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Leases
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Leases Leases
Most of the leases the Company enters into are for equipment, buildings and vehicles as part of its ongoing operations. The Company also leases certain equipment to third parties.
Lessee Accounting
The Company has entered into operating leases as part of its ongoing operations. The corresponding lease costs are included in Cost of sales and Selling, general and administrative expenses on the unaudited condensed consolidated statements of income.
Generally, leases for vehicles and equipment have a term of five years or less and buildings have a longer term of up to 35 years or more. The Company has previously guaranteed the residual value under certain of its equipment operating leases and could in the future, agreeing to pay any difference between the residual value and the fair market value of the underlying asset at the date of lease termination. Historically, the fair value of the assets at the time of lease termination generally has approximated or exceeded the residual value guarantees. The Company currently does not have any residual value guarantee amounts probable of being owed to a lessor, for financing leases or material agreements with related parties.
In March 2024, in anticipation of the Separation, the Company entered into a 60 months lease for a new corporate headquarters, with a lease term of August 1, 2024 through July 31, 2029. The new corporate headquarters, which is located in Bismarck, North Dakota, is for 16,188 square feet with average annual rent payments and average annual common area maintenance (“CAM”) charges totaling approximately $303 thousand and $102 thousand, respectively, for the duration of the lease.
The following table provides a summary of the Company's lease costs for operating leases:
Three months ended September 30, Nine months ended September 30,
2024202320242023
(In thousands)
Lease costs:
Operating lease cost
$8,156 $6,693 $22,769 $19,448 
Variable lease cost(1)
319 296 917 892 
Short-term lease cost(1)
27,965 25,889 75,703 72,803 
Total lease costs
$36,440 $32,878 $99,389 $93,143 
__________________
(1)Subsequent to the filing of the audited consolidated financial statements for the year ended December 31, 2023 and the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 in the Form 10, the Company’s management determined that the Company incorrectly presented variable lease cost and short-term lease cost due to a clerical error when preparing the financial statements, including the related footnotes. The amounts in the preceding table have been revised to correct the impact of this classification error for the nine months ended September 30, 2024 and 2023. The classification error will be corrected in future filings for the historical periods. The reclassification error had no impact to results of operations, balance sheets, or cash flows for any of the periods within the Form 10.
The following is a summary of the lease terms and discount rates for operating leases:
September 30, 2024December 31, 2023
Weighted average remaining lease term
1.38 years
1.34 years
Weighted average discount rate5.51 %4.94 %
The following is a summary of other information and supplemental cash flow information related to operating leases:
Nine months ended September 30,
20242023

(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating lease liabilities
$22,653 $19,745 
Right-of-use assets obtained in exchange for new operating lease liabilities
$38,454 $21,164 
The reconciliation of future undiscounted cash flows to operating lease liabilities, including current portion of operating lease liabilities, presented on the unaudited condensed consolidated balance sheets was as follows:
September 30, 2024
(In thousands)
Remainder of 2024$7,963 
202526,851 
202618,202 
202711,052 
20286,087 
Thereafter6,043 
Total
76,198 
Less: discount
6,841 
Total operating lease liabilities
$69,357 
The Company has entered into operating leases for land, buildings, equipment and office space with certain members of management and officers of the Company in connection with acquisitions of subsidiaries that were previously owned and operated by such management. Refer to Note 15 – Related-Party Transactions for additional information.
Lessor Accounting
The Company leases certain equipment to third parties. These leases are considered short-term operating leases with terms of less than 12 months. The Company recognizes revenue from operating leases in Operating revenues in the unaudited condensed consolidated statements of income on a straight-line basis over the respective operating lease terms.
The Company recognized revenue from operating leases of $10.2 million and $30.0 million for the three and nine months ended September 30, 2024, respectively, and $11.0 million and $34.0 million for the three and nine months ended September 30, 2023, respectively.
As of September 30, 2024 and December 31, 2023, the Company had $8.6 million and $9.3 million, respectively, of lease receivables with a majority due within 12 months or less from the respective balance sheet dates.
The components of certain equipment leased to third parties under operating leases, which are included within Property, plant and equipment, net in the unaudited condensed consolidated balance sheets, were as follows:
September 30, 2024December 31, 2023
(In thousands)
Machinery and equipment$56,367 $56,186 
Less: accumulated depreciation
29,427 29,134 
Property, plant and equipment, net
$26,940 $27,052 
Leases Leases
Most of the leases the Company enters into are for equipment, buildings and vehicles as part of its ongoing operations. The Company also leases certain equipment to third parties.
