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LEASES | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
LEASES | LEASES In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which was modified by subsequently issued ASUs 2018-01, 2018-10, 2018-11 and 2018-20. The update requires organizations that lease assets ("lessees") to recognize the assets and liabilities of the rights and obligations created by leases with terms of more than 12 months. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee remains dependent on its classification as a finance or operating lease. The criteria for determining whether a lease is a finance or operating lease was not significantly changed by this ASU. The ASU also requires additional disclosure of the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. This pronouncement was effective for financial statements issued for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements (Topic 842). ASU 2018-11 provided additional relief in the comparative reporting requirements for initial adoption of ASC 842. Prior to ASU 2018-11, a modified retrospective transition was required for financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. ASU 2018-11 provided an additional transition method to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date (such as January 1, 2019, for calendar year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company adopted the standard effective January 1, 2019. We elected to apply the current period transition approach as introduced by ASU 2018-11 for our transition at January 1, 2019 and we elected to apply the following practical expedients and accounting policy decisions. We elected a package of transition expedients that allowed us to forgo reassessing certain conclusions reached under ASC 840 which must be elected together. All expedients in this package were applied together for all leases that commenced before the effective date, January 1, 2019, of ASC 842. As a result, in transitioning to ASC 842, for existing leases as of January 1,2019, we continued to use judgments made under ASC 840 related to embedded leases, lease classification and accounting for initial direct costs. We generally have four classes of leased assets : Real Estate related properties (such as office space, warehouses, distribution centers and land), Automobiles, Office Equipment and Manufacturing Equipment and do not utilize finance leases. In addition, we have chosen, as an accounting policy election by class of underlying asset, not to separate nonlease components from the associated lease for all of our leased asset classes, except for Real Estate related leases. As a result, for classes of Automobiles, Office Equipment and Manufacturing Equipment, we account for each separate lease component and the nonlease components associated with that lease as a single lease component. For short-term leases as defined under ASC 842, we elected the short-term lease exception pursuant to ASC 842 to all classes of our leased assets. We do not recognize a lease liability or a right of use asset on our consolidated balance sheets for our leased assets with an original lease term of twelve months or less. Instead, we recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred and disclose in the notes to the consolidated financial statements our short-term lease expense. The new standard did have a material impact on our consolidated balance sheets related to recording right-of-use (ROU) assets and the corresponding lease liabilities for our inventory of operating leases. In January 2019, we recorded a ROU Asset and total lease liability obligations of approximately $72 million each. The new standard did not have a material impact on our consolidated statements of operations and had no impact on cash flows. We lease office space, warehouses, land, automobiles, and office and manufacturing equipment. All of our leases are classified as operating leases. Our leases have remaining lease terms of 1 month to 12 years, some of which include options to extend the leases for up to 14 years. The exercise of lease renewal options is at our sole discretion. Our lease agreements do not include options to purchase the leased property. The lease expenses were as follows (in thousands):
|  |  |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Lease cost |  | Classification |  | 2019
Short-term lease expense |  | SG&A expenses(*) |  | 309 |  |  | 870 |
Other operating lease cost |  | SG&A expenses(*) |  | 6,081 |  |  | 17,957 |
Total operating lease cost |  |  |  | $ | 6,390 |  |  | $ | 18,827 |
(*) Manufacturing equipment and some vehicle rental expenses are included in the cost of sales.
Supplemental cash flow information related to leases was as follows (in thousands):
|  | Nine Months Ended September 30,
Lease |  | 2019
Cash paid for amounts included in the measurement of lease liabilities: |  |
Operating cash flows from operating leases |  | 13,941 |
Right-of-use assets obtained in exchange for lease liabilities |  |
Operating leases |  | 8,889 |
Supplemental balance sheet information related to leases was as follows (in thousand):
Lease |  | Classification |  | September 30, 2019 |  | Impact of ASC 842 Transition
Assets |  |  |  |  |  |
Operating |  | Operating lease right-of-use assets |  | 67,296 |  |  | 72,679 |
Liabilities |  |  |  |  |  |
Current operating |  | Short-term operating lease liabilities |  | 17,711 |  |  | 18,762 |
Non-current operating |  | Long-term operating lease liabilities |  | 49,602 |  |  | 53,654 |
Total operating lease liabilities |  |  |  | $ | 67,313 |  |  | $ | 72,416 |
Note: As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments for lease commenced on or after January 1, 2019. We used our incremental borrowing rate as of the transition date of January 1, 2019 for operating leases that commenced prior to transition. Maturities of lease liabilities were as follows (in thousands):
Year Ending December 31, |  | Operating leases (*)
2019 (excluding 9 months ended 9/30/2019) |  | 5,880 |
2020 |  | 20,841 |
2021 |  | 17,530 |
2022 |  | 13,315 |
2023 |  | 8,170 |
Thereafter |  | 14,218 |
Total lease payments |  | $ | 79,954 |
Less: imputed interest |  | 12,641 |
Present value of lease liabilities |  | $ | 67,313 |
(*) Operating lease payments exclude $1.2 million of legally binding minimum lease payments for leases signed but not yet commenced. Contractual obligations related to operating leases as of December 31, 2018, under ASC 840 (in thousands):
|  | Payments due by period (in thousands)
|  | Less than 1 year |  | 1-3 years |  | 3-5 years |  | More than 5 years |  | Total
Operating lease obligations |  | $ | 22,096 |  |  | $ | 33,825 |  |  | $ | 18,379 |  |  | $ | 11,022 |  |  | $ | 85,322 |
Lease term and discount rate |  | Nine Months Ended September 30, 2019
Weighted average remaining lease term (years) |  |
Operating lease |  | 4.8
Weighted average discount rate |  |
Operating lease |  | 7.3%
For the nine months ended September 30, 2019, the Company paid approximately $1.9 million in lease expenses to entities controlled by the Company's Chief Executive Officer, David Little and family.

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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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