UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
| Quarterly Report under Section 13 OR 15(d) of the Securities Exchange Act of 1934 | ||||||||
For quarterly period ended June 30, 2020
or
| Transition Report under Section 13 OR 15(d) of the Securities Exchange Act of 1934 | ||||||||
For the transition period from to
Commission file Number: 0-10546
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | ☒ | |||||||||
| Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
The number of shares outstanding of the registrant’s common stock, $1 par value, as of July 15, 2020 was 9,008,254 .
1
TABLE OF CONTENTS
| Page # | ||||||||
2
“Safe Harbor” Statement under the Securities Litigation Reform Act of 1995:
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause or contribute to such differences or that might otherwise impact the business include:
•the effect of the COVID-19 virus on the overall economy, demand for our products, our supply chain, our employees and our operating results;
•the effect of general economic and market conditions;
•the ability to generate sufficient cash to fund our operating requirements;
•the ability to meet the covenant requirements of our line of credit;
•the market price of our common stock may decline;
•inventory obsolescence;
•work stoppages and other disruptions at transportation centers or shipping ports;
•changing customer demand and product mixes;
•increases in energy costs, tariffs and the cost of raw materials, including commodity prices;
•decreases in demand from oil and gas customers due to lower oil prices;
•disruptions of our information and communication systems;
•cyber attacks or other information security breaches;
•failure to recruit, integrate and retain a talented workforce including productive sales representatives;
•the inability to successfully make or integrate acquisitions into the organization;
•foreign currency fluctuations
•failure to manage change within the organization;
•highly competitive market;
•changes that affect governmental and other tax-supported entities;
•violations of environmental protection or other governmental regulations;
•negative changes related to tax matters;
•Luther King Capital's significant influence over the Company given its ownership percentage; and
•all other factors discussed in the Company’s “Risk Factors” set forth in its Annual Report on Form 10-K for the year ended December 31, 2019 and in this Quarterly Report on Form 10-Q for the period ended June 30, 2020.
The Company undertakes no obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.
3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Lawson Products, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share data)
| June 30, | December 31, | ||||||||||
| 2020 | 2019 | ||||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, less allowance for doubtful accounts of $961 and $593, respectively | |||||||||||
| Inventories, net | |||||||||||
| Miscellaneous receivables and prepaid expenses | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Deferred income taxes | |||||||||||
| Goodwill | |||||||||||
| Cash value of life insurance | |||||||||||
| Intangible assets, net | |||||||||||
| Right of use assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Lease obligation | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Revolving line of credit | |||||||||||
| Security bonus plan | |||||||||||
| Lease obligation | |||||||||||
| Deferred compensation | |||||||||||
| Deferred tax liability | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Authorized - | |||||||||||
Common stock, $ | |||||||||||
Authorized - Issued - 9,201,315 and 9,190,171 shares, respectively Outstanding -9,007,411 and 9,043,771 shares, respectively | |||||||||||
| Capital in excess of par value | |||||||||||
| Retained earnings | |||||||||||
Treasury stock – 193,904 and 146,400 shares, respectively | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See notes to condensed consolidated financial statements.
4
Lawson Products, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Product revenue | $ | $ | $ | $ | |||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Product cost of goods sold | |||||||||||||||||||||||
| Service costs | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling expenses | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense), net | ( | ||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
Basic income per share of common stock | $ | $ | $ | $ | |||||||||||||||||||
Diluted income per share of common stock | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic weighted average shares outstanding | |||||||||||||||||||||||
| Effect of dilutive securities outstanding | |||||||||||||||||||||||
Diluted weighted average shares outstanding | |||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income, net of tax | |||||||||||||||||||||||
| Adjustment for foreign currency translation | ( | ||||||||||||||||||||||
| Net comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See notes to condensed consolidated financial statements.
5
Lawson Products, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands)
(Unaudited)
| Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||
| Outstanding Shares | $1 Par Value | Retained Earnings | Treasury Stock | ||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2020 | 9,043,771 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Treasury shares repurchased | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Adjustment for foreign currency translation | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Adjustment for foreign currency translation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Shares issued | — | — | — | ||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||
| Outstanding Shares | $1 Par Value | Retained Earnings | Treasury Stock | ||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
Change in accounting principle (1) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Adjustment for foreign currency translation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Shares issued | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Adjustment for foreign currency translation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Shares issued | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||
(1) The Company adopted the ASC No.842, Leases (ASC 842) on January 1, 2019 using the modified retrospective approach. See Note 7 - Leases for further details.
