LEASES

3 Months Ended

Mar. 31, 2019

NOTE D —LEASES

The Company adopted ASC Topic 842—Leases as of January 1, 2019, using the cumulative effective adjustment method wherein the Company applied the new leases standard at adoption date. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840, Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease ROU and operating lease liabilities of approximately $90.9 million and $104.4 million, respectively, as of January 1, 2019. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s condensed consolidated statements of operations or cash flows.

The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain vehicles. Leases with an initial term of

months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The components of lease costs were as follows:

	Three Months Ended March 31, 2019 (in thousands)
Operating lease costs:
Fixed	$	4,224
Total	$	4,224

Supplemental cash flow information was as follows:

	Three Months Ended March 31, 2019 (in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,680
Total	$	3,680

	Three Months Ended March 31, 2019 (in thousands)
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	94,497
Total	$	94,497

The aggregate future lease payments for operating leases as of March 31, 2019 were as follows:

	Operating (in thousands)
2019 (excluding the three months ending March 31, 2019)	$	12,891
2020		15,251
2021		14,901
2022		15,006
2023		15,210
Thereafter		66,130
Total lease payments		139,389
Less: Interest		(32,314	)
Present value of lease liabilities	$	107,075

Average lease terms and discount rates were as follows:


	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases		8.6
Weighted-average discount rate
Operating leases		6.1	%

As of March 31, 2019, the Company has an additional operating lease for the U.K. headquarters and warehouse that has not yet commenced with a present value of $

19.4

million. It is anticipated that the operating lease will commence in the second quarter of 2019 with a lease term of

years.