Leases

3 Months Ended

Mar. 31, 2020

NACCO adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019. The most significant effect to the Unaudited Condensed Consolidated Balance Sheets relates to the recognition of new right-of-use assets (“ROU assets”) and lease liabilities for operating leases of real estate, mining and other equipment that expire at various dates through 2031. The majority of the Company's leases are operating leases. See the table below for further information on the balances included in the Unaudited Condensed Consolidated Balance Sheets. Several leases include renewal or fair value purchase options, which are not recognized on the Unaudited Condensed Consolidated Balance Sheets. The Company's lease agreements do not contain lease payments that depend on an index or a rate, as such, minimum lease payments do not include variable lease payments.

Leased assets and liabilities include the following:



Description	Location	MARCH 31 2020		DECEMBER 31 2019
Assets
Operating	Operating lease right-of-use assets	$	11,081	$	11,398
Finance	Property, plant and equipment, net ^(a)	$	107	$	544

Liabilities
Current
Operating	Other current liabilities	$	1,303	$	1,318
Finance	Current maturities of long-term debt	$	33	$	558
Noncurrent
Operating	Operating lease liabilities	$	12,117	$	12,448
Finance	Long-term debt	$	76	$	85

^(a)Finance leased assets are recorded net of accumulated amortization of less than $0.1 million and $1.9 million as of March 31, 2020 and December 31, 2019, respectively.

The components of lease expense were as follows:



		THREE MONTHS ENDED
		MARCH 31
Description	Location	2020		2019
Lease expense
Operating lease cost	Selling, general and administrative expenses	$	510	$	625
Finance lease cost:
Amortization of leased assets	Cost of sales	94		96
Interest on lease liabilities	Interest expense	5		3
Variable lease expense	Selling, general and administrative expenses	150		101
Short-term lease expense	Selling, general and administrative expenses	114		20
Total lease expense		$	873	$	845

Future minimum finance and operating lease payments were as follows at March 31, 2020:



	Finance Leases		Operating Leases		Total
Remainder of 2020	$	28	$	1,622	$	1,650
2021	37		2,149		2,186
2022	37		2,175		2,212
2023	16		1,685		1,701
2024	—		1,661		1,661
Subsequent to 2024	—		9,330		9,330
Total minimum lease payments	$	118	$	18,622	$	18,740
Amounts representing interest	9		5,202
Present value of net minimum lease payments	$	109	$	13,420

As most of the Company's leases do not provide an implicit rate, the Company determines the incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company considers its credit rating and the current economic environment in determining this collateralized rate.

The assumptions used in accounting for ASC 842 were as follows:



	THREE MONTHS ENDED
	MARCH 31
Lease term and discount rate	2020		2019
Weighted average remaining lease term (years)
Operating	9.48		10.00
Finance	3.17		0.80

Weighted average discount rate
Operating	7.00	%	6.95	%
Finance	5.09	%	3.98	%

The following table details cash paid for amounts included in the measurement of lease liabilities:



	THREE MONTHS ENDED
	MARCH 31
Cash paid for amounts included in the measurement of lease liabilities	2020		2019
Operating cash flows from operating leases	$	571	$	573
Operating cash flows from finance leases	$	5	$	3
Financing cash flows from finance leases	$	534	$	122

Leases