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Note 9 - Leases

9 Months Ended

Sep. 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 right of use ("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 statements 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 statements of comprehensive income.

The components of total lease cost consist of the following:

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019

Operating lease cost	$	2,312	$	7,263
Finance lease cost:
Amortization of ROU assets		643		1,873
Interest on lease liabilities		554		1,696
Total lease cost	$	3,509	$	10,832

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 is as follows:

	September 30, 2019
Operating Leases
Operating lease ROU assets (1)	$	37,270

Operating lease liabilities - current (2)	$	7,519
Operating lease liabilities - noncurrent (3)		30,693
Total operating lease liabilities	$	38,212

Finance Leases
Finance lease ROU assets, gross	$	29,353
Accumulated depreciation - finance lease ROU assets		(3,326	)
Finance lease ROU assets, net (4)	$	26,027

Finance lease liabilities - current (5)	$	1,813
Finance lease liabilities - noncurrent (6)		24,158
Total finance lease liabilities	$	25,971

(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 and 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 is as follows:

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,565	$	7,951
Operating cash flows from finance leases		471		1,393
Financing cash flows from finance leases		905		2,261

ROU assets obtained in exchange for lease liabilities
Operating leases		989		3,782
Finance leases		194		8,165

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

	September 30, 2019
Weighted average remaining lease term (in years)
Operating Leases		7.00
Finance Leases		14.24

Weighted average discount rate
Operating Leases		5.51	%
Finance Leases		7.87	%

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

	As of September 30, 2019
	Finance Leases			Operating Leases
Remainder of 2019	$	934		$	2,481
2020		3,519			8,934
2021		3,158			6,898
2022		3,388			5,368
2023		2,655			4,581
After 2023		32,016			18,338
Total minimum lease payments		45,670			46,600
Interest component		(19,699	)		(8,388	)
Present value of minimum lease payments	$	25,971		$	38,212

	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 component		(8,517	)
Present value of minimum lease payments	$	20,171