Lessee Accounting
The Company has entered into operating leases as part of its ongoing operations. The corresponding lease costs are included in Cost of sales and Selling, general and administrative expenses on the unaudited condensed consolidated statements of income.
Generally, leases for vehicles and equipment have a term of five years or less and buildings have a longer term of up to 35 years or more. The Company has previously guaranteed the residual value under certain of its equipment operating leases and could in the future, agreeing to pay any difference between the residual value and the fair market value of the underlying asset at the date of lease termination. Historically, the fair value of the assets at the time of lease termination generally has approximated or exceeded the residual value guarantees. The Company currently does not have any residual value guarantee amounts probable of being owed to a lessor, for financing leases or material agreements with related parties.
In March 2024, in anticipation of the Separation, the Company entered into a 60 months lease for a new corporate headquarters, with a lease term of August 1, 2024 through July 31, 2029. The new corporate headquarters, which is located in Bismarck, North Dakota, is for 16,188 square feet with average annual rent payments and average annual common area maintenance (“CAM”) charges totaling approximately $303 thousand and $102 thousand, respectively, for the duration of the lease.
The following table provides a summary of the Company's lease costs for operating leases:
Three months ended September 30, Nine months ended September 30,
2024202320242023
(In thousands)
Lease costs:
Operating lease cost
$8,156 $6,693 $22,769 $19,448 
Variable lease cost(1)
319 296 917 892 
Short-term lease cost(1)
27,965 25,889 75,703 72,803 
Total lease costs
$36,440 $32,878 $99,389 $93,143 
__________________
(1)Subsequent to the filing of the audited consolidated financial statements for the year ended December 31, 2023 and the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 in the Form 10, the Company’s management determined that the Company incorrectly presented variable lease cost and short-term lease cost due to a clerical error when preparing the financial statements, including the related footnotes. The amounts in the preceding table have been revised to correct the impact of this classification error for the nine months ended September 30, 2024 and 2023. The classification error will be corrected in future filings for the historical periods. The reclassification error had no impact to results of operations, balance sheets, or cash flows for any of the periods within the Form 10.
The following is a summary of the lease terms and discount rates for operating leases:
September 30, 2024December 31, 2023
Weighted average remaining lease term
1.38 years
1.34 years
Weighted average discount rate5.51 %4.94 %
The following is a summary of other information and supplemental cash flow information related to operating leases:
Nine months ended September 30,
20242023

(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating lease liabilities
$22,653 $19,745 
Right-of-use assets obtained in exchange for new operating lease liabilities
$38,454 $21,164 
The reconciliation of future undiscounted cash flows to operating lease liabilities, including current portion of operating lease liabilities, presented on the unaudited condensed consolidated balance sheets was as follows:
September 30, 2024
(In thousands)
Remainder of 2024$7,963 
202526,851 
202618,202 
202711,052 
20286,087 
Thereafter6,043 
Total
76,198 
Less: discount
6,841 
Total operating lease liabilities
$69,357 
The Company has entered into operating leases for land, buildings, equipment and office space with certain members of management and officers of the Company in connection with acquisitions of subsidiaries that were previously owned and operated by such management. Refer to Note 15 – Related-Party Transactions for additional information.
Lessor Accounting
The Company leases certain equipment to third parties. These leases are considered short-term operating leases with terms of less than 12 months. The Company recognizes revenue from operating leases in Operating revenues in the unaudited condensed consolidated statements of income on a straight-line basis over the respective operating lease terms.
The Company recognized revenue from operating leases of $10.2 million and $30.0 million for the three and nine months ended September 30, 2024, respectively, and $11.0 million and $34.0 million for the three and nine months ended September 30, 2023, respectively.
As of September 30, 2024 and December 31, 2023, the Company had $8.6 million and $9.3 million, respectively, of lease receivables with a majority due within 12 months or less from the respective balance sheet dates.
The components of certain equipment leased to third parties under operating leases, which are included within Property, plant and equipment, net in the unaudited condensed consolidated balance sheets, were as follows:
September 30, 2024December 31, 2023
(In thousands)
Machinery and equipment$56,367 $56,186 
Less: accumulated depreciation
29,427 29,134 
Property, plant and equipment, net
$26,940 $27,052