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Leases | 12 Months Ended
--- | ---
Dec. 31, 2019
Leases [Abstract] |
Leases | Leases Adoption of ASC Topic 842, "Leases" On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. 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. The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC, an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the 2018 MUSA-Galvanized and 2019 American Stainless acquisitions. As of December 31, 2019, operating lease liabilities related to the master lease agreement with Store Capital totaled $36.8 million, or 97 percent of the total lease liabilities on the consolidated balance sheet. Discount Rate To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR"). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. Such adjustments included assuming the Store Capital lease would require two lenders with the secondary lender being secured on a second lien requiring mezzanine rates. Based on this assessment, the Company determined that 7.32 percent was an appropriate incremental borrowing rate to apply to its portfolio of real-estate operating leases at adoption. The Company elected to utilize a single discount rate for its portfolio of operating leases because of similar lease characteristics; the resulting calculation does not differ materially from applying the standard to the individual leases. Weighted average discount rates for operating and finance leases are as follows:
Operating Leases | 7.32 | %
Finance Leases | 11.94 | %
Balance Sheet Presentation Operating and finance lease amounts included in the Consolidated Balance Sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | December 31, 2019 |
Assets |  | Right-of-use assets, operating leases |  | $ | 35,772 |
Assets |  | Property, plant and equipment, net |  | 401 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 3,562 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 253 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 33,723 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 336 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
(in thousands) | December 31, 2019
Operating lease cost | $ | 4,112 |
Finance lease cost: |
Reduction in carrying amount of right-of-use assets | 175 |
Interest on finance lease liabilities | 85 |
Total lease cost | $ | 4,372 |
Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the consolidated statement of operations. Maturity of Leases The amounts of undiscounted future minimum lease payments under leases as of December 31, 2019 are as follows:
(in thousands) | Operating |  | Finance
2020 | 3,562 |  |  | 275 |
2021 | 3,635 |  |  | 316 |
2022 | 3,673 |  |  | 12 |
2023 | 3,563 |  |  | — |
2024 | 3,635 |  |  | — |
Thereafter | 48,554 |  |  | — |
Total undiscounted minimum future lease payments | 66,622 |  |  | 603 |
Imputed Interest | 29,337 |  |  | 14 |
Total lease liabilities | $ | 37,285 |  |  | $ | 589 |
Additional Information Weighted average remaining lease terms for operating and finance leases as of December 31, 2019 are as follows:
Operating Leases | 16.55 years
Finance Leases | 2.16 years
During the year ended December 31, 2019, right-of-use assets recognized in exchange for new operating lease liabilities totaled $4.9 million. On January 1, 2019, the Company and Store Capital amended and restated the Master Lease, pursuant to which the Company leases the Statesville and Troutman, NC facilities, purchased by Store Capital from American Stainless on January 1, 2019, for the remainder of the initial term of 20 years set forth in the Master Lease, with two renewal options of 10 years each. Because the Company is not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Master Lease includes a rent escalator equal to the lesser of 1.25 times the percentage increase in the Consumer Price Index since the previous increase or 2 percent. Undiscounted future minimum lease payments under non-cancellable operating and capital leases as of December 31, 2018 accounted for under ASC 840 "Leases" were as follows:
(in thousands) | Operating |  | Capital
2019 | $ | 3,207 |  |  | $ | 354 |
2020 | 3,244 |  |  | 358 |
2021 | 3,239 |  |  | 347 |
2022 | 3,225 |  |  | 18 |
2023 | 3,103 |  |  | — |
Thereafter | 45,337 |  |  | — |
Total undiscounted minimum future operating lease payments |  |  | 1,077 |
Imputed Interest |  |  | 165 |
Total lease liabilities recorded as of December 31, 2018 |  |  | $ | 912 |
Rent expense related to operating leases was $4.0 million and $3.3 million in 2018 and 2017, respectively.
Leases | Leases Adoption of ASC Topic 842, "Leases" On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. 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. The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC, an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the 2018 MUSA-Galvanized and 2019 American Stainless acquisitions. As of December 31, 2019, operating lease liabilities related to the master lease agreement with Store Capital totaled $36.8 million, or 97 percent of the total lease liabilities on the consolidated balance sheet. Discount Rate To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR"). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. Such adjustments included assuming the Store Capital lease would require two lenders with the secondary lender being secured on a second lien requiring mezzanine rates. Based on this assessment, the Company determined that 7.32 percent was an appropriate incremental borrowing rate to apply to its portfolio of real-estate operating leases at adoption. The Company elected to utilize a single discount rate for its portfolio of operating leases because of similar lease characteristics; the resulting calculation does not differ materially from applying the standard to the individual leases. Weighted average discount rates for operating and finance leases are as follows:
Operating Leases | 7.32 | %
Finance Leases | 11.94 | %
Balance Sheet Presentation Operating and finance lease amounts included in the Consolidated Balance Sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | December 31, 2019 |
Assets |  | Right-of-use assets, operating leases |  | $ | 35,772 |
Assets |  | Property, plant and equipment, net |  | 401 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 3,562 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 253 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 33,723 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 336 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
(in thousands) | December 31, 2019
Operating lease cost | $ | 4,112 |
Finance lease cost: |
Reduction in carrying amount of right-of-use assets | 175 |
Interest on finance lease liabilities | 85 |
Total lease cost | $ | 4,372 |
Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the consolidated statement of operations. Maturity of Leases The amounts of undiscounted future minimum lease payments under leases as of December 31, 2019 are as follows:
(in thousands) | Operating |  | Finance
2020 | 3,562 |  |  | 275 |
2021 | 3,635 |  |  | 316 |
2022 | 3,673 |  |  | 12 |
2023 | 3,563 |  |  | — |
2024 | 3,635 |  |  | — |
Thereafter | 48,554 |  |  | — |
Total undiscounted minimum future lease payments | 66,622 |  |  | 603 |
Imputed Interest | 29,337 |  |  | 14 |
Total lease liabilities | $ | 37,285 |  |  | $ | 589 |
Additional Information Weighted average remaining lease terms for operating and finance leases as of December 31, 2019 are as follows:
Operating Leases | 16.55 years
Finance Leases | 2.16 years
During the year ended December 31, 2019, right-of-use assets recognized in exchange for new operating lease liabilities totaled $4.9 million. On January 1, 2019, the Company and Store Capital amended and restated the Master Lease, pursuant to which the Company leases the Statesville and Troutman, NC facilities, purchased by Store Capital from American Stainless on January 1, 2019, for the remainder of the initial term of 20 years set forth in the Master Lease, with two renewal options of 10 years each. Because the Company is not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Master Lease includes a rent escalator equal to the lesser of 1.25 times the percentage increase in the Consumer Price Index since the previous increase or 2 percent. Undiscounted future minimum lease payments under non-cancellable operating and capital leases as of December 31, 2018 accounted for under ASC 840 "Leases" were as follows:
(in thousands) | Operating |  | Capital
2019 | $ | 3,207 |  |  | $ | 354 |
2020 | 3,244 |  |  | 358 |
2021 | 3,239 |  |  | 347 |
2022 | 3,225 |  |  | 18 |
2023 | 3,103 |  |  | — |
Thereafter | 45,337 |  |  | — |
Total undiscounted minimum future operating lease payments |  |  | 1,077 |
Imputed Interest |  |  | 165 |
Total lease liabilities recorded as of December 31, 2018 |  |  | $ | 912 |
Rent expense related to operating leases was $4.0 million and $3.3 million in 2018 and 2017, respectively.
Leases | Leases Adoption of ASC Topic 842, "Leases" On January 1, 2019, the Company adopted Topic 842 using the modified retrospective method applied to leases that were in place as of January 1, 2019. 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. The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC, an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the 2018 MUSA-Galvanized and 2019 American Stainless acquisitions. As of December 31, 2019, operating lease liabilities related to the master lease agreement with Store Capital totaled $36.8 million, or 97 percent of the total lease liabilities on the consolidated balance sheet. Discount Rate To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR"). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. Such adjustments included assuming the Store Capital lease would require two lenders with the secondary lender being secured on a second lien requiring mezzanine rates. Based on this assessment, the Company determined that 7.32 percent was an appropriate incremental borrowing rate to apply to its portfolio of real-estate operating leases at adoption. The Company elected to utilize a single discount rate for its portfolio of operating leases because of similar lease characteristics; the resulting calculation does not differ materially from applying the standard to the individual leases. Weighted average discount rates for operating and finance leases are as follows:
Operating Leases | 7.32 | %
Finance Leases | 11.94 | %
Balance Sheet Presentation Operating and finance lease amounts included in the Consolidated Balance Sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | December 31, 2019 |
Assets |  | Right-of-use assets, operating leases |  | $ | 35,772 |
Assets |  | Property, plant and equipment, net |  | 401 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 3,562 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 253 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 33,723 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 336 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
(in thousands) | December 31, 2019
Operating lease cost | $ | 4,112 |
Finance lease cost: |
Reduction in carrying amount of right-of-use assets | 175 |
Interest on finance lease liabilities | 85 |
Total lease cost | $ | 4,372 |
Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the consolidated statement of operations. Maturity of Leases The amounts of undiscounted future minimum lease payments under leases as of December 31, 2019 are as follows:
(in thousands) | Operating |  | Finance
2020 | 3,562 |  |  | 275 |
2021 | 3,635 |  |  | 316 |
2022 | 3,673 |  |  | 12 |
2023 | 3,563 |  |  | — |
2024 | 3,635 |  |  | — |
Thereafter | 48,554 |  |  | — |
Total undiscounted minimum future lease payments | 66,622 |  |  | 603 |
Imputed Interest | 29,337 |  |  | 14 |
Total lease liabilities | $ | 37,285 |  |  | $ | 589 |
Additional Information Weighted average remaining lease terms for operating and finance leases as of December 31, 2019 are as follows:
Operating Leases | 16.55 years
Finance Leases | 2.16 years
During the year ended December 31, 2019, right-of-use assets recognized in exchange for new operating lease liabilities totaled $4.9 million. On January 1, 2019, the Company and Store Capital amended and restated the Master Lease, pursuant to which the Company leases the Statesville and Troutman, NC facilities, purchased by Store Capital from American Stainless on January 1, 2019, for the remainder of the initial term of 20 years set forth in the Master Lease, with two renewal options of 10 years each. Because the Company is not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term and associated potential option payments are excluded from lease payments. The Master Lease includes a rent escalator equal to the lesser of 1.25 times the percentage increase in the Consumer Price Index since the previous increase or 2 percent. Undiscounted future minimum lease payments under non-cancellable operating and capital leases as of December 31, 2018 accounted for under ASC 840 "Leases" were as follows:
(in thousands) | Operating |  | Capital
2019 | $ | 3,207 |  |  | $ | 354 |
2020 | 3,244 |  |  | 358 |
2021 | 3,239 |  |  | 347 |
2022 | 3,225 |  |  | 18 |
2023 | 3,103 |  |  | — |
Thereafter | 45,337 |  |  | — |
Total undiscounted minimum future operating lease payments |  |  | 1,077 |
Imputed Interest |  |  | 165 |
Total lease liabilities recorded as of December 31, 2018 |  |  | $ | 912 |
Rent expense related to operating leases was $4.0 million and $3.3 million in 2018 and 2017, respectively.

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