Operating and Finance Lease Liabilities

9 Months Ended

Sep. 30, 2022

Operating and Finance Lease Liabilities

Operating and Finance Lease Liabilities

17.  Operating and Finance Lease Liabilities

As of September 30, 2022, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, “Nature of Operations”) as summarized below.  These leases expire over the next one to nine years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.  

Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.  At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates.  No residual value guarantees are contained in the leases.  No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include credit support in the form of either cash, collateral or letters of credit.  See Note 19, “Commitments and Contingencies” for a description of cash held as security associated with the leases.    

The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations.  The fair value of this finance obligation approximated the carrying value as of September 30, 2022.

Future minimum lease payments under operating and finance leases (with initial or remaining lease terms in excess of one year) as of September 30, 2022 were as follows (in thousands):

			Finance		Total
	Operating Lease		Lease		Lease
	Liability		Liability		Liabilities
Remainder of 2022	$	28,717	$	2,501	$	31,218
2023		65,008		9,731		74,739
2024		64,055		9,704		73,759
2025		59,685		12,615		72,300
2026		51,780		9,967		61,747
2027 and thereafter		97,981		5,596		103,577
Total future minimum payments		367,226		50,114		417,340
Less imputed interest		(78,148)		(7,034)		(85,182)
Total	$	289,078	$	43,080	$	332,158

Rental expense for all operating leases was $17.4 million and $9.6 million for the three months ended September 30, 2022 and 2021, respectively. Rental expense for all operating leases was $46.5 million and $25.8 million for the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and December 31, 2021, security deposits associated with sale/leaseback transactions were $5.2 million and $3.5 million, respectively, and were included in other assets in the unaudited interim condensed consolidated balance sheets.

At September 30, 2022 and December 31, 2021, the right of use assets associated with finance leases was $52.9 million and $33.9 million, respectively. The accumulated depreciation for these right of use assets was $3.3 million and $1.5 million at September 30, 2022 and December 31, 2021, respectively.

Other information related to the operating leases are presented in the following table:

	Nine months ended		Nine months ended
	September 30, 2022		September 30, 2021
Cash payments (in thousands)	$	44,565	$	25,726
Weighted average remaining lease term (years)		6.31		5.72
Weighted average discount rate		11.1%		11.2%

Finance lease costs include amortization of the right of use assets (i.e., depreciation expense) and interest on lease liabilities (i.e., interest and other expense, net in the consolidated statement of operations), and were $0.8 million and $0.6 million for the three months ended September 30, 2022, respectively. Finance lease costs include amortization of the right of use assets (i.e., depreciation expense) and interest on lease liabilities (i.e., interest and other expense, net in the consolidated statement of operations), and were $2.4 million and $1.8 million for the nine months ended September 30, 2022, respectively.

Other information related to the finance leases are presented in the following table:

	Nine months ended		Nine months ended
	September 30, 2022		September 30, 2021
Cash payments (in thousands)	$	6,166	$	2,128
Weighted average remaining lease term (years)		4.09		4.57
Weighted average discount rate		6.5%		6.9%