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Leases | 12 Months Ended
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Dec. 31, 2020
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 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 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 a 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. Certain of our leases contain non-lease components which are not separated from the lease components when calculating the right-of-use asset and lease liability per our use of the practical expedient to combine both components of an arrangement for all classes of leased assets. Our lease portfolio primarily consists of operating leases for certain facilities and office spaces, and financing leases for 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 summarizes the supplemental balance sheet information related to lease assets and lease liability obligations as of December 31, 2020 and 2019 (in thousands):
|  |  | December 31,
| Classification |  | 2020 |  | 2019
Assets |  |  |  |  |
Operating lease assets | Right-of-use assets |  | $ | 786 |  | $ | 965
Finance lease assets | Property and equipment, net of accumulated depreciation |  | 6,781 |  | 9,302
Total lease assets |  |  | 7,567 |  | 10,267
Liabilities |  |  |  |  |
Current |  |  |  |  |
Operating | Current portion of operating lease obligations |  | 362 |  | 364
Finance | Current portion of finance lease obligation - related parties |  | 648 |  | 3,440
Noncurrent |  |  |  |  |
Operating | Long-term portion of operating lease obligation |  | 490 |  | 650
Finance | Finance lease obligations, net of current portion - related parties |  | — |  | 648
Total lease liabilities |  |  | $ | 1,500 |  | $ | 5,102
The following table summarizes the components of lease expense for the year ended December 31, 2020 and 2019 (in thousands):
Lease Cost |  | Classification |  | December 31,
| 2020 |  | 2019
Operating lease cost |  | Cost of sales |  | $ | 164 |  |  | $ | 155 |
Operating lease cost |  | Selling, general and administrative expenses |  | 253 |  |  | 240 |
Finance lease cost |  |  |  |  |  |
Amortization of leased assets |  | Depreciation expense |  | 1,171 |  |  | 1,171 |
Interest on lease liabilities |  | Interest expense |  | 497 |  |  | 644 |
Net lease cost |  |  |  | $ | 2,085 |  |  | $ | 2,210 |
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, which expired February 28, 2021. The lease will not be renewed for an additional term. The total rent expense incurred under the lease for the years ended December 31, 2020 and 2019 totaled $67 thousand and $92 thousand, respectively. In January 2019, the Company began to sublease a portion of the office space to a subsidiary of TMG for $2 thousand a month beginning January 2019 (see Note 12—Related Party Transactions for further discussion). The sublease with TMG ended January 2020. In December 2020, the Company extended its one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through November 2021. In June 2020, 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 May 31, 2021. The Company subleased the yard space to a subsidiary of TMG during 2019 (see Note 12—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 2025. 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 2023. 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. Rent expense totaled approximately $262 thousand and $298 thousand for the years ended December 31, 2020 and 2019, respectively. In 2018, the Company entered into three finance lease agreements that included purchase options, which were reasonably certain to occur. During 2020, the Company exercised its purchase options on these agreements and the assets are now owned outright. These assets are included in the Company's property, plant and equipment, net on the consolidated balance sheets and the purchase had no effect on the net book value of these assets. The following schedule presents the future minimum lease payments for our operating and finance lease obligations at December 31, 2020 (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2021 | $ | 405 |  |  | $ | 648 |  |  | $ | 1,053 |
2022 | 223 |  |  | — |  |  | 223 |
2023 | 145 |  |  | — |  |  | 145 |
2024 | 150 |  |  | — |  |  | 150 |
2025 | 25 |  |  | — |  |  | 25 |
Thereafter | — |  |  | — |  |  | — |
Total lease payments | 948 |  |  | 648 |  |  | 1,596 |
Less: Interest | (96) |  |  | — |  |  | (96) |
Present value of lease liabilities | $ | 852 |  |  | $ | 648 |  |  | $ | 1,500 |
Lease term and discount rates for our operating and finance lease obligations are as follows:
|  | December 31,
Lease Term and Discount Rate |  | 2020 |  | 2019
Weighted-average remaining lease term (years) |  |  |  |
Operating leases |  | 3.1 |  | 3.7
Finance leases |  | 0.1 |  | 1.0
Weighted-average discount rate |  |  |  |
Operating leases |  | 7.3% |  | 7.3%
Finance leases |  | 8.9% |  | 9.1%
The following table summarizes the supplemental cash flow information related to leases as of December 31, 2020 and 2019:
Other information |  | December 31, 2020 |  | December 31, 2019
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 399 |  |  | $ | 298 |
Financing cash flows from finance leases |  | 3,439 |  |  | 3,491 |
Interest paid |  | 374 |  |  | 644 |
Noncash activities from right-of-use assets obtained in exchange for lease obligations: |  |  |  |
Operating leases |  | $ | 1,159 |  |  | $ | 1,208 |
