Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
 9 Months Ended
Sep. 30, 2020
Leases [Abstract]  
Leases Leases
On September 10, 2020, Store Master Funding XII, LLC, a Delaware limited liability company (“Store”) and the Company's sale-leaseback partner, closed on a transaction pursuant to which Store sold to a third party approximately 12.5 acres of unimproved land and immaterial improvements located at Synalloy’s facility in Munhall, Pennsylvania. Synalloy subleases the Munhall facility to Bristol Metals, LLC.
As a result of the sale, on September 10, 2020, Synalloy and Store entered into a Third Amended and Restated Master Lease Agreement (the “Master Lease”) to reduce Synalloy’s rent at the Munhall facility pursuant to the terms and conditions of the Second Amended and Restated Master Lease Agreement between the parties dated January 2, 2019. The Master Lease amendment was determined to be a lease modification that qualified for a change of accounting on the existing lease and not a separate contract. Upon modification of the Master Lease Agreement, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized a reduction in the right-of-use asset and operating lease liability related to the Master Lease of $3.2 million and $3.4 million, respectively, and recognized a gain on the modification of $0.2 million, which is reported within operating expenses on the unaudited condensed consolidated statement of operations.
Balance Sheet Presentation
Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
Classification Financial Statement Line Item September 30, 2020
Assets Right-of-use assets, operating leases $ 32,090 
Assets Property, plant and equipment 65 
Current liabilities Current portion of lease liabilities, operating leases 835 
Current liabilities Current portion of lease liabilities, finance leases 26 
Non-current liabilities Non-current portion of lease liabilities, operating leases 33,000 
Non-current liabilities Non-current portion of lease liabilities, finance leases 41 
Total Lease Cost
Individual components of the total lease cost incurred by the Company are as follows:
(in thousands) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Operating lease cost $ 1,032  $ 3,101 
Finance lease cost:
Amortization of right-of-use assets 9  84 
Interest on finance lease liabilities —  24 
Total lease cost $ 1,041  $ 3,209 
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 unaudited condensed consolidated statement of operations.
Maturity of Leases
The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:
(in thousands) Operating Finance
Remainder of 2020 $ 899  $ 9 
2021 3,610  22 
2022 3,665  15 
2023 3,699  15 
2024 3,549  8 
Thereafter 47,159  — 
Total undiscounted minimum future lease payments 62,581  69 
Imputed Interest 28,746  2 
Present value of lease liabilities $ 33,835  $ 67 
Lease Term and Discount Rate
Weighted-average remaining lease term September 30, 2020
Operating Leases 15.70 years
Finance Leases 2.91 years
Weighted-average discount rate
Operating Leases 8.33  %
Finance Leases 2.56  %
During the three and nine months ended September 30, 2020, no right-of-use assets were recognized in exchange for new operating lease liabilities.
Leases Leases
On September 10, 2020, Store Master Funding XII, LLC, a Delaware limited liability company (“Store”) and the Company's sale-leaseback partner, closed on a transaction pursuant to which Store sold to a third party approximately 12.5 acres of unimproved land and immaterial improvements located at Synalloy’s facility in Munhall, Pennsylvania. Synalloy subleases the Munhall facility to Bristol Metals, LLC.
As a result of the sale, on September 10, 2020, Synalloy and Store entered into a Third Amended and Restated Master Lease Agreement (the “Master Lease”) to reduce Synalloy’s rent at the Munhall facility pursuant to the terms and conditions of the Second Amended and Restated Master Lease Agreement between the parties dated January 2, 2019. The Master Lease amendment was determined to be a lease modification that qualified for a change of accounting on the existing lease and not a separate contract. Upon modification of the Master Lease Agreement, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized a reduction in the right-of-use asset and operating lease liability related to the Master Lease of $3.2 million and $3.4 million, respectively, and recognized a gain on the modification of $0.2 million, which is reported within operating expenses on the unaudited condensed consolidated statement of operations.
Balance Sheet Presentation
Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
Classification Financial Statement Line Item September 30, 2020
Assets Right-of-use assets, operating leases $ 32,090 
Assets Property, plant and equipment 65 
Current liabilities Current portion of lease liabilities, operating leases 835 
Current liabilities Current portion of lease liabilities, finance leases 26 
Non-current liabilities Non-current portion of lease liabilities, operating leases 33,000 
Non-current liabilities Non-current portion of lease liabilities, finance leases 41 
Total Lease Cost
Individual components of the total lease cost incurred by the Company are as follows:
(in thousands) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Operating lease cost $ 1,032  $ 3,101 
Finance lease cost:
Amortization of right-of-use assets 9  84 
Interest on finance lease liabilities —  24 
Total lease cost $ 1,041  $ 3,209 
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 unaudited condensed consolidated statement of operations.
Maturity of Leases
The amounts of undiscounted future minimum lease payments under leases as of September 30, 2020 are as follows:
(in thousands) Operating Finance
Remainder of 2020 $ 899  $ 9 
2021 3,610  22 
2022 3,665  15 
2023 3,699  15 
2024 3,549  8 
Thereafter 47,159  — 
Total undiscounted minimum future lease payments 62,581  69 
Imputed Interest 28,746  2 
Present value of lease liabilities $ 33,835  $ 67 
Lease Term and Discount Rate
Weighted-average remaining lease term September 30, 2020
Operating Leases 15.70 years
Finance Leases 2.91 years
Weighted-average discount rate
Operating Leases 8.33  %
Finance Leases 2.56  %
During the three and nine months ended September 30, 2020, no right-of-use assets were recognized in exchange for new operating lease liabilities.