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Leases | 3 Months Ended
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Mar. 31, 2019
Leases [Abstract] |
Leases | 5. Leases As discussed in Note 2, the Company adopted ASU No. 2016-02—Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $20.2 million and $20.5 million, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact and the elimination of historical prepaid or deferred rent, was recorded as an adjustment to retained earnings. The net impact of adoption to the Company’s balance sheet as of January 1, 2019 is presented in the table below. The standard did not have a material impact to the Company’s condensed consolidated statements of operations and comprehensive income (loss) or cash flows.
(U.S. Dollars, in thousands) |  | December 31, 2018 |  |  | Impact of Adoption of ASC 842 |  |  | January 1, 2019 |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |
Cash, cash equivalents, and restricted cash |  | $ | 72,189 |  |  | $ | — |  |  | $ | 72,189 |
Accounts receivable, net |  |  | 77,747 |  |  |  | — |  |  |  | 77,747 |
Inventories |  |  | 76,847 |  |  |  | — |  |  |  | 76,847 |
Prepaid expenses and other current assets |  |  | 17,856 |  |  |  | (15 | ) |  |  | 17,841 |
Total current assets |  |  | 244,639 |  |  |  | (15 | ) |  |  | 244,624 |
Property, plant, and equipment, net |  |  | 42,835 |  |  |  | — |  |  |  | 42,835 |
Intangible assets, net and goodwill |  |  | 124,298 |  |  |  | — |  |  |  | 124,298 |
Deferred income taxes |  |  | 33,228 |  |  |  | 71 |  |  |  | 33,299 |
Other long-term assets |  |  | 21,641 |  |  |  | 20,209 |  |  |  | 41,850 |
Total assets |  | $ | 466,641 |  |  | $ | 20,265 |  |  | $ | 486,906 |
Liabilities and shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 17,989 |  |  | $ | — |  |  | $ | 17,989 |
Other current liabilities |  |  | 67,919 |  |  |  | 2,166 |  |  |  | 70,085 |
Total current liabilities |  |  | 85,908 |  |  |  | 2,166 |  |  |  | 88,074 |
Other long-term liabilities |  |  | 45,336 |  |  |  | 18,028 |  |  |  | 63,364 |
Total liabilities |  | $ | 131,244 |  |  | $ | 20,194 |  |  | $ | 151,438 |
Shareholders’ equity |  |  |  |  |  |  |  |  |  |  |  |
Common shares |  |  | 1,858 |  |  |  | — |  |  |  | 1,858 |
Additional paid-in capital |  |  | 243,165 |  |  |  | — |  |  |  | 243,165 |
Retained earnings |  |  | 87,078 |  |  |  | 71 |  |  |  | 87,149 |
Accumulated other comprehensive income |  |  | 3,296 |  |  |  | — |  |  |  | 3,296 |
Total shareholders’ equity |  |  | 335,397 |  |  |  | 71 |  |  |  | 335,468 |
Total liabilities and shareholders’ equity |  | $ | 466,641 |  |  | $ | 20,265 |  |  | $ | 486,906 |
The Company determines if an arrangement is a lease at inception. The Company’s leases primarily relate to facilities, vehicles, and equipment. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives. The Company has made an accounting policy election for short-term leases, in that the Company will not recognize a lease liability or lease asset on the balance sheet for leases with a lease term of twelve months or less as of the commencement date. Rather, any short-term lease payments will be recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments. The Company has made a policy election for all classifications of leases to combine lease and nonlease components and to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. During the first quarter of 2019, the Company entered into an amendment for its corporate headquarters lease. As a result, the classification of this lease changed from an operating lease to a finance lease, resulting in an increase to both the lease liability and lease asset of approximately $8.0 million. A summary of the Company’s lease portfolio as of March 31, 2019 is presented in the table below:
(U.S. Dollars, in thousands, except lease term and discount rate) |  | Classification |  | March 31, 2019 |
Assets |  |  |  |  |  |
Operating leases |  | Other long-term assets |  | $ | 6,758 |
Finance leases |  | Property, plant and equipment, net |  |  | 20,940 |
Total lease assets |  |  |  |  | 27,698 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating leases |  | Other current liabilities |  |  | 1,764 |
Finance leases |  | Current portion of finance lease liability |  |  | 359 |
Long-term |  |  |  |  |  |
Operating leases |  | Other long-term liabilities |  |  | 5,028 |
Finance leases |  | Long-term portion of finance lease liability |  |  | 20,879 |
Total lease liabilities |  |  |  | $ | 28,030 |
Weighted Average Remaining Lease Term |  |  |  |  |  |
Operating leases |  |  |  | 4.7 years |
Finance leases |  |  |  | 21.4 years |
Weighted Average Discount Rate |  |  |  |  |  |
Operating leases |  |  |  |  | 2.48 | %
Finance leases |  |  |  |  | 4.38 | %
The components of lease costs were as follows:
(U.S. Dollars, in thousands) |  | Three Months Ended March 31, 2019 |
Finance lease costs: |  |  |  |
Amortization of right-of-use assets |  | $ | 239 |
Interest on finance lease liabilities |  |  | 223 |
Operating lease costs |  |  | 540 |
Short-term lease costs |  |  | 62 |
Variable lease costs |  |  | 152 |
Total lease costs |  | $ | 1,216 |
Supplemental cash flow information related to leases was as follows:
(U.S. Dollars, in thousands) |  | Three Months Ended March 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 950 |
Operating cash flows from finance leases |  |  | 222 |
Financing cash flows from finance leases |  |  | 99 |
Right-of-use assets obtained in exchange for lease obligations |  |  |  |
Operating leases |  |  | 200 |
Finance leases |  |  | 21,179 |
A summary of the Company’s remaining lease liabilities as of March 31, 2019 is included below:
(U.S. Dollars, in thousands) |  | Operating Leases |  |  | Finance Leases |
Year 1 |  | $ | 1,886 |  |  | $ | 1,284 |
Year 2 |  |  | 1,710 |  |  |  | 1,042 |
Year 3 |  |  | 1,525 |  |  |  | 1,421 |
Year 4 |  |  | 1,107 |  |  |  | 1,450 |
Year 5 |  |  | 178 |  |  |  | 1,479 |
Thereafter |  |  | 830 |  |  |  | 26,835 |
Total undiscounted value of lease liabilities |  | $ | 7,236 |  |  | $ | 33,511 |
Less: Interest |  |  | (444 | ) |  |  | (12,273 | )
Present value of lease liabilities |  | $ | 6,792 |  |  | $ | 21,238 |
Current portion of lease liabilities |  |  | 1,764 |  |  |  | 359 |
Long-term portion of lease liabilities |  |  | 5,028 |  |  |  | 20,879 |
Total lease liabilities |  | $ | 6,792 |  |  | $ | 21,238 |

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