The Company adopted ASU No. 2016-02, Leases (Topic 842), on January 1, 2019. This new accounting standard requires a dual approach for lessee accounting whereby a lessee accounts for lease arrangements as either finance leases or operating leases. The lease classification affects the pattern of expense recognition in the income statement. The most significant impact of adopting ASU No. 2016-02, Leases (Topic 842) is that a lessee is now required to recognize a “right-of-use” (ROU) asset and corresponding lease liability for operating lease agreements. ROU assets represent a right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Operating leases are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property.

The Company elected to apply the new lease standard at adoption (January 1, 2019) as allowed under ASU No. 2018-11 and, as a result, the Company did not retrospectively adjust prior periods presented. The Company elected the practical expedient to not separate non-lease components from lease components for all asset classes and the practical expedient which permits a Company to not reassess prior conclusions about lease identification, lease classifications and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. In addition, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption of ASC 842, the Company recognized $42,400,000 of ROU assets and related operating lease liabilities on its balance sheet. There was no cumulative catch-up adjustment made to beginning retained earnings.

Significant judgments used by the Company to determine whether a contract is or contains a lease include: (i) determining whether any explicitly or implicitly identified assets have been identified in the contract and (ii) determining whether the Company obtains substantially all of the economic benefits from the use of an underlying asset and directs how and for what purpose the asset is used during the term of the contract.

The Company’s operating leases are primarily comprised of railcars, real estate, storage tanks, autos, trailers and manufacturing/office equipment. Railcars and real estate comprise approximately 26 percent and 56 percent, respectively, of the Company’s consolidated ROU asset balance. Except for real estate, typical lease terms range from one to ten years. Real estate lease terms typically range from one to fifty years. The Company’s three principal real estate leases relate to the office lease for the new corporate headquarters in Northbrook, Illinois and land leases in the Philippines and Singapore.

As most of the Company’s leases do not provide an implicit borrowing rate, the Company uses its incremental borrowing rate (IBR) based on the information available at the commencement date in determining the present value of lease payments. IBRs were specifically determined for the United States, the Philippines, Singapore, Brazil and China, typically for five-year increments. The U.S. IBR was used for all other countries as the leases in these countries are not material. The total value of leases that reside in the five countries identified above represents approximately 98 percent of the Company’s consolidated ROU asset balance. The lease cost is included in Cost of sale and Operating expenses sections of the Consolidated Statements of Income.

(In thousands)	Year ended December 31, 2020		Year ended December 31, 2019
Lease Cost
Operating lease cost	$	11,821	$	10,908
Short-term lease cost		4,922		4,420
Variable lease cost		1,135		1,045
Total lease cost	$	17,878	$	16,373
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	11,843	$	10,954
Right-of-use assets obtained in exchange for new operating lease liabilities		27,766		5,694


(In thousands)
Undiscounted Cash Flows:
2021	$	12,704
2022		11,241
2023		9,204
2024		5,685
2025		4,094
Subsequent to 2025		32,452
Total Undiscounted Cash Flows	$	75,380
Less: Imputed interest		(12,785	)
Present value	$	62,595
Current operating lease liabilities ⁽¹⁾		11,028
Non-current operating lease liabilities		51,567
Total lease liabilities	$	62,595