Leases

12 Months Ended

Dec. 31, 2019

Orion has entered into lease contracts as a lessee and is not acting as a lessor. On January 1, 2019, Orion adopted Topic 842 (Leases). Orion adopted ASUs 2016-02, 2018-11, 2018-10 and 2019-01 (“Lease ASUs”) using the optional transition method under ASU 2018-11 that allows for a cumulative-effect adjustment in the period of adoption without restating prior periods. Orion elected the optional practical expedient upon transition to retain the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We have not recorded an adjustment to retained earnings due to materiality. In addition, the adoption did not materially impact our consolidated net income and had no impact on our cash flows.

Orion’s vast majority of lease contracts are concerning operational items such as rail cars, company cars, offices, office equipment.

The recorded right-of-use assets as of December 31, 2019 amounted to $27.5 million, and the corresponding lease liabilities amounted to $29.1 million, of which $7.6 million were recorded within other current liabilities and $21.5 million as other liabilities.

The weighted remaining average minimum lease period is 2.6 years.

The undiscounted minimum lease payments are due in and reconcile to the discounted lease liabilities as follows:


	December 31,
			2019
			(In thousands)
Next 12 months	$	7,598
1 to 2 years	6,359
2 to 3 years	5,638
3 to 4 years	5,039
4 to 5 years	4,339
More than 5 years	5,622
Total undiscounted minimum lease payments	$	34,595
Discount	(5,533)
Lease liability (current and non-current)	$	29,061

The weighted average discount rate applied to the lease liabilities is 6.93%.

Finance lease costs were immaterial for the year ended December 31, 2019, with segregated depreciation expenses of the right-of-use assets in the amount of $0.5 million, and interest on lease liabilities of $0.1 million. Operating lease costs amounted in total to $12.5 million for the year ended December 31, 2019 and were recorded as operating expenses under cost of sales, selling, general and administrative expenses and under research and development cost. Cash paid for amounts included in the measurement of lease liabilities from operating leases was $8.6 million for the year ended December 31, 2019 and was immaterial for finance leases during the same period.

In addition to the above, we entered into a forward-starting lease agreement in October 2016, for a district heating facility in Cologne, Germany, where we plan to operate the equipment to generate the required heat energy. The lessor, the public utility of our neighbor city and its agents, are currently constructing the facilities at our location, with the lease scheduled to commence by the end of 2020 after construction is completed. The lease agreement will have a total of approximately $35.0 million in undiscounted future lease payments over the 20 year term of the lease.