See notes to condensed consolidated financial statements.
6
Lawson Products, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | ( | ||||||||||
| Deferred income taxes | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable and other liabilities | ( | ( | |||||||||
| Other | |||||||||||
| Net cash provided by (used in) operating activities | $ | $ | ( | ||||||||
| Investing activities: | |||||||||||
| Purchases of property, plant and equipment | $ | ( | $ | ( | |||||||
| Net cash used in investing activities | $ | ( | $ | ( | |||||||
| Financing activities: | |||||||||||
| Net payments on revolving lines of credit | $ | ( | $ | ( | |||||||
| Repurchase treasury shares | ( | ||||||||||
| Payment of financing lease principal | ( | ( | |||||||||
| Proceeds from stock option exercises | |||||||||||
| Net cash used in financing activities | $ | ( | $ | ( | |||||||
| Effect of exchange rate changes on cash and cash equivalents | $ | ( | $ | ||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Net cash paid for income taxes | |||||||||||
| Net cash paid for interest | |||||||||||
See notes to condensed consolidated financial statements.
7
Notes to Condensed Consolidated Financial Statements
Note 1 — Basis of Presentation and Summary of Significant Accounting Policies
Note 2 - Revenue Recognition
As part of the Company's revenue recognition analysis, it concluded that it has two separate performance obligations, and accordingly, two separate revenue streams: products and services. As a result, the Company reports two separate revenue streams and two separate costs of revenues. Under the definition of a contract as defined by ASC 606, the Company considers contracts to be created at the time an order to purchase product is agreed upon regardless of whether or not there is a written contract.
Performance Obligations
Lawson has two operating segments; the Lawson segment and the Bolt Supply segment.
The Lawson segment has two distinct performance obligations offered to its customers: a product performance obligation and a service performance obligation. Although the Company has identified that it offers its customers both a product and a service obligation, the customer only receives one invoice per transaction with no price breakout between these obligations. The Company does not price its offerings based on any breakout between these obligations.
Lawson generates revenue primarily from the sale of MRO products to its customers. Revenue related to product sales is recognized at the time that control of the product has been transferred to the customer; either at the time the product is shipped or the time the product has been received by the customer. The Company does not commit to long-term contracts to sell customers a certain minimum quantity of products.
The Lawson segment offers a vendor managed inventory ("VMI") service proposition to its customers. A portion of these services, primarily related to stocking of product and maintenance of the MRO inventory, is provided a short period of time after control of the purchased product has been transferred to the customer. Since some components of VMI service have not been provided at the time the control of the product transfers to the customer, that portion of expected consideration is deferred until the time that those services have been provided.
The Bolt Supply segment does not provide VMI services for its customers or provide services in addition to product sales to customers. Revenue is recognized at the time that control of the product has been transferred to the customer which is either upon delivery or shipment depending on the terms of the contract.
Accounting Policy Elections
The Company has elected to treat shipping and handling costs after the control of the product has been transferred to the customer as a fulfillment cost.
Sales taxes that are imposed on our sales and collected from customers are excluded from revenues.
8
The Company expenses sales commissions when incurred as the amortization period is one year or less.
Certain Judgments
The Company employs certain judgments to estimate the dollar amount of revenue, and related expenses, allocated to the sale of product and service. These judgments include, among others, the percentage of customers that take advantage of the VMI services offered, the amount of revenue to be allocated to the VMI service based on the value of the service to its customers, and the amount of time after control of the product passes to the customer that the VMI service obligation is completed. It is assumed that any customer who averages placing orders at a frequency of longer than 30 days does not take advantage of the available VMI services offered. The estimate of the cost of sales is based on expenses directly related to sales representatives that provide direct VMI services to the customer.
The onset of the COVID-19 pandemic impacted the ability of the Lawson sales representatives to call on their customers in person, particularly in the first half of the second quarter of 2020. As a result, Lawson sales representatives were not able to perform VMI services with the same frequency in the second quarter of 2020 as they were in prior quarters. As a result, the amount of revenue allocated to the service revenue component is lower in the second quarter of 2020 than in previous quarters. Additionally the amount of service costs allocated to gross margin from selling expense is lower than in prior quarters. The Company expects the COVID-19 pandemic to continue to impact the allocation of service revenue and service related costs for the foreseeable future, though the Company is unable to determine the extent of the impact at this time.
