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Note 9 - Leases

6 Months Ended

Jun. 30, 2019

Leases of Lessee Disclosure [Text Block]

9. Leases

The Company determines if an arrangement is or contains a lease at contract inception. The Company recognizes a ROU asset and lease liability at the lease commencement date based on the present value of the lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the incremental borrowing rate is used to determine the present value of lease payments. The incremental borrowing rate is a collateralized rate determined based on the lease term, the Company’s credit rating, and other market information available at the commencement date. The ROU asset also includes any lease payments made prior to the commencement date and is reduced by any lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while lease expense for finance leases is recognized as depreciation and interest expense using the effective interest method. The Company’s variable lease expense generally consists of property tax and insurance payments that are variable in nature, however, these amounts are immaterial to the condensed consolidated financial statements.

The Company has lease agreements with both lease and nonlease components, which it elected to account for as a single lease component. However, the Company did not elect to apply the recognition exception for short-term leases. The Company is applying these elections to all asset classes.

The Company leases certain manufacturing facilities, distribution centers, office space, warehouses, automobiles, machinery and computer equipment globally under both finance and operating leases. The Company’s leases have remaining lease terms of up to 20 years, of which certain leases, primarily within the buildings and improvements asset class, include options to extend the leases for up to 10 additional years. Further, the Company leases certain buildings from a noncontrolling interest holder, which the Company has determined to be arms’ length transactions.

The Company is a lessor of one building that it leases to a third party. The lease income related to this arrangement is not material to the condensed consolidated financial statements.

The Company records its operating lease cost and amortization of finance lease ROU assets within cost of goods sold or operating expenses in the condensed consolidated statement of comprehensive income depending on the cost center of the underlying asset. The Company records its finance lease interest cost within interest expense in the condensed consolidated statement of comprehensive income.

The components of total lease cost consist of the following:

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019

Operating lease cost	$	2,352	$	4,951
Finance lease cost:
Amortization of ROU assets		704		1,122
Interest on lease liabilities		561		1,142
Total lease cost	$	3,617	$	7,215

Prior to the adoption of ASC 842, lease expense consisted of payments on operating leases.

As of January 1, 2019, the date of the adoption of ASU 2016-02, the Company recognized ROU assets and lease liabilities related to operating leases of $42,024 and $42,056, respectively, and there was no cumulative effect adjustment made to retained earnings. Supplemental balance sheet information related to the Company’s leases was as follows:

	June 30, 2019
Operating Leases
Operating lease ROU assets (1)	$	39,799

Operating lease liabilities - current (2)	$	7,753
Operating lease liabilities - noncurrent (3)		33,012
Total operating lease liabilities	$	40,765

Finance Leases
Finance lease ROU assets, gross	$	29,221
Accumulated depreciation - finance lease ROU assets		(2,786	)
Finance lease ROU assets, net (4)	$	26,435

Finance lease liabilities - current (5)	$	1,648
Finance lease liabilities - noncurrent (6)		24,363
Total finance lease liabilities	$	26,011

(1)

Recorded in the operating lease and other assets line

(2)

Recorded in the other accrued liabilities line

(3)

Recorded in the operating lease and other long-term liabilities line

(4)

Recorded in the property & equipment, net line

(5)

Recorded in the current portion of long-term borrowings and finance lease obligations line

(6)

Recorded in the long-term borrowings and finance lease obligations line

Supplemental cash flow information related to the Company’s leases was as follows:

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,768	$	5,386
Operating cash flows from finance leases		466		922
Financing cash flows from finance leases		827		1,356

ROU assets obtained in exchange for lease liabilities
Operating leases		2,396		2,793
Finance leases		995		7,971

Weighted average remaining lease term and discount rate information related to the Company’s leases was as follows:

	June 30, 2019
Weighted average remaining lease term (in years)
Operating Leases		7.13
Finance Leases		14.32

Weighted average discount rate
Operating Leases		5.50	%
Finance Leases		7.83	%

The maturities of the Company’s lease liabilities are as follows:

	As of June 30, 2019
	Finance Leases			Operating Leases
Remainder of 2019	$	1,806		$	4,978
2020		3,498			8,861
2021		3,122			6,904
2022		2,792			5,373
2023		2,659			4,624
After 2023		32,026			18,591
Total minimum lease payments		45,903			49,331
Interest		(19,892	)		(8,566	)
Present value of minimum lease payments	$	26,011		$	40,765

	As of December 31, 2018
	Capital Leases			Operating Leases
2019	$	2,166		$	8,914
2020		2,477			7,575
2021		2,053			6,379
2022		1,995			4,955
2023		1,889			4,482
After 2023		18,108			18,614
Total minimum lease payments		28,688		$	50,919
Interest		(8,517	)
Present value of minimum lease payments	$	20,171