v3.19.3.a.u2

LEASE ASSETS AND LIABILITIES | 12 Months Ended
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Dec. 31, 2019
Leases [Abstract] |
Lessee, Operating Leases [Text Block] | LEASE ASSETS AND LIABILITIES Transition On January 1, 2019, we adopted Accounting Standards Codification Topic 842, “Leases” (ASC Topic 842) using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented under ASC Topic 842. In accordance with the modified retrospective approach, prior period amounts were not adjusted and are reported under ASC Topic 840, “Leases.” As a result of the adoption of ASC Topic 842, we recorded right-of-use assets and lease liabilities of approximately $207.0 million and $192.0 million, respectively, as of January 1, 2019. The adoption of ASC Topic 842 had an immaterial impact on our results of operations and cash flows. We elected the following practical expedients permitted under the transition guidance within the new standard:
• | the package of practical expedients, which, among other things, allowed us to carry forward historical lease classification;
• | the practical expedient specifically related to land easements, which, among other things, allowed us to carry forward our historical accounting treatment for existing land easement agreements;
• | the lessee practical expedient to combine lease and non-lease components for all of our asset classes except the other pipeline and terminal equipment asset class; and
• | the lessor practical expedient to combine lease and non-lease components and to account for the transaction based on the predominant component (i.e., ASC Topic 842 or ASC Topic 606, “Revenue from Contracts with Customers”). We apply this expedient to certain contracts in which we agree to provide both storage capacity and optional services to customers.
We record all leases on our consolidated balance sheet except for those leases with an initial term of 12 months or less, which are expensed on a straight-line basis over the lease term. We use judgment in determining the reasonably certain lease term and consider factors such as the nature and utility of the leased asset, as well as the importance of the leased asset to our operations. We calculate the present value of our lease liabilities based upon our incremental borrowing rate unless the rate implicit in the lease is readily determinable. Lessee Arrangements Our operating leases consist primarily of land and dock leases at various terminal facilities. As of December 31, 2019, land and dock leases have remaining terms generally of up to 6 years and include options to extend, some up to 20 years, which we are reasonably certain to exercise. The primary component of our finance lease portfolio is a dock at a terminal facility, which includes a commitment for minimum dockage and wharfage throughput volumes. The dock lease has a remaining initial term of 1 year and four additional five-year renewal periods, all of which we are reasonably certain to exercise. We historically accounted for the dock lease under legacy build-to-suit accounting guidance, which was eliminated by ASC Topic 842. Certain of our leases are subject to variable payment arrangements, the most notable of which include:
• | dockage and wharfage charges, which are based on volumes moved over leased docks and are included in our calculation of our lease payments based on minimum throughput volume requirements. We recognize charges on excess throughput volumes in profit or loss in the period in which the obligation for those payments is incurred; and
• | consumer price index adjustments, which are measured and included in the calculation of our lease payments based on the consumer price index at the adoption date or, after adoption, at the commencement date. We recognize changes in lease payments as a result of changes in the consumer price index in profit or loss in the period in which those payments are made.
Right-of-use assets and lease liabilities included in our consolidated balance sheet were as follows:
|  | Balance Sheet Location |  | December 31, 2019
|  |  |  | (Thousands of Dollars)
Right-of-Use Assets: |  |  |  |
Operating |  | Other long-term assets, net |  | $ | 81,219 |
Finance |  | Property, plant and equipment, net of accumulated amortization of $3,748 |  | $ | 74,953 |
Lease Liabilities: |  |  |  |
Operating: |  |  |  |
Current |  | Accrued liabilities |  | $ | 10,416 |
Noncurrent |  | Other long-term liabilities |  | 70,083 |
Total operating lease liabilities |  |  |  | $ | 80,499 |
Finance: |  |  |  |
Current |  | Short-term debt and current portion of finance leases |  | $ | 4,546 |
Noncurrent |  | Long-term debt, less current portion |  | 55,446 |
Total finance lease liabilities |  |  |  | $ | 59,992 |
As of December 31, 2019, maturities of our operating and finance lease liabilities were as follows:
|  | Operating Leases |  | Finance Leases
|  | (Thousands of Dollars)
2020 |  | $ | 12,647 |  |  | $ | 6,702 |
2021 |  | 9,419 |  |  | 5,252 |
2022 |  | 8,717 |  |  | 4,582 |
2023 |  | 7,605 |  |  | 4,480 |
2024 |  | 6,739 |  |  | 4,067 |
Thereafter |  | 60,354 |  |  | 59,681 |
Total lease payments |  | $ | 105,481 |  |  | $ | 84,764 |
Less: Interest |  | 24,982 |  |  | 24,772 |
