Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases, Operating LEASES
We lease certain real estate (warehouse and office space), vehicles and equipment. For leases with an initial term of less than 13 months we recognize lease expense for these leases on a straight-line basis over the lease term. Leases with an initial term of thirteen months or more are recorded on the balance sheet. We consider all payments fixed unless there is a material impact to the balance sheet at any given time during the lease period.
Our leases have remaining lease terms of one month to ten years. Many leases include one or more options to renew, with renewal terms that can extend the lease term from one month to ten years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The FASB allows companies transition and practical expedient elections to simplify the transition of the new standard. We have elected the following:
We have elected to not restate comparative prior periods but instead recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, if a difference existed between the initial lease liability and related right of use asset.
We have elected to use the hindsight practical expedient with respect to determining the lease term allowing us to consider the actual outcome of lease renewals, termination options and purchase options, and in assessing impairment of right-of-use assets for existing leases.
We have elected to combine lease and non-lease components as a single component and account for it as a lease for all asset classes with the exception of land and non-operating buildings. Lease and non-lease components of land and non-operating buildings are generally accounted for separately.
We have elected to use a portfolio approach to determine the discount rate and defined portfolio based on the geographic location of the asset by country and duration of the lease.
The following table summarizes components of lease expense:
 
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Finance lease cost
 
 
 
 
   Amortization of right-of-use asset
 
$

 
$
0.2

Operating lease cost
 
1.0

 
3.1

Short-term lease cost
 
0.4

 
1.0

Sublease income
 
(0.1
)
 
(1.5
)
Total lease cost
 
$
1.3

 
$
2.8



In the second quarter of 2019, we recognized $0.9 million and $1.6 million of sublease income and income from non-lease components, respectively, in SG&A expenses related to termination fees received from TZI due to the cancellation of a sublease before the end of the lease term.

The following table summarizes supplemental balance sheet information related to leases:
 
 
Balance Sheet Classification
 
September 30, 2019
Assets
 
 
 
 
Operating lease assets
 
Operating lease assets
 
$
6.9

Finance lease assets
 
Property, plant and equipment, less accumulated depreciation
 
0.5

Total lease assets
 
 
 
$
7.4

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
      Operating
 
Accounts payable and accrued expenses
 
$
3.6

      Finance
 
Current installments of long-term debt
 
0.2

Noncurrent
 
 
 
 
      Operating
 
Noncurrent operating lease liabilities
 
3.3

      Finance
 
Long-term debt
 
0.3

Total lease liabilities
 
 
 
$
7.4



The following table summarizes supplemental cash flow information related to leases:
 
 
Nine Months Ended September 30,
 
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
   Operating cash flows from operating leases
 
$
3.1

   Financing cash flows from finance leases
 
$
0.2



The following table summarizes weighted average remaining lease term and weighted average discount rate:
 
 
September 30, 2019
 
 
Weighted Average
 
 
Remaining Lease Term (Years)
 
Discount Rate
 
 
 
 
 
Operating leases
 
3.4
 
5.8
%
Finance leases
 
2.7
 
5.4
%


The following table provides future minimum payments at September 30, 2019, by year and in the aggregate, for leases having non-cancelable lease terms in excess of one year:
 
 
Operating Leases
 
Finance Leases
2019 (Remaining)
 
$
1.1

 
$
0.1

2020
 
3.6

 
0.2

2021
 
1.2

 
0.1

2022
 
0.3

 
0.1

2023
 
0.3

 

Thereafter
 
1.3

 

Total
 
$
7.8

 
$
0.5



In our 2018 Form 10-K we disclosed expected future minimum lease payments at December 31, 2018 of $20.4 million. The adoption of ASC 842 reduced the expected future minimum lease payments by removing costs related to non-lease components of existing contracts and agreements no longer defined as operating leases by $8.2 million and $2.3 million, respectively.

