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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our condensed consolidated balance sheet unless it is reasonably certain we will renew the lease. All leases with an initial term greater than 12 months, whether classified as operating or finance, are recorded to our condensed consolidated balance sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate: therefore, we use a weighted average borrowing rate based on the information available at the commencement date.

Our lease portfolio primarily consists of operating leases for certain, facilities, office spaces and equipment. Our leases have remaining terms of 1 year to 5 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease asset also includes any upfront lease payments made and excludes lease incentives and initial direct cost incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The following table summarized the supplemental balance sheet information related to lease assets and lease liability obligations as of September 30, 2019 (in thousands, unaudited):

	Classification	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	1,002
Finance lease assets	Property and equipment, net of accumulated depreciation	9,595
Total lease assets		10,597
Liabilities
Current
Operating	Current portion of operating lease obligations	340
Finance	Current portion of finance lease obligation	4,662
Noncurrent
Operating	Operating lease liabilities	682
Finance	Finance lease obligations,—related parties, net of current portion	3
Total lease liabilities		$	5,687

The following table summarizes the components of lease expenses for the three and nine months ended September 30, 2019 (in thousands, unaudited):

Lease Cost		Classification	Three Months Ended September 30,								Nine Months Ended September 30,
			2019				2018				2019				2018
Operating lease cost		Cost of sales and Selling, general and administrative expenses	$	203			$	—			$	298			$	—
Finance lease cost
Amortization of leased assets		Cost of operations	274				261				858				759
Interest on lease liabilities		Interest expense	170				176				510				542
Net lease cost			$	647			$	437			$	1,666			$	1,301

In 2014, the Company entered into a five year non-cancelable operating lease for an office in Denver, Colorado. In January 2019, the Company amended its operating lease for the Denver, Colorado office relocating to a smaller office suite and reducing the lease expense for the remainder of the term. The total rent expense incurred under the lease for the nine months ended September 30, 2019 and 2018 totaled $74 thousand and $175 thousand, respectively. In February of 2018, the Company began to sublease a portion of the office space to a subsidiary of TMG for $5 thousand a month through December 2018 and $2 thousand a month beginning January 2019 (see Note 13, Related Party Transactions for further discussion).

In December 2018, the Company entered into a one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through December 31, 2019.

In January 2019, the Company extended its lease for one year for yard space from an unrelated party in Fort Lupton, Colorado. The lease called for monthly payments of $2 thousand through December 31, 2019. The Company subleased the yard space to a subsidiary of TMG during 2018 (see Note 13, Related Party Transactions for further discussion).

The Company leases certain buildings and facilities, including office space in Bellevue, Washington; Houston, Texas; and certain equipment under non-cancellable operating leases expiring at various dates through 2022. M&I Brazil leases offices and facilities in three cities in Brazil that are under operating lease agreements. The leases expire at various dates through January 2022. The assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments based on Brazil’s General Market Price Index rate. Brazil also has multiple short-term equipment leases which are less than twelve months and have no cancellation penalties, therefore they are not recorded in the balance sheet.

The following schedule presents the future minimum lease payments for our operating and finance obligations at September 30, 2019 (in thousands):

	Operating Leases				Finance Leases				Total
Remainder 2019	$	80			$	1,108			$	1,188
2020	420				3,879				4,299
2021	221				—				221
2022	144				—				144
Thereafter	321				—				321
Total lease payments	1,186				4,987				6,173
Less: Interest	(164		)		(322		)		(486		)
Present value of lease liabilities	$	1,022			$	4,665			$	5,687

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate		September 30, 2019
Weighted-average remaining lease term (years)
Operating leases		3.8
Finance leases		0.7
Weighted-average discount rate
Operating leases		7.2	%
Finance leases		9.9	%

The following table summarizes the supplemental cash flow information related to leases as of September 30, 2019:

Other information		September 30, 2019
		(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	298
Financing cash flows from finance leases		2,582
Interest paid		510
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	1,173

Leases

Leases

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our condensed consolidated balance sheet unless it is reasonably certain we will renew the lease. All leases with an initial term greater than 12 months, whether classified as operating or finance, are recorded to our condensed consolidated balance sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate: therefore, we use a weighted average borrowing rate based on the information available at the commencement date.