Present value of lease liabilities |  | $ | 80,499 |  |  | $ | 59,992 |
Costs incurred for leases, including costs associated with discontinued operations, were as follows:
|  | Year Ended December 31, 2019
|  | (Thousands of Dollars)
Operating lease cost |  | $ | 29,167 |
Finance lease cost: |  |
Amortization of right-of-use assets |  | 3,748 |
Interest expense on lease liability |  | 2,212 |
Short-term lease cost |  | 19,140 |
Variable lease cost |  | 6,990 |
Total lease cost |  | $ | 61,257 |
Rental expense for operating leases (pursuant to ASC Topic 840) totaled $42.9 million and $36.2 million for the years ended December 31, 2018 and 2017, respectively, including rental expense reported in “(Loss) income from discontinued operations, net of tax” on the consolidated statements of (loss) income. The table below presents additional information regarding our leases:
|  | Operating Leases |  | Finance Leases
|  | (Thousands of Dollars, Except Term and Rate Data)
For the year ended December 31, 2019: |  |  |  |
Cash outflows from operating activities |  | $ | 27,567 |  |  | $ | 2,027 |
Cash outflows from financing activities |  | $ | — |  |  | $ | 3,700 |
Right-of-use assets obtained in exchange for lease liabilities |  | $ | 2,153 |  |  | $ | 4,430 |
As of December 31, 2019: |  |  |  |
Weighted-average remaining lease term (in years) |  | 15 |  |  | 20 |
Weighted-average discount rate |  | 3.6 | % |  | 3.7 | %
Lessee, Finance Leases [Text Block] | LEASE ASSETS AND LIABILITIES Transition On January 1, 2019, we adopted Accounting Standards Codification Topic 842, “Leases” (ASC Topic 842) using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented under ASC Topic 842. In accordance with the modified retrospective approach, prior period amounts were not adjusted and are reported under ASC Topic 840, “Leases.” As a result of the adoption of ASC Topic 842, we recorded right-of-use assets and lease liabilities of approximately $207.0 million and $192.0 million, respectively, as of January 1, 2019. The adoption of ASC Topic 842 had an immaterial impact on our results of operations and cash flows. We elected the following practical expedients permitted under the transition guidance within the new standard:
• | the package of practical expedients, which, among other things, allowed us to carry forward historical lease classification;
• | the practical expedient specifically related to land easements, which, among other things, allowed us to carry forward our historical accounting treatment for existing land easement agreements;
• | the lessee practical expedient to combine lease and non-lease components for all of our asset classes except the other pipeline and terminal equipment asset class; and
• | the lessor practical expedient to combine lease and non-lease components and to account for the transaction based on the predominant component (i.e., ASC Topic 842 or ASC Topic 606, “Revenue from Contracts with Customers”). We apply this expedient to certain contracts in which we agree to provide both storage capacity and optional services to customers.
We record all leases on our consolidated balance sheet except for those leases with an initial term of 12 months or less, which are expensed on a straight-line basis over the lease term. We use judgment in determining the reasonably certain lease term and consider factors such as the nature and utility of the leased asset, as well as the importance of the leased asset to our operations. We calculate the present value of our lease liabilities based upon our incremental borrowing rate unless the rate implicit in the lease is readily determinable. Lessee Arrangements Our operating leases consist primarily of land and dock leases at various terminal facilities. As of December 31, 2019, land and dock leases have remaining terms generally of up to 6 years and include options to extend, some up to 20 years, which we are reasonably certain to exercise. The primary component of our finance lease portfolio is a dock at a terminal facility, which includes a commitment for minimum dockage and wharfage throughput volumes. The dock lease has a remaining initial term of 1 year and four additional five-year renewal periods, all of which we are reasonably certain to exercise. We historically accounted for the dock lease under legacy build-to-suit accounting guidance, which was eliminated by ASC Topic 842. Certain of our leases are subject to variable payment arrangements, the most notable of which include:
• | dockage and wharfage charges, which are based on volumes moved over leased docks and are included in our calculation of our lease payments based on minimum throughput volume requirements. We recognize charges on excess throughput volumes in profit or loss in the period in which the obligation for those payments is incurred; and
• | consumer price index adjustments, which are measured and included in the calculation of our lease payments based on the consumer price index at the adoption date or, after adoption, at the commencement date. We recognize changes in lease payments as a result of changes in the consumer price index in profit or loss in the period in which those payments are made.