The following table provides reconciliation of future minimum lease payments and lease liability:
 
September 30, 2019
 
Operating Leases
 
Finance Leases
Future minimum lease payments
$
7.8

 
$
0.5

  Less: Unamortized interest
0.9

 

Total lease liability
$
6.9

 
$
0.5


Leases, Finance LEASES
We lease certain real estate (warehouse and office space), vehicles and equipment. For leases with an initial term of less than 13 months we recognize lease expense for these leases on a straight-line basis over the lease term. Leases with an initial term of thirteen months or more are recorded on the balance sheet. We consider all payments fixed unless there is a material impact to the balance sheet at any given time during the lease period.
Our leases have remaining lease terms of one month to ten years. Many leases include one or more options to renew, with renewal terms that can extend the lease term from one month to ten years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The FASB allows companies transition and practical expedient elections to simplify the transition of the new standard. We have elected the following:
We have elected to not restate comparative prior periods but instead recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, if a difference existed between the initial lease liability and related right of use asset.
We have elected to use the hindsight practical expedient with respect to determining the lease term allowing us to consider the actual outcome of lease renewals, termination options and purchase options, and in assessing impairment of right-of-use assets for existing leases.
We have elected to combine lease and non-lease components as a single component and account for it as a lease for all asset classes with the exception of land and non-operating buildings. Lease and non-lease components of land and non-operating buildings are generally accounted for separately.
We have elected to use a portfolio approach to determine the discount rate and defined portfolio based on the geographic location of the asset by country and duration of the lease.
The following table summarizes components of lease expense:
 
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Finance lease cost
 
 
 
 
   Amortization of right-of-use asset
 
$

 
$
0.2

Operating lease cost
 
1.0

 
3.1

Short-term lease cost
 
0.4

 
1.0

Sublease income
 
(0.1
)
 
(1.5
)
Total lease cost
 
$
1.3

 
$
2.8



In the second quarter of 2019, we recognized $0.9 million and $1.6 million of sublease income and income from non-lease components, respectively, in SG&A expenses related to termination fees received from TZI due to the cancellation of a sublease before the end of the lease term.

The following table summarizes supplemental balance sheet information related to leases:
 
 
Balance Sheet Classification
 
September 30, 2019
Assets
 
 
 
 
Operating lease assets
 
Operating lease assets
 
$
6.9

Finance lease assets
 
Property, plant and equipment, less accumulated depreciation
 
0.5

Total lease assets
 
 
 
$
7.4

 
 
 
 
 
Liabilities
 
 
 
 
Current
 
 
 
 
      Operating
 
Accounts payable and accrued expenses
 
$
3.6

      Finance
 
Current installments of long-term debt
 
0.2

Noncurrent
 
 
 
 
      Operating
 
Noncurrent operating lease liabilities
 
3.3

      Finance
 
Long-term debt
 
0.3

Total lease liabilities
 
 
 
$
7.4



The following table summarizes supplemental cash flow information related to leases:
 
 
Nine Months Ended September 30,
 
 
2019
Cash paid for amounts included in the measurement of lease liabilities
 
 
   Operating cash flows from operating leases
 
$
3.1

   Financing cash flows from finance leases
 
$
0.2



The following table summarizes weighted average remaining lease term and weighted average discount rate:
 
 
September 30, 2019
 
 
Weighted Average
 
 
Remaining Lease Term (Years)
 
Discount Rate
 
 
 
 
 
Operating leases
 
3.4
 
5.8
%
Finance leases
 
2.7
 
5.4
%


The following table provides future minimum payments at September 30, 2019, by year and in the aggregate, for leases having non-cancelable lease terms in excess of one year:
 
 
Operating Leases
 
Finance Leases
2019 (Remaining)
 
$
1.1

 
$
0.1

2020
 
3.6

 
0.2

2021
 
1.2

 
0.1

2022
 
0.3

 
0.1

2023
 
0.3

 

Thereafter
 
1.3

 

Total
 
$
7.8

 
$
0.5



In our 2018 Form 10-K we disclosed expected future minimum lease payments at December 31, 2018 of $20.4 million. The adoption of ASC 842 reduced the expected future minimum lease payments by removing costs related to non-lease components of existing contracts and agreements no longer defined as operating leases by $8.2 million and $2.3 million, respectively.

The following table provides reconciliation of future minimum lease payments and lease liability:
 
September 30, 2019
 
Operating Leases
 
Finance Leases
Future minimum lease payments
$
7.8

 
$
0.5

  Less: Unamortized interest
0.9

 

Total lease liability
$
6.9

 
$
0.5