Our lease portfolio primarily consists of operating leases for certain, facilities, office spaces and equipment. Our leases have remaining terms of 1 year to 5 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease asset also includes any upfront lease payments made and excludes lease incentives and initial direct cost incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The following table summarized the supplemental balance sheet information related to lease assets and lease liability obligations as of September 30, 2019 (in thousands, unaudited):

	Classification	September 30, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	1,002
Finance lease assets	Property and equipment, net of accumulated depreciation	9,595
Total lease assets		10,597
Liabilities
Current
Operating	Current portion of operating lease obligations	340
Finance	Current portion of finance lease obligation	4,662
Noncurrent
Operating	Operating lease liabilities	682
Finance	Finance lease obligations,—related parties, net of current portion	3
Total lease liabilities		$	5,687

The following table summarizes the components of lease expenses for the three and nine months ended September 30, 2019 (in thousands, unaudited):

Lease Cost		Classification	Three Months Ended September 30,								Nine Months Ended September 30,
			2019				2018				2019				2018
Operating lease cost		Cost of sales and Selling, general and administrative expenses	$	203			$	—			$	298			$	—
Finance lease cost
Amortization of leased assets		Cost of operations	274				261				858				759
Interest on lease liabilities		Interest expense	170				176				510				542
Net lease cost			$	647			$	437			$	1,666			$	1,301

In 2014, the Company entered into a five year non-cancelable operating lease for an office in Denver, Colorado. In January 2019, the Company amended its operating lease for the Denver, Colorado office relocating to a smaller office suite and reducing the lease expense for the remainder of the term. The total rent expense incurred under the lease for the nine months ended September 30, 2019 and 2018 totaled $74 thousand and $175 thousand, respectively. In February of 2018, the Company began to sublease a portion of the office space to a subsidiary of TMG for $5 thousand a month through December 2018 and $2 thousand a month beginning January 2019 (see Note 13, Related Party Transactions for further discussion).

In December 2018, the Company entered into a one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through December 31, 2019.

In January 2019, the Company extended its lease for one year for yard space from an unrelated party in Fort Lupton, Colorado. The lease called for monthly payments of $2 thousand through December 31, 2019. The Company subleased the yard space to a subsidiary of TMG during 2018 (see Note 13, Related Party Transactions for further discussion).

The Company leases certain buildings and facilities, including office space in Bellevue, Washington; Houston, Texas; and certain equipment under non-cancellable operating leases expiring at various dates through 2022. M&I Brazil leases offices and facilities in three cities in Brazil that are under operating lease agreements. The leases expire at various dates through January 2022. The assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments based on Brazil’s General Market Price Index rate. Brazil also has multiple short-term equipment leases which are less than twelve months and have no cancellation penalties, therefore they are not recorded in the balance sheet.

The following schedule presents the future minimum lease payments for our operating and finance obligations at September 30, 2019 (in thousands):

	Operating Leases				Finance Leases				Total
Remainder 2019	$	80			$	1,108			$	1,188
2020	420				3,879				4,299
2021	221				—				221
2022	144				—				144
Thereafter	321				—				321
Total lease payments	1,186				4,987				6,173
Less: Interest	(164		)		(322		)		(486		)
Present value of lease liabilities	$	1,022			$	4,665			$	5,687

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate		September 30, 2019
Weighted-average remaining lease term (years)
Operating leases		3.8
Finance leases		0.7
Weighted-average discount rate
Operating leases		7.2	%
Finance leases		9.9	%

The following table summarizes the supplemental cash flow information related to leases as of September 30, 2019:

Other information		September 30, 2019
		(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	298
Financing cash flows from finance leases		2,582
Interest paid		510
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	1,173

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- References

No definition available.

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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