease. The Company has elected not to apply recognition requirements to leases with terms of one year or less. All other leases are recorded on the balance sheet, with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease. The Company’s lease portfolio consists primarily of operating leases which expire at various dates through 2032.

The ROU assets and corresponding lease liabilities are recorded based upon the net present value of the remaining lease payments, discounted using interest rates determined by utilizing such factors as the Company's current credit facility terms, the length of the remaining term of the lease, the Company's expected debt credit rating and comparable company term loan yields. Adoption of the new standard resulted in the Company recording ROU assets and lease liabilities of approximately $54 million and $64 million, respectively, at January 1, 2019. Certain leases may include options to extend the lease, however the Company is not including any impact of such options in the valuation of its ROU assets or liabilities as they are not currently probable of being extended. The Company’s lease agreements do not contain residual value guarantees or restrictive covenants. The Company has sublease agreements for certain unused facilities. For the three and nine month periods ended September 30, 2019, the Company recorded $0.5 million and $1.5 million, respectively, of sublease income in continuing and discontinued operations.

In April 2019, the Company entered into a lease agreement for a portion of a distribution facility located in Texas for approximately 490,000 square feet and a lease term of 125 months. The total lease obligation is approximately $19.8 million. The Company is separately charged for real estate taxes, insurance and common area maintenance. The Company recorded an ROU asset and related lease liability of approximately $14.7 million during the second quarter of 2019.

In the third quarter of 2019, the Company renewed certain leased facilities in Nevada and Shanghai. The restated and amended Nevada lease for business to business ("B2b") sales office space has a lease term of 60 months and the total lease obligation is approximately $0.7 million. The Company is separately charged for real estate taxes, insurance and common area maintenance. The Company recorded an ROU asset and related lease liability of approximately $0.6 million. The amended Shanghai lease for office space has a lease term of 24 months and the total lease obligation is $0.1 million. The Company is separately charged for real estate taxes, insurance and common area maintenance. The Company recorded an ROU asset and related lease liability of $0.1 million.

Also, in the third quarter of 2019, the Company's former German branch recorded approximately $0.8 million gain related to a change in estimate of its outstanding lease obligation.

The following table details the Company's ROU asset operating lease cost, included in continuing operations, for the three and nine months ended September 30, 2019 (in millions):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019		2019
Operating lease cost	$	3.2	$	8.9

The following tables detail the Company's ROU asset activity for continuing and discontinued operations as of September 30, 2019.



	Nine Months Ended September 30,
	2019
Weighted Average Remaining Lease Term
Operating leases	8.4 years

Weighted Average Discount Rate
Operating leases	5.7	%

Maturities of lease liabilities were as follows (in millions):



Year Ending December 31	Operating Leases
2019 (remaining three months)	$	2.0
2020	13.8
2021	10.6
2022	9.7
2023	9.7
Thereafter	45.1
Total lease payments	90.9
Less: interest	(19.8		)
Total present value of lease liabilities	$	71.1

The Company currently leases its headquarters office facility from an entity owned by the Company’s principal shareholders.