At June 30, 2020, the Company had a deferred revenue liability of $0.5 million and a deferred expense of $0.2 million for related expenses associated with the deferred service performance obligations, respectively. The decrease in deferred revenues and related expenses associated with the deferred service performance obligations is driven by the effects of the COVID-19 pandemic.
The deferral of revenue and expenses does not affect the amount, timing and any uncertainty of cash flows generated from operations.
Disaggregated revenue by geographic area follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| Canada | |||||||||||||||||||||||
| Consolidated total | $ | $ | $ | $ | |||||||||||||||||||
Disaggregated revenue by product type follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Fastening Systems | % | % | % | % | |||||||||||||||||||
| Fluid Power | % | % | % | % | |||||||||||||||||||
| Specialty Chemicals | % | % | % | % | |||||||||||||||||||
| Cutting Tools and Abrasives | % | % | % | % | |||||||||||||||||||
| Electrical | % | % | % | % | |||||||||||||||||||
| Safety | % | % | % | % | |||||||||||||||||||
| Aftermarket Automotive Supplies | % | % | % | % | |||||||||||||||||||
| Welding and Metal Repair | % | % | % | % | |||||||||||||||||||
| Other | % | % | % | % | |||||||||||||||||||
| Consolidated Total | % | % | % | % | |||||||||||||||||||
9
Note 3 — Restricted Cash
Note 4 — Inventories, Net
Inventories, net, consisting primarily of purchased goods which are offered for resale, were as follows:
| (Dollars in thousands) | |||||||||||
| June 30, 2020 | December 31, 2019 | ||||||||||
| Inventories, gross | $ | $ | |||||||||
| Reserve for obsolete and excess inventory | ( | ( | |||||||||
| Inventories, net | $ | $ | |||||||||
Note 5 - Goodwill
Goodwill activity for the first six months of 2020 and 2019 is included in the table below:
| (Dollars in thousands) | |||||||||||
| Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Beginning balance | $ | $ | |||||||||
| Adjustment to original acquisition allocation | |||||||||||
| Impact of foreign exchange | ( | ||||||||||
| Ending balance | $ | $ | |||||||||
The Company performed a quantitative impairment test on the Bolt goodwill as of March 31, 3020 and June 30, 2020. As of June 30, 2020 the Bolt reporting unit's fair value exceeded its carrying value by approximately $5.4 million or 16%. As of June 30, 2020 goodwill allocated to the Bolt operating unit was $12.8 million. Related to the Lawson reporting unit, the Company performed a qualitative assessment as of March 31, 2020 and June 30, 2020 and determined that it was more likely than not the fair value of the reporting unit exceeded the carrying value of the reporting unit.
Although the Company believes the projected future operating results and cash flows and related estimates regarding the values were based on reasonable assumptions, it is reasonably possible that estimates made may be materially and adversely impacted in the near term as a result of the COVID-19 pandemic, including impairment losses related to goodwill.
Note 6 - Intangible Assets
The gross carrying amount and accumulated amortization by intangible asset class were as follows:
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||||||||||||
| Trade names | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Customer relationships | ( | ( | |||||||||||||||||||||||||||||||||
| $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
10
Note 7 - Leases
The Company leases property used for distribution centers, office space, and Bolt branch locations throughout the US and Canada, along with various equipment located in distribution centers and corporate headquarters. The Company is also a lessor of its Decatur, Alabama property previously used in conjunction with a discontinued operation.
Lawson Operating Leases
Lawson MRO primarily has two types of leases: leases for real estate and leases for equipment. Operating real estate leases that have a material impact on the operations of the Company are related to the Company's distribution network and headquarters. The Company possesses several additional property leases that are month to month basis and are not material in nature. Lawson MRO does not possess any leases that have residual value guarantees. Several property leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use assets and associated lease liabilities when the Company is reasonably certain it will renew a lease.
The value of the Right Of Use ("ROU") assets and associated lease liabilities is calculated using the total cash payments over the course of the lease, discounted to the present value using the appropriate incremental borrowing rate. The right of use asset will be amortized over its useful life. The lease liability is reduced in conjunction with the lease payments made, with adjustments made to the lease liability in order to account for non-straight line cash payments through the life of the lease.