Right-of-use assets and lease liabilities included in our consolidated balance sheet were as follows:
|  | Balance Sheet Location |  | December 31, 2019
|  |  |  | (Thousands of Dollars)
Right-of-Use Assets: |  |  |  |
Operating |  | Other long-term assets, net |  | $ | 81,219 |
Finance |  | Property, plant and equipment, net of accumulated amortization of $3,748 |  | $ | 74,953 |
Lease Liabilities: |  |  |  |
Operating: |  |  |  |
Current |  | Accrued liabilities |  | $ | 10,416 |
Noncurrent |  | Other long-term liabilities |  | 70,083 |
Total operating lease liabilities |  |  |  | $ | 80,499 |
Finance: |  |  |  |
Current |  | Short-term debt and current portion of finance leases |  | $ | 4,546 |
Noncurrent |  | Long-term debt, less current portion |  | 55,446 |
Total finance lease liabilities |  |  |  | $ | 59,992 |
As of December 31, 2019, maturities of our operating and finance lease liabilities were as follows:
|  | Operating Leases |  | Finance Leases
|  | (Thousands of Dollars)
2020 |  | $ | 12,647 |  |  | $ | 6,702 |
2021 |  | 9,419 |  |  | 5,252 |
2022 |  | 8,717 |  |  | 4,582 |
2023 |  | 7,605 |  |  | 4,480 |
2024 |  | 6,739 |  |  | 4,067 |
Thereafter |  | 60,354 |  |  | 59,681 |
Total lease payments |  | $ | 105,481 |  |  | $ | 84,764 |
Less: Interest |  | 24,982 |  |  | 24,772 |
Present value of lease liabilities |  | $ | 80,499 |  |  | $ | 59,992 |
Costs incurred for leases, including costs associated with discontinued operations, were as follows:
|  | Year Ended December 31, 2019
|  | (Thousands of Dollars)
Operating lease cost |  | $ | 29,167 |
Finance lease cost: |  |
Amortization of right-of-use assets |  | 3,748 |
Interest expense on lease liability |  | 2,212 |
Short-term lease cost |  | 19,140 |
Variable lease cost |  | 6,990 |
Total lease cost |  | $ | 61,257 |
Rental expense for operating leases (pursuant to ASC Topic 840) totaled $42.9 million and $36.2 million for the years ended December 31, 2018 and 2017, respectively, including rental expense reported in “(Loss) income from discontinued operations, net of tax” on the consolidated statements of (loss) income. The table below presents additional information regarding our leases:
|  | Operating Leases |  | Finance Leases
|  | (Thousands of Dollars, Except Term and Rate Data)
For the year ended December 31, 2019: |  |  |  |
Cash outflows from operating activities |  | $ | 27,567 |  |  | $ | 2,027 |
Cash outflows from financing activities |  | $ | — |  |  | $ | 3,700 |
Right-of-use assets obtained in exchange for lease liabilities |  | $ | 2,153 |  |  | $ | 4,430 |
As of December 31, 2019: |  |  |  |
Weighted-average remaining lease term (in years) |  | 15 |  |  | 20 |
Weighted-average discount rate |  | 3.6 | % |  | 3.7 | %
Lessor, Operating Leases [Text Block] | Lessor Arrangements We have entered into certain revenue arrangements where we are considered to be the lessor. Under the largest of these arrangements, we lease certain of our storage tanks in exchange for a fixed fee, subject to an annual consumer price index adjustment. The operating leases commenced on January 1, 2017, and have initial terms of 10 years with successive automatic renewal terms. We recognized lease revenues from these leases of $40.8 million for the year ended December 31, 2019, which are included in “Service revenues” in the consolidated statements of (loss) income. As of December 31, 2019, we expect to receive minimum lease payments totaling $273.7 million, based upon the consumer price index as of the adoption date. We will recognize these payments ratably over the remaining initial lease term. As of December 31, 2019, the cost and accumulated depreciation of lease storage assets, which are included in our “Pipeline, storage and terminals” asset class within property, plant and equipment and have an estimated useful life of 30 years, total $238.2 million and $121.5 million, respectively.

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