Leases

6 Months Ended

Jun. 30, 2019

The Company maintains leases of certain manufacturing, distribution and assembly facilities, office space, land, machinery and equipment. Leases generally have remaining terms of one year to ten years. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets. The Company recognizes lease expense for minimum lease payments on a straight line basis over the term of the lease. Certain leases include options to renew or terminate. Renewal options are exercisable per the discretion of the Company and vary based on the nature of each lease, with renewal periods generally ranging from one year to five years. The term of the lease includes renewal periods only if the Company is reasonably certain that it will exercise the renewal option. When determining if a renewal option is reasonably certain of being exercised, the Company considers several factors, including but not limited to, the cost of moving to another location, the cost of disruption to operations, whether the purpose or location of the leased asset is unique and the contractual terms associated with extending the lease.

Certain leases provide the option to purchase the leased property and are therefore evaluated for finance lease consideration. Right-of-use ("ROU") assets and lease liabilities related to finance leases were not material as of June 30, 2019. The

depreciable life of leased assets are limited by the expected term of the lease, unless there is a transfer of title or purchase option and the Company believes it is reasonably certain of exercise.

Lease agreements generally do not contain any material residual value guarantees or materially restrictive covenants and the Company does not sublease to any third parties. The Company does not have any material leases that have been signed but not commenced.

Contracts are evaluated at inception to determine whether they contain a lease, where the Company obtains the right to control an identified asset. The following table sets forth the classification of ROU assets and lease liabilities on the Consolidated Balance Sheets:




Operating Leases	Classification	June 30, 2019
Leased Assets
ROU assets	Other assets	$	34,428

Lease Liabilities
Current lease liability	Accrued liabilities	11,045
Long term lease liability	Other liabilities	24,186
		$	35,231

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The operating lease ROU assets represent the lease liability, plus any lease payments made at or before the commencement date, less any lease incentives received. The Company's real estate leases, which are comprised primarily of manufacturing, distribution and assembly facilities, represent a majority of the lease liability. A significant portion of lease payments are fixed, although an immaterial portion of payments are variable in nature. Variable lease payments vary based on changes in facts and circumstances related to the use of the ROU and are recorded as incurred. The Company uses an incremental borrowing rate based on rates available at commencement in determining the present value of future payments.

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. The Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

Operating lease costs during the three and six months ended June 30, 2019 were $3,889 and $7,832, respectively, and were included within cost of sales and selling and administrative expenses. Operating lease costs include short-term and variable leases costs, which were immaterial during the period.

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:




	Operating Leases
2019	$	6,590
2020	10,823
2021	8,213
2022	4,013
2023	2,761
After 2023	8,054
Total lease payments	$	40,454
Less: Interest	5,223
Present value of lease payments	$	35,231

Minimum rental commitments under non-cancellable leases as of December 31, 2018 for years 2019 through 2023 were $11,931, $8,322, $5,888, $2,898 and $2,064, respectively, and $7,659 thereafter.




Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	6.0
Weighted-average discount rate
Operating leases	3.96	%




Other Information	Six months ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	6,770
Leased assets obtained in exchange for new operating lease liabilities	$	8,690