Bolt primarily leases the real estate for its branch locations as well as its distribution center in Calgary, Alberta. Bolt possesses additional property leases that are month to month and not material in nature. Bolt property leases include renewal clauses which vary in length and may not include specific rent renewal amounts. The Company will revise the value of the right of use asset and associated lease liability when the Company is reasonably certain it will renew a lease.
Significant Assumptions
The Company is required to determine a discount rate for the present value of lease payments. If the rate is not included in the lease or cannot be readily determined, the Company must estimate the incremental borrowing rate to be used for the discount rate. The discount rate of Lawson MRO and Bolt will be reviewed on a periodic basis and updated as needed.
The expenses and income generated by the leasing activity of Lawson as lessee for the three months ended June 30, 2020 and June 30, 2019 are as follows (Dollars in thousands):
| Lease Type | Classification | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | |||||||||||||||||
Consolidated Operating Lease Expense (1) | Operating expenses | $ | $ | |||||||||||||||||
| Consolidated Financing Lease Amortization | Operating expenses | $ | ||||||||||||||||||
| Consolidated Financing Lease Interest | Interest expense | |||||||||||||||||||
| Consolidated Financing Lease Expense | ||||||||||||||||||||
Sublease Income (2) | Operating expenses | ( | ||||||||||||||||||
| Net Lease Cost | $ | $ | ||||||||||||||||||
(1) Includes short term lease expense, which is immaterial
(2) Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases.
11
The expenses and income generated by the leasing activity of Lawson as lessee for the six months ended June 30, 2020 and June 30, 2019 are as follows (Dollars in thousands):
| Lease Type | Classification | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | |||||||||||||||||
Consolidated Operating Lease Expense (1) | Operating expenses | $ | $ | |||||||||||||||||
| Consolidated Financing Lease Amortization | Operating expenses | |||||||||||||||||||
| Consolidated Financing Lease Interest | Interest expense | |||||||||||||||||||
| Consolidated Financing Lease Expense | ||||||||||||||||||||
Sublease Income (2) | Operating expenses | ( | ||||||||||||||||||
| Net Lease Cost | $ | $ | ||||||||||||||||||
(1) Includes short term lease expense, which is immaterial
(2) Sublease income from sublease of a portion of the Company headquarters. The sublease was terminated in June 2019 and the Company has no other subleases.
The value of the net assets and liabilities generated by the leasing activity of Lawson as lessee as of June 30, 2020 and December 31, 2019 are as follows (Dollars in thousands):
| Lease Type | June 30, 2020 | December 31, 2019 | ||||||||||||
Total ROU operating lease assets (1) | $ | $ | ||||||||||||
Total ROU financing lease assets (2) | ||||||||||||||
| Total lease assets | $ | $ | ||||||||||||
| Total current operating lease obligation | $ | $ | ||||||||||||
| Total current financing lease obligation | ||||||||||||||
| Total current lease obligations | $ | $ | ||||||||||||
| Total long term operating lease obligation | $ | $ | ||||||||||||
| Total long term financing lease obligation | ||||||||||||||
| Total long term lease obligation | $ | $ | ||||||||||||
(1) Operating lease assets are recorded net of accumulated amortization of $4.5 million and $2.4 million as of June 30, 2020 and December 31, 2019, respectively
(2) Financing lease assets are recorded net of accumulated amortization of $0.3 million and $0.2 million as of June 30, 2020 and December 31, 2019, respectively
The value of the lease liabilities generated by the leasing activities of Lawson as lessee as of June 30, 2020 were as follows (Dollars in thousands):
| Maturity Date of Lease Liabilities | Operating Leases | Financing Leases | Total | |||||||||||||||||
| Year one | $ | $ | $ | |||||||||||||||||
| Year two | ||||||||||||||||||||
| Year three | ||||||||||||||||||||
| Year four | ||||||||||||||||||||
| Year five | ||||||||||||||||||||
| Subsequent years | ||||||||||||||||||||
| Total lease payments | ||||||||||||||||||||
| Less: Interest | ||||||||||||||||||||
| Present value of lease liabilities | $ | $ | $ | |||||||||||||||||
(1) Minimum lease payments exclude payments to landlord for re