Leases

12 Months Ended

Dec. 31, 2019

LEASES

Lessee Accounting

We have operating and finance leases for real estate, vehicles and equipment. Certain of our vehicle leases include residual value guarantees, which have been excluded from the measurement of our lease liabilities as we do not believe it is probable the residual value guarantees will be paid at the end of the lease. Our real estate and vehicle leases generally include options to renew or extend the lease term at our discretion. These options are included in the measurement of our lease liabilities only when it is reasonably certain that we will exercise these rights.

Balance sheet presentation—Leases are presented in our consolidated balance sheet as follows:



(in thousands)	Balance Sheet Classification	December 31, 2019
Right-of Use Assets:
Finance leases	Property, plant, and equipment, net	$	9,406
Operating leases	Other non-current assets	24,289
Total lease right-of-use assets		33,695
Lease Liabilities:
Finance leases - current	Current portion of finance lease liabilities	4,845
Finance leases	Long-term debt	4,530
Operating leases - current	Accrued expenses and other current liabilities	7,620
Operating leases	Other long-term liabilities	19,419
Total lease liabilities		$	36,414

Components of total lease cost—Components of total lease cost were as follows:



(in thousands)	Year ended December 31, 2019
Finance lease cost:
Amortization of right-of-use assets	$	5,200
Interest on lease liabilities	439
Operating lease cost ⁽¹⁾	11,191
Short-term lease cost	3,996
Variable lease cost	1,049
Sublease income	(463		)
Total net lease cost	$	21,412

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(1) Rent expense, net of sublease rental income, for our operating leases was $16.8 million and $15.6 million for the years ended December 31, 2018, and 2017, respectively.

Lease term and discount rate—Our weighted-average remaining lease term and weighted-average discount rate for operating and finance leases are as follows:



	December 31, 2019
Weighted-average remaining lease term (years):
Operating lease	4.6
Finance lease	2.1
Weighted-average discount rate:
Operating lease	6.7	%
Finance lease	5.3	%

Maturity Analysis—Future minimum payments, as determined in accordance with ASC 842, on our operating and finance leases as of December 31, 2019 are as follows:



(in thousands)	Operating			Finance
2020	$	9,096		$	5,219
2021	5,939			3,488
2022	5,147			1,054
2023	4,456			155
2024	2,906			34
Thereafter	4,889			—
Total future minimum lease payments	32,433			9,950
Interest included within lease payments	(5,394		)	(575		)
Total lease liabilities	$	27,039		$	9,375

Lessor Accounting

Lease revenue is primarily generated from our electric submersible pump (“ESP”) leased asset program within our Production & Automation Technologies segment. An ESP rental unit has components consisting of surface, downhole and cable equipment. Our lease arrangements generally allow customers to rent equipment on a daily basis with no stated end date. Customers may return the equipment at any point subsequent to the lease commencement date without penalty. We account for these arrangements as a daily renewal option beginning on the lease commencement date, with the lease term determined as the period in which it is reasonably certain the option will be exercised. The average length of these arrangements generally range from six months to nine months. Lease revenue was $44.7 million for the year ended December 31, 2019.

Leased assets—Components of our leased asset program, all of which are included within “Property, plant, and equipment, net” on our consolidated balance sheet, are as follows:



(in thousands)	Useful life	December 31, 2019
Cable equipment	1 year	$	52,144
Downhole equipment	1 year	32,193
Surface equipment	5 years	69,566
Other lease equipment	3 - 5 years	16,090
		169,993
Accumulated depreciation		(71,968		)
Leased assets, net		$	98,025

Depreciation expense on our leased assets was $37.1 million for the year ended December 31, 2019.