Leases (Notes)

6 Months Ended

Jun. 30, 2020

Leases of Lessee Disclosure [Text Block]

Leases

The Company has various operating and finance leases primarily for the use of land, storage tanks, railcars, equipment, precious metals and office facilities that have remaining lease terms of greater than one year to 16 years, some of which include options to extend the lease for up to 35 years, and others of which include options to terminate the lease within one year.

Supplemental balance sheet information related to the Company’s leases as of June 30, 2020 and December 31, 2019, were as follows (in millions):



		June 30, 2020		December 31, 2019
Assets:	Classification:
Operating lease assets	Operating lease right-of-use assets ⁽¹⁾	$	63.1	$	93.1
Finance lease assets	Property, plant and equipment, net ⁽²⁾	4.2		3.2
Total leased assets		$	67.3	$	96.3
Liabilities:
Current
Operating	Current portion of operating lease liabilities ⁽¹⁾	$	36.3	$	60.6
Finance	Current portion of long-term debt	0.5		0.3
Non-current
Operating	Long-term operating lease liabilities ⁽¹⁾	27.5		33.0
Finance	Long-term debt, less current portion	3.4		2.4
Total lease liabilities		$	67.7	$	96.3


⁽¹⁾	In the second quarter of 2020, the Company had additions to its operating lease right-of-use assets and operating lease liabilities of approximately $0.7 million.


⁽²⁾	Finance lease assets are recorded net of accumulated amortization of $3.1 million and $7.1 million as of June 30, 2020 and December 31, 2019, respectively.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense related to the Company’s leases for the three and six months ended June 30, 2020 and 2019 were as follows (in millions).



		Three Months Ended June 30,				Six Months Ended June 30,
Lease Costs:	Classification:	2020		2019		2020		2019
Fixed operating lease cost	Cost of Sales; SG&A Expenses	$	9.5	$	16.2	$	26.1	$	33.7
Short-term operating lease cost ⁽¹⁾	Cost of Sales; SG&A Expenses	2.5		1.4		5.2		3.4
Variable operating lease cost ^{(2) (3)}	Cost of Sales; SG&A Expenses	0.4		0.2		1.3		0.7
Finance lease cost:
Amortization of right-of-use asset	Cost of Sales	0.2		0.4		0.3		0.7
Interest on lease liabilities	Interest expense	0.1		0.1		0.2		1.1
Total lease cost		$	12.7	$	18.3	$	33.1	$	39.6


⁽¹⁾	The Company’s leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets.

⁽²⁾

Approximately $0.8 million and $0.5 million for the six months ended June 30, 2020 and 2019, respectively, of the Company’s variable operating lease cost relates to its lease agreement with Phillips 66 associated with the LVT unit at its Lake Charles, Louisiana refinery (the “LVT Agreement”). Pursuant to the LVT Agreement, Phillips 66 is obligated to supply a minimum supply quantity which the Company agreed to purchase through December 31, 2020. Pricing for the agreement is indexed to the prior month’s average of Platts Mid USGC 55 Grade Jet Kero price on the day of loading plus a specified margin. Phillips 66 invoices the Company for the estimated volume of product to be purchased by the Company based on a supplied forecast and differences between actual volumes purchased and the estimated volume of product originally billed, which makes up the variable component of the operating lease contract. There were no variable operating lease costs related to the LVT Agreement for the three months ended June 30, 2020 and 2019, respectively.


⁽³⁾	The Company’s railcar leases typically include a mileage limit the railcar can travel over the life of the lease. For any mileage incurred over this limit, the Company is obligated to pay an agreed upon dollar value for each mile that is traveled over the limit.

As of June 30, 2020, the Company had estimated minimum commitments for the payment of rentals under leases which, at inception, had a noncancelable term of more than one year, as follows (in millions):



Maturity of Lease Liabilities	Operating Leases ⁽¹⁾		Finance Leases ⁽²⁾		Total
2020	$	31.5	$	0.5	$	32.0
2021	13.9		0.8		14.7
2022	10.2		0.8		11.0
2023	7.2		0.8		8.0
2024	4.1		0.8		4.9
Thereafter	3.3		1.2		4.5
Total	$	70.2	$	4.9	$	75.1
Less: Interest	6.4		1.0		7.4
Present value of lease liabilities	$	63.8	$	3.9	$	67.7


⁽¹⁾	As of June 30, 2020, the Company’s operating lease payments included no material options to extend lease terms that are reasonably certain of being exercised. The Company has no legally binding minimum lease payments for leases signed but not yet commenced as of June 30, 2020.


⁽²⁾	As of June 30, 2020, the Company’s finance lease payments included no material options to extend lease terms that are reasonably certain of being exercised. The Company has no legally binding minimum lease payments for leases that have been signed but not yet commenced as of June 30, 2020.

Weighted-Average Lease Term and Discount Rate

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating and finance leases were as follows:



	June 30, 2020
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	2.6
Finance leases	5.9
Weighted-average discount rate:
Operating leases	7.4	%
Finance leases	7.4	%