(13) COMMITMENTS AND CONTINGENCIES

Lease commitments.

Effective January 1, 2019, we adopted Accounting Standards Codification (“ASC”) Topic 842, Leases and the series of related Accounting Standards Updates that followed (collectively referred to as “ASC 842”), using the modified retrospective transition method applied at the effective date of the standard. By electing this optional transition method, information prior to January 1, 2019 has not been restated and continues to be reported under the accounting standards in effect for that period (ASC 840).

The Company elected the following practical expedients permitted under the transition guidance within the new standard; 1) the option to carry forward the historical lease classifications and assessment of initial direct costs, 2) the option to not include leases with an initial term of less than twelve months in the lease assets and liabilities and 3) the option to account for lease and non-lease components as a single lease component.

We lease property including corporate offices, vehicles and land. We determine if an arrangement is a lease at inception and evaluate identified leases for operating or finance lease treatment at lease commencement. Operating or finance lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our leases have remaining lease terms of less than one year to 41 years, some of which have options to extend or terminate the lease. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Beginning January 1, 2019, operating right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We determined our incremental borrowing rate using the borrowing rate of our revolving credit facility. The terms of our vehicle, office and land leases are in line with our revolving credit facility, our primary finance mechanism. We have certain land and vehicle lease agreements with lease and non-lease components, which are accounted for separately. Non-lease components include payments for taxes and other operating and maintenance expenses incurred by the lessor but payable by us in connection with the leasing arrangement. As of June 30, 2020, the Company was party to certain subleasing arrangements whereby the Company, as the primary obligor on the lease, has recognized sublease income for lease payments made by affiliates to the lessor.

Following are components of our lease costs (in thousands):


	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Operating leases	$	1,165	$	1,157	$	2,347	$	2,226
Variable lease costs (including insignificant short-term leases)		215		233		426		505
Sublease income as primary obligor		(249)		(247)		(495)		(493)
Total lease costs	$	1,131	$	1,143	$	2,278	$	2,238

Other information related to our operating leases was as follows (in thousands, except lease term and discount rate):


	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Cash outflows for operating leases	$	1,078	$	756	$	2,287	$	1,970
Weighted average remaining lease term (years)		18.57		19.61		18.57		19.61
Weighted average discount rate		5.2%		5.2%		5.2%		5.2%

Undiscounted cash flows owed by the Company to lessors pursuant to contractual agreements in effect as of June 30, 2020 and related imputed interest was as follows (in thousands):


2020 (remainder of the year)	$	2,349
2021		4,541
2022		4,532
2023		3,993
2024		3,676
Thereafter		39,831
Total lease payments		58,922
Less imputed interest		(22,392)
Present value of operating lease liabilities	$	36,530

Contract commitments. At June 30, 2020, we have contractual commitments of approximately $34.8 million for the supply of services, labor and materials related to capital projects that currently are under development. We expect that these contractual commitments will primarily be paid within a year.

Legal proceedings. We are party to various legal, regulatory and other matters arising from the day-to-day operations of our business that may result in claims against us. While the ultimate impact of any proceedings cannot be predicted with certainty, our management believes that the resolution of any of our pending legal proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows.