Note 3. Leases

On January 1, 2019, the Partnership adopted ASC 842 using the prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. The adoption of the lease standard did not result in a cumulative-effect adjustment to opening equity. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842 while prior period amounts are not adjusted and continue to be reported in accordance with the Partnership’s historic accounting under ASC 840, “Leases,” (“ASC 840”).

The adoption of ASC 842 resulted in the recognition of ROU assets and lease liabilities of approximately $330.8 million and $340.8 million, respectively, as of January 1, 2019. The difference between ROU asset and lease liabilities of $10.0 million is primarily associated with amounts previously recognized on the Partnership’s consolidated balance sheet under ASC 840 and is recognized net within ROU assets under ASC 842. The standard did not materially impact the Partnership’s consolidated statement of operations or its consolidated statement of cash flows for the year ended December 31, 2019. See Note 2 for the Partnership’s lease policy and below for the required disclosures under ASC 842.

The following table presents supplemental balance sheet information related to leases at December 31, 2019 (in thousands):


Assets:	Balance Sheet Location
ROU assets - operating	Right-of-use assets, net	$	296,746

Liabilities:
Current lease liability - operating	Lease liability - current portion	$	68,160
Noncurrent lease liability - operating	Lease liability - less current portion		239,349
Total lease liability		$	307,509

Lessee Lease Arrangements

The following table presents the components of lease cost for the year ended December 31, 2019 (in thousands):


Statement of operations location:
Cost of sales (a)	$	57,369
Selling, general and administrative expenses		3,094
Operating expenses (b)		50,904
Total lease cost	$	111,367

(a)

Includes short-term lease costs of $2.5 million.

(b)

Includes variable lease cost of $6.7 million and short-term leases costs which were immaterial.

Operating lease costs included in cost of sales are primarily associated with leases of barges and railcars and dedicated storage facility lease arrangements. Operating lease costs included in operating expenses are primarily associated with the leases of gasoline station and convenience stores and terminal lease arrangements where the Partnership is responsible for operating the terminal facility. Operating lease costs included in selling, general and administrative expenses are primarily associated with the leases of office space, computers and automobiles.

The future minimum lease payments to be paid under operating leases in effect and included in the calculation of lease liabilities at December 31, 2019 were as follows (in thousands):


2020	$	86,156
2021		78,729
2022		54,672
2023		43,501
2024		31,983
Thereafter		85,788
Total lease payments		380,829
Less imputed interest		73,320
Total lease liabilities	$	307,509
Current portion	$	68,160
Long-term portion		239,349
Total lease liabilities	$	307,509

The future minimum lease payments include $19.7 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $2.3 million in lease payments that were not fixed at lease commencement or lease modification and $1.3 million related to minimum lease payments for leases that are less than one year.

Lessor Lease Arrangements

The following table presents the components of lease revenue for the year ended December 31, 2019 (in thousands):


Statement of operations location:
Sales (a)(b)	$	74,184

(a)

Lease revenue includes sub-lessor rental income from leased properties of $38.3 million for the year ended December 31, 2019, where the Partnership is the lessee of the property.

(b)

Includes variable lease revenue of $6.4 million for the year ended December 31, 2019 and short-term lease revenue which was immaterial for the year ended December 31, 2019.

The future minimum lease payments to be received under operating leases in effect at December 31, 2019 were as follows (in thousands):


2020	$	63,012
2021		35,984
2022		19,787
2023		6,547
2024		4,445
Thereafter		11,114
Total	$	140,889

Supplemental Information Related to Lease Arrangements

The following table presents supplemental information related to leases as of and for the year ended December 31, 2019 (in thousands):


Cash paid for amounts included in the measurement of lease liabilities	$	105,366
Right-of-use assets obtained in exchange for new lease liabilities	$	54,313
Weighted average remaining non-cancellable lease term		6.0 years
Weighted average discount rate as of December 31, 2019		6.65%