Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases, Finance Leases
12. Leases:
The Company has operating and finance lease agreements with remaining lease terms as of June 30, 2019 of up to 28 years, including leases of land, buildings, railcars, vehicles, manufacturing equipment and general office equipment. Some leases include options to terminate or extend for one or more years. These options are incorporated in the Company’s lease term when it is reasonably certain that the option will be exercised. Some leases include options to purchase, which the Company assesses under the guidance to determine if these leases should be classified as finance lease agreements.
When the Company enters into an arrangement, at inception, the Company determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance). The Company accounts for the lease and non-lease components based on the estimated standalone price of each component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate and these are initially measured using the index or rate in effect at the commencement date. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term using the Company’s incremental borrowing rate. The Company is required to use the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When the Company is unable to readily determine the discount rate implicit in the lease agreement, the Company utilizes its incremental borrowing rate over the relevant lease term. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Company’s balance sheet.
Lease expense for operating leases and financing leases is recognized on a straight-line basis over the lease term and is included in cost of goods sold or selling, general, and administrative expense on the condensed consolidated statements of income.
The table below presents the operating and finance right-of-use lease assets and lease liabilities recognized on the condensed consolidated balance sheet as of June 30, 2019:
 
 
Classification
 
June 30,
2019
Assets
 
 
 
 
Operating lease assets
 
Right-of-use lease assets
 
$
55,095

Finance lease assets
 
Property, plant and equipment, net
 
1,612

Total leased assets
 
 
 
$
56,707

 
 
 
 
 
Liabilities
 
 
 
 
Current:
 
 
 
 
Operating lease liabilities
 
Operating lease liabilities - current
 
$
13,997

Finance lease liabilities
 
Accrued liabilities
 
177

 
 
 
 
 
Noncurrent:
 
 
 
 
Operating lease liabilities
 
Operating lease liabilities - noncurrent
 
39,352

Finance lease liabilities
 
Other long-term liabilities
 
410

Total lease liabilities
 
 
 
$
53,936

 
 
 
 
 

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are as follows:
 
 
June 30,
2019
Weighted average remaining lease term (in years):
 
 
Operating leases
 
5.52

Finance leases
 
3.14

 
 
 
Weighted average discount rate:
 
 
Operating leases
 
5.76
%
Finance leases
 
4.67
%
 
 
 

Maturities of lease liabilities as of June 30, 2019 are as follows:
 
 
Operating
Leases
 
Finance
Leases
Remainder of 2019
 
$
16,438

 
$
100

2020
 
13,462

 
201

2021
 
10,190

 
201

2022
 
7,605

 
123

2023
 
5,125

 
4

Thereafter
 
10,222

 

Total lease payments
 
63,042

 
629

Less: Interest
 
(9,693
)
 
(42
)
Total lease liabilities (1)
 
$
53,349

 
$
587

 
 
 
 
 

 
(1)
Refer to the above table regarding the Company’s right-of-use lease assets and lease liabilities for the presentation of the lease liabilities in the Company’s condensed consolidated balance sheet at June 30, 2019.
At December 31, 2018, future minimum payments under non-cancelable operating leases under previous lease guidance was as follows:
Year
 
Amount
2019
 
$
18,457

2020
 
14,344

2021
 
11,432

2022
 
8,354

2023
 
6,198

Thereafter
 
17,477

 
 
$
76,262

 
 
 

Operating lease costs of $4,680 and $9,359 are included in cost of goods sold and in selling, general and administrative expenses for the three and six months ended June 30, 2019, respectively. Finance lease, short-term lease and variable lease costs for the three and six months ended June 30, 2019 were not material. Lease income is not material to the results of operations for the three and six months ended June 30, 2019.
The following table presents other information related to our operating and finance leases and the impact on the Company’s condensed consolidated statement of cash flows:
 
 
Six months ended
June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Payments on operating leases included in operating cash flows
 
$
8,064

Interest payments under finance lease obligations included in operating cash flows
 
19

Principal payments under finance lease obligations included in financing cash flows
 
109

 
 
 
Right-of-use assets obtained in exchange for new lease liabilities (non-cash):
 
 
Operating leases
 
1,566

Finance leases
 

 
 
 

Leases, Operating Leases
12. Leases:
The Company has operating and finance lease agreements with remaining lease terms as of June 30, 2019 of up to 28 years, including leases of land, buildings, railcars, vehicles, manufacturing equipment and general office equipment. Some leases include options to terminate or extend for one or more years. These options are incorporated in the Company’s lease term when it is reasonably certain that the option will be exercised. Some leases include options to purchase, which the Company assesses under the guidance to determine if these leases should be classified as finance lease agreements.
When the Company enters into an arrangement, at inception, the Company determines if the arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance). The Company accounts for the lease and non-lease components based on the estimated standalone price of each component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate and these are initially measured using the index or rate in effect at the commencement date. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company recognizes a right-of-use lease asset and lease liability at the lease commencement date based on the present value of the remaining lease payments over the lease term using the Company’s incremental borrowing rate. The Company is required to use the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When the Company is unable to readily determine the discount rate implicit in the lease agreement, the Company utilizes its incremental borrowing rate over the relevant lease term. Short-term leases, which have an initial term of twelve months or less, are not recorded on the Company’s balance sheet.
Lease expense for operating leases and financing leases is recognized on a straight-line basis over the lease term and is included in cost of goods sold or selling, general, and administrative expense on the condensed consolidated statements of income.
The table below presents the operating and finance right-of-use lease assets and lease liabilities recognized on the condensed consolidated balance sheet as of June 30, 2019:
 
 
Classification
 
June 30,
2019
Assets
 
 
 
 
Operating lease assets
 
Right-of-use lease assets
 
$
55,095

Finance lease assets
 
Property, plant and equipment, net
 
1,612

Total leased assets
 
 
 
$
56,707

 
 
 
 
 
Liabilities
 
 
 
 
Current:
 
 
 
 
Operating lease liabilities
 
Operating lease liabilities - current
 
$
13,997

Finance lease liabilities
 
Accrued liabilities
 
177

 
 
 
 
 
Noncurrent:
 
 
 
 
Operating lease liabilities
 
Operating lease liabilities - noncurrent
 
39,352

Finance lease liabilities
 
Other long-term liabilities
 
410

Total lease liabilities
 
 
 
$
53,936

 
 
 
 
 

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are as follows:
 
 
June 30,
2019
Weighted average remaining lease term (in years):
 
 
Operating leases
 
5.52

Finance leases
 
3.14

 
 
 
Weighted average discount rate:
 
 
Operating leases
 
5.76
%
Finance leases
 
4.67
%
 
 
 

Maturities of lease liabilities as of June 30, 2019 are as follows:
 
 
Operating
Leases
 
Finance
Leases
Remainder of 2019
 
$
16,438

 
$
100

2020
 
13,462

 
201

2021
 
10,190

 
201

2022
 
7,605

 
123

2023
 
5,125

 
4

Thereafter
 
10,222

 

Total lease payments
 
63,042

 
629

Less: Interest
 
(9,693
)
 
(42
)
Total lease liabilities (1)
 
$
53,349

 
$
587

 
 
 
 
 

 
(1)
Refer to the above table regarding the Company’s right-of-use lease assets and lease liabilities for the presentation of the lease liabilities in the Company’s condensed consolidated balance sheet at June 30, 2019.
At December 31, 2018, future minimum payments under non-cancelable operating leases under previous lease guidance was as follows:
Year
 
Amount
2019
 
$
18,457

2020
 
14,344

2021
 
11,432

2022
 
8,354

2023
 
6,198

Thereafter
 
17,477

 
 
$
76,262

 
 
 

Operating lease costs of $4,680 and $9,359 are included in cost of goods sold and in selling, general and administrative expenses for the three and six months ended June 30, 2019, respectively. Finance lease, short-term lease and variable lease costs for the three and six months ended June 30, 2019 were not material. Lease income is not material to the results of operations for the three and six months ended June 30, 2019.
The following table presents other information related to our operating and finance leases and the impact on the Company’s condensed consolidated statement of cash flows:
 
 
Six months ended
June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Payments on operating leases included in operating cash flows
 
$
8,064

Interest payments under finance lease obligations included in operating cash flows
 
19

Principal payments under finance lease obligations included in financing cash flows
 
109

 
 
 
Right-of-use assets obtained in exchange for new lease liabilities (non-cash):
 
 
Operating leases
 
1,566

Finance leases