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Leases | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
Leases | NOTE 7 - LEASES On January 1, 2019, we adopted ASC 842, “Leases” which, among other changes, requires us to record liabilities classified as operating leases on our Condensed Consolidated Balance Sheets along with a corresponding right-of-use asset. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840. We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are or contain leases, lease classification tests and treatment of initial direct costs. We also elected to not separate lease components from non-lease components for all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease obligations. Upon adoption of ASC 842, we recorded a $44.9 million increase in other assets, a $1.4 million decrease to other current assets, a $1.0 million decrease to other current liabilities and a $44.5 million increase to operating lease obligations. These adjustments are the result of assigning a right-of-use asset and related lease liability to our operating leases. We did not record any cumulative effect adjustments to opening retained earnings, and adoption of the lease standard had no impact to cash from or used in operating, financing, or investing activities on our consolidated cash flow statements. We determine if an arrangement is a lease at inception. Most of our operating leases do not provide an implicit rate so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the ordinary course of business as follows: warehouses to store our materials and perform staging activities for certain products we install; various office spaces for selling and administrative activities to support our business; certain manufacturing facilities to produce insulation materials; and certain vehicles and equipment to facilitate our operations, including, but not limited to, trucks, forklifts and office equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. Most lease agreements include one or more renewal options, all of which are at our sole discretion. Generally, future renewal options that have not been executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Some of our vehicle lease agreements include provisions for residual value guarantees and any expected payment is included in our lease liability. Lease Position as of September 30, 2019 The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet:
(in thousands) |  | Classification |  | As of September 30, 2019 |
Assets |  |  |  |  |  |
Non-Current |  |  |  |  |  |
Operating |  | Operating lease right-of-use assets |  | $ | 42,553 |
Finance |  | Property and equipment, net |  |  | 7,691 |
Total lease assets |  |  |  | $ | 50,244 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Current maturities of operating lease obligations |  | $ | 15,032 |
Financing |  | Current maturities of finance lease obligations |  |  | 3,133 |
Non-Current |  |  |  |  |  |
Operating |  | Operating lease obligations |  |  | 27,129 |
Financing |  | Finance lease obligations |  |  | 3,682 |
Total lease liabilities |  |  |  | $ | 48,976 |
Weighted-average remaining lease term |  |  |  |
Operating leases |  |  | 3.8 years |
Finance leases |  |  | 2.6 years |
Weighted-average discount rate (1) |  |  |  |
Operating leases |  |  | 4.85 | %
Finance leases |  |  | 4.75 | %
(1) | Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
Lease Costs The table below presents certain information related to the lease costs for finance and operating leases during 2019:
(in thousands) |  | Classification |  | Three months ended September 30, 2019 |  |  | Nine months ended September 30, 2019 |
Operating lease cost (1) |  | Administrative |  | $ | 5,225 |  |  | $ | 15,266 |
Finance lease cost |  |  |  |  |  |  |  |  |  |
Amortization of leased assets (2) |  | Cost of sales |  |  | 1,144 |  |  |  | 3,955 |
Interest on finance lease obligations |  | Interest expense, net |  |  | 84 |  |  |  | 268 |
Total lease costs |  |  |  | $ | 6,453 |  |  | $ | 19,489 |
(1) | Includes variable lease costs of $0.5 million and $1.5 million, respectively, and short-term lease costs of $0.2 million and $0.6 million, respectively.
(2) | Includes variable lease costs of $0.2 million and $0.7 million, respectively.