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 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 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 a 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. Certain of our leases contain non-lease components which are not separated from the lease components when calculating the right-of-use asset and lease liability per our use of the practical expedient to combine both components of an arrangement for all classes of leased assets. Our lease portfolio primarily consists of operating leases for certain facilities and office spaces, and financing leases for 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 summarizes the supplemental balance sheet information related to lease assets and lease liability obligations as of December 31, 2020 and 2019 (in thousands):
|  |  | December 31,
| Classification |  | 2020 |  | 2019
Assets |  |  |  |  |
Operating lease assets | Right-of-use assets |  | $ | 786 |  | $ | 965
Finance lease assets | Property and equipment, net of accumulated depreciation |  | 6,781 |  | 9,302
Total lease assets |  |  | 7,567 |  | 10,267
Liabilities |  |  |  |  |
Current |  |  |  |  |
Operating | Current portion of operating lease obligations |  | 362 |  | 364
Finance | Current portion of finance lease obligation - related parties |  | 648 |  | 3,440
Noncurrent |  |  |  |  |
Operating | Long-term portion of operating lease obligation |  | 490 |  | 650
Finance | Finance lease obligations, net of current portion - related parties |  | — |  | 648
Total lease liabilities |  |  | $ | 1,500 |  | $ | 5,102
The following table summarizes the components of lease expense for the year ended December 31, 2020 and 2019 (in thousands):
Lease Cost |  | Classification |  | December 31,
| 2020 |  | 2019
Operating lease cost |  | Cost of sales |  | $ | 164 |  |  | $ | 155 |
Operating lease cost |  | Selling, general and administrative expenses |  | 253 |  |  | 240 |
Finance lease cost |  |  |  |  |  |
Amortization of leased assets |  | Depreciation expense |  | 1,171 |  |  | 1,171 |
Interest on lease liabilities |  | Interest expense |  | 497 |  |  | 644 |
Net lease cost |  |  |  | $ | 2,085 |  |  | $ | 2,210 |
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, which expired February 28, 2021. The lease will not be renewed for an additional term. The total rent expense incurred under the lease for the years ended December 31, 2020 and 2019 totaled $67 thousand and $92 thousand, respectively. In January 2019, the Company began to sublease a portion of the office space to a subsidiary of TMG for $2 thousand a month beginning January 2019 (see Note 12—Related Party Transactions for further discussion). The sublease with TMG ended January 2020. In December 2020, the Company extended its one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through November 2021. In June 2020, 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 May 31, 2021. The Company subleased the yard space to a subsidiary of TMG during 2019 (see Note 12—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 2025. 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 2023. 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. Rent expense totaled approximately $262 thousand and $298 thousand for the years ended December 31, 2020 and 2019, respectively. In 2018, the Company entered into three finance lease agreements that included purchase options, which were reasonably certain to occur. During 2020, the Company exercised its purchase options on these agreements and the assets are now owned outright. These assets are included in the Company's property, plant and equipment, net on the consolidated balance sheets and the purchase had no effect on the net book value of these assets. The following schedule presents the future minimum lease payments for our operating and finance lease obligations at December 31, 2020 (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2021 | $ | 405 |  |  | $ | 648 |  |  | $ | 1,053 |
2022 | 223 |  |  | — |  |  | 223 |
2023 | 145 |  |  | — |  |  | 145 |
2024 | 150 |  |  | — |  |  | 150 |
2025 | 25 |  |  | — |  |  | 25 |
Thereafter | — |  |  | — |  |  | — |
Total lease payments | 948 |  |  | 648 |  |  | 1,596 |
Less: Interest | (96) |  |  | — |  |  | (96) |
Present value of lease liabilities | $ | 852 |  |  | $ | 648 |  |  | $ | 1,500 |
Lease term and discount rates for our operating and finance lease obligations are as follows:
|  | December 31,
Lease Term and Discount Rate |  | 2020 |  | 2019
Weighted-average remaining lease term (years) |  |  |  |
Operating leases |  | 3.1 |  | 3.7
Finance leases |  | 0.1 |  | 1.0
Weighted-average discount rate |  |  |  |
Operating leases |  | 7.3% |  | 7.3%
Finance leases |  | 8.9% |  | 9.1%
The following table summarizes the supplemental cash flow information related to leases as of December 31, 2020 and 2019:
Other information |  | December 31, 2020 |  | December 31, 2019
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 399 |  |  | $ | 298 |
Financing cash flows from finance leases |  | 3,439 |  |  | 3,491 |
Interest paid |  | 374 |  |  | 644 |
Noncash activities from right-of-use assets obtained in exchange for lease obligations: |  |  |  |
Operating leases |  | $ | 1,159 |  |  | $ | 1,208 |

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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 + Details
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