Note 8 – Leases

As mentioned in Note 2 – Summary of Significant Accounting Policies, the Company adopted ASU 2016-02, Leases on January 1, 2019, using the modified retrospective approach. The adoption of this accounting standard resulted in the recording of operating lease right-of-use (“ROU”) assets of $9.2 million in Operating lease right-of use assets, and operating lease liabilities of $2.5 million and $8.5 million in Other accrued expenses and Long-term lease liabilities, respectively, as of January 1, 2019, to capture the cumulative effect of the standard. The difference between the asset and liability is a result of lease incentives, such as tenant improvement allowances, and deferred rent on the balance sheet at transition.

The Company leases certain real estate and automobiles. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the unaudited consolidated balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company determines if an arrangement is a lease at inception. All of our leases are operating leases.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its imputed collateralized rate based on the information available at the commencement date in determining the present value of lease payments. Operating lease ROU assets are comprised of the lease liability plus prepaid rents and are reduced by lease incentives or deferred rents. The Company has lease agreements with non-lease components which are not bifurcated.

Some of our leases include one or more options to renew, with renewal terms that can extend the lease from one to five years. The exercise of a lease renewal option typically occurs at the discretion of both parties. Certain leases also include options to purchase the leased property at fair value. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease termination until it is reasonably certain that the Company will exercise that option. Certain of the Company’s lease agreements include payments adjusted periodically for inflation based on the consumer price index. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease cost details for the three and six months ended June 30, 2019 and 2018 are as follows:


	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(in thousands)				(in thousands)
Building rent	$	857	$	1,199	$	1,721	$	1,961
Automobile rentals		233		329		510		661
Total net operating lease costs	$	1,090	$	1,528	$	2,231	$	2,622

Short term lease costs and variable lease costs recognized during the three and six months ended June 30, 2019 are immaterial.

Supplemental unaudited consolidated balance sheet information related to leases is as follows:


	June 30, 2019
in thousands
Leases
Assets		8,278
Operating lease assets	$	8,278

Liabilities
Current
Operating lease liabilities	$	2,624

Noncurrent
Operating lease liabilities		7,474
Total lease liabilities	$	10,098

The weighted average remaining lease term for our operating leases is 5.8 years. The weighted-average discount rate for our operating leases is 4.9%.

Supplemental unaudited interim consolidated cash flow information related to leases is as follows:


	Six Months Ended
	June 30, 2019
		(in $ thousands)
Supplemental cash flow and other information related to leases was as follows:

Operating cash payments from operating leases	$	1,754

ROU assets obtained in exchange for new operating lease liabilities	$	555

Maturities of our operating leases are as follows:


	As of June 30, 2019
		(in $ thousands)
2019 (remaining six months)	$	1,603
2020		2,510
2021		1,996
2022		1,575
2023		1,243
Later years		2,955
Less imputed interest		(1,784)
Total lease obligations	$	10,098

Disclosures related to periods prior to adoption of ASU 2016-02

Operating lease rent expense was $4.9 million for the year ended December 31, 2018. Future minimum lease payments under non-cancelable rental and lease agreements which had initial or remaining terms in excess of one year are as follows:


	As of December 31, 2018
		(in $ thousands)
2019	$	3,817
2020		3,081
2021		2,671
2022		2,244
2023		1,941
Later years		8,870
Minimum lease commitments	$	22,624

During the year ended December 31, 2018, we entered into a new lease agreement which will commence during the three months ended September 30, 2019. We estimate that the undiscounted future minimum obligations related to this lease will be approximately $7.4 million. This obligation is disclosed as part of our future minimum lease obligations table above.