Other Information The table below presents supplemental cash flow information related to leases during 2019 (in thousands):
|  | 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 for operating leases |  | $ | 4,488 |  |  | $ | 13,009 |
Operating cash flows for finance leases |  |  | 84 |  |  |  | 268 |
Financing cash flows for finance leases |  |  | 917 |  |  |  | 3,398 |
Undiscounted Cash Flows The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years for the finance lease obligations and operating lease obligations recorded on the Condensed Consolidated Balance Sheet as of September 30, 2019 (in thousands):
|  | Finance Leases |  |  | Operating Leases |
|  |  |  |  | Related Party |  |  | Other |  |  | Total Operating |
Remainder of 2019 |  | $ | 1,233 |  |  | $ | 260 |  |  | $ | 4,213 |  |  | $ | 4,473 |
2020 |  |  | 2,854 |  |  |  | 1,055 |  |  |  | 14,490 |  |  |  | 15,545 |
2021 |  |  | 1,845 |  |  |  | 910 |  |  |  | 9,947 |  |  |  | 10,857 |
2022 |  |  | 911 |  |  |  | 836 |  |  |  | 5,708 |  |  |  | 6,544 |
2023 |  |  | 532 |  |  |  | 415 |  |  |  | 3,386 |  |  |  | 3,801 |
Thereafter |  |  | 131 |  |  |  | 823 |  |  |  | 4,304 |  |  |  | 5,127 |
Total minimum lease payments |  |  | 7,506 |  |  | $ | 4,299 |  |  | $ | 42,048 |  |  |  | 46,347 |
Less: Amounts representing executory costs |  |  | (195 | ) |  |  |  |  |  |  |  |  |  |  | — |
Less: Amounts representing interest |  |  | (496 | ) |  |  |  |  |  |  |  |  |  |  | (4,186 | )
Present value of future minimum lease payments |  |  | 6,815 |  |  |  |  |  |  |  |  |  |  |  | 42,161 |
Less: Current obligation under leases |  |  | (3,133 | ) |  |  |  |  |  |  |  |  |  |  | (15,032 | )
Long-term lease obligations |  | $ | 3,682 |  |  |  |  |  |  |  |  |  |  | $ | 27,129 |
Disclosures Related to Periods Prior to Adoption of ASC 842 under ASU 2016-02 Lease amounts presented as of December 31, 2018 and for the nine months ended September 30, 2018 are in accordance with accounting guidance in effect prior to adoption of ASC 842, “Leases,” on January 1, 2019. Total assets relating to capital leases were approximately $58.7 million and a total of approximately $32.0 million were fully depreciated as of December 31, 2018. The net book value of assets under capital leases was approximately $9.5 million as of December 31, 2018. Amortization of assets held under capital leases is included within cost of sales on the Consolidated Statements of Operations and Comprehensive Income. Future minimum lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2018 were as follows (in thousands):
|  | Capital Leases |  |  | Operating Leases |
|  |  |  |  | Related Party |  |  | Other |  |  | Total Operating |
2019 |  | $ | 5,207 |  |  | $ | 1,159 |  |  | $ | 14,418 |  |  | $ | 15,577 |
2020 |  |  | 2,253 |  |  |  | 1,184 |  |  |  | 11,293 |  |  |  | 12,477 |
2021 |  |  | 1,339 |  |  |  | 1,058 |  |  |  | 7,014 |  |  |  | 8,072 |
2022 |  |  | 452 |  |  |  | 972 |  |  |  | 4,335 |  |  |  | 5,307 |
2023 |  |  | 93 |  |  |  | 51 |  |  |  | 2,613 |  |  |  | 2,664 |
Thereafter |  |  | — |  |  |  | — |  |  |  | 4,695 |  |  |  | 4,695 |
|  |  | 9,344 |  |  | $ | 4,424 |  |  | $ | 44,368 |  |  | $ | 48,792 |
Less: Amounts representing executory costs |  |  | (255 | ) |  |  |  |  |  |  |  |  |  |  |  |
Less: Amounts representing interest |  |  | (459 | ) |  |  |  |  |  |  |  |  |  |  |  |
Total obligation under capital leases |  |  | 8,630 |  |  |  |  |  |  |  |  |  |  |  |  |
Less: Current portion of capital leases |  |  | (4,806 | ) |  |  |  |  |  |  |  |  |  |  |  |
Long term capital lease obligation |  | $ | 3,824 |  |  |  |  |  |  |  |  |  |  |  |  |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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