Leases

6 Months Ended

Jun. 30, 2023

Leases [Abstract]

LEASES

LEASES

Lessee Accounting

    We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms up to ten years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

    Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $4.0 million and $7.9 million for the three and six month period ended June 30, 2023, respectively, of which $0.4 million and $0.6 million respectively, related to short-term leases. Total lease expense was $4.1 million and $8.3 million for the three and six month period ended June 30, 2022, respectively, of which $1.2 million and $2.6 million respectively, related to short-term leases. Variable rent expense was not material.

Operating lease supplemental cash flow information:

	Six Months Ended June 30,
	2023		2022
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	7,338	$	5,684
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,182	$	9,104

Supplemental balance sheet information:

	June 30, 2023		December 31, 2022
	(In Thousands)
Operating leases:
Operating right-of-use asset	$	27,841	$	27,205
Accrued liabilities and other	$	9,604	$	7,620
Operating lease liabilities	18,194		19,419
Total operating lease liabilities	$	27,798	$	27,039

Additional operating lease information:

	June 30, 2023		December 31, 2022
Weighted average remaining lease term:
Operating leases	3.79 years		4.51 years
Weighted average discount rate:
Operating leases	10.05	%	9.93	%

    Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2023:

	Operating Leases
	(In Thousands)
Remainder of 2023	$	6,559
2024	9,695
2025	6,221
2026	5,390
2027	2,540
Thereafter	2,781
Total lease payments	33,186
Less imputed interest	(5,388)
Total lease liabilities	$	27,798

Lessor Accounting

Our leased equipment primarily consists of amine plants, gas coolers, and other production equipment. Certain of our agreements with our customers for rental equipment contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, and (iii) the customer directs the use of the identified assets throughout the period of use. We have elected to apply the practical expedient provided to lessors to combine the lease and non-lease component of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.

Our lease agreements generally have contract terms based on monthly rates. Lease revenue is recognized straight-line based on these monthly rates. We do not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets.

We recognized operating lease revenue, which is included in “Equipment rentals” on the consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023	2022
	(In Thousands)				(In Thousands)
Equipment rentals	$	4,773	$	3,618	8,887	7,118

The following table presents the maturity of lease payments for operating lease agreements in effect as of June 30, 2023. This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration. These agreements have remaining lease terms ranging from 1 month to 6 years. The following table presents the undiscounted cash flows expected to be received related to these agreements:

	2023		2024		2025		2026		2027		Thereafter
	(In Thousands)
Future minimum lease revenue	$	13,145	$	8,973	$	2,388	$	1,576	$	1,576	$	2,233

LEASES

LEASES

Lessee Accounting

    We have operating leases for some of our office space, warehouse space, operating locations, and machinery and equipment. Our leases have remaining lease terms up to ten years. Some of our leases have options to extend for various periods, while some have termination options with prior notice of generally 30 days or six months. Our leases generally require us to pay all maintenance and insurance costs. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

    Lease costs are included in either cost of revenues or selling, general, and administrative expense depending on the use of the underlying asset. Total lease expense (inclusive of lease expense for leases not included on our consolidated balance sheet based on our accounting policy election to exclude leases with a term of 12 months or less), was $4.0 million and $7.9 million for the three and six month period ended June 30, 2023, respectively, of which $0.4 million and $0.6 million respectively, related to short-term leases. Total lease expense was $4.1 million and $8.3 million for the three and six month period ended June 30, 2022, respectively, of which $1.2 million and $2.6 million respectively, related to short-term leases. Variable rent expense was not material.

Operating lease supplemental cash flow information:

	Six Months Ended June 30,
	2023		2022
	(In Thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	7,338	$	5,684
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,182	$	9,104

Supplemental balance sheet information:

	June 30, 2023		December 31, 2022
	(In Thousands)
Operating leases:
Operating right-of-use asset	$	27,841	$	27,205
Accrued liabilities and other	$	9,604	$	7,620
Operating lease liabilities	18,194		19,419
Total operating lease liabilities	$	27,798	$	27,039

Additional operating lease information:

	June 30, 2023		December 31, 2022
Weighted average remaining lease term:
Operating leases	3.79 years		4.51 years
Weighted average discount rate:
Operating leases	10.05	%	9.93	%

    Future minimum lease payments by year and in the aggregate, under non-cancelable operating leases with terms in excess of one year, consist of the following at June 30, 2023:

	Operating Leases
	(In Thousands)
Remainder of 2023	$	6,559
2024	9,695
2025	6,221
2026	5,390
2027	2,540
Thereafter	2,781
Total lease payments	33,186
Less imputed interest	(5,388)
Total lease liabilities	$	27,798

Lessor Accounting

Our leased equipment primarily consists of amine plants, gas coolers, and other production equipment. Certain of our agreements with our customers for rental equipment contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, and (iii) the customer directs the use of the identified assets throughout the period of use. We have elected to apply the practical expedient provided to lessors to combine the lease and non-lease component of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.

Our lease agreements generally have contract terms based on monthly rates. Lease revenue is recognized straight-line based on these monthly rates. We do not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets.

We recognized operating lease revenue, which is included in “Equipment rentals” on the consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023	2022
	(In Thousands)				(In Thousands)
Equipment rentals	$	4,773	$	3,618	8,887	7,118

The following table presents the maturity of lease payments for operating lease agreements in effect as of June 30, 2023. This presentation includes minimum fixed lease payments and does not include an estimate of variable lease consideration. These agreements have remaining lease terms ranging from 1 month to 6 years. The following table presents the undiscounted cash flows expected to be received related to these agreements:

	2023		2024		2025		2026		2027		Thereafter
	(In Thousands)
Future minimum lease revenue	$	13,145	$	8,973	$	2,388	$	1,576	$	1,576	$	2,233