LEASES

3 Months Ended

Mar. 31, 2020

Finance Leases

Finance leases are included in finance lease right-of-use lease assets and finance lease liability current and long-term liabilities on the unaudited consolidated balance sheets. The associated amortization expenses for the three months ended March 31, 2020 and 2019 were $53,121 and $22,071, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expenses for the three months ended March 31, 2020 and 2019 were $10,919 and $5,647, respectively, and are included in interest expense on the unaudited consolidated statements of operations. Please see “Note 6. Line of Credit and Long-Term Debt” for more details.

Operating Leases

Operating leases are included in operating lease right-of-use lease assets, and operating current and long-term lease liabilities on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense for equipment is included in cost of revenues and other rents are included in selling, general and administrative expense on the consolidated statements of operations and are reported net of lease income. Lease income is not material to the results of operations for the three months ended March 31, 2020 and 2019. Total operating lease costs for the three months ended March 31, 2020 and 2019 were $1.5 million and $1.5 million, respectively.

Cash Flows

An initial right-of-use asset of $37.8 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. Cash paid for amounts included in operating lease liabilities was $0.5 million and $0.7 million during the three months ended March 31, 2020 and 2019, respectively, and is included in operating cash flows. Cash paid for amounts included in finance lease was $53,119 and $23,382 during the three months ended March 31, 2020 and 2019, respectively, and is included in financing cash flows.

Maturities of our lease liabilities for all operating leases are as follows as of March 31, 2020:



March 31, 2020
	Facilities			Equipment			Plant			Railcar			Total
Year 1	$	686,622		$	161,539		$	4,060,417		$	955,956		$	5,864,534
Year 2	506,516			145,827			4,060,417			496,986			5,209,746
Year 3	365,539			2,280			4,060,417			99,780			4,528,016
Year 4	300,000			—			4,060,417			—			4,360,417
Year 5	300,000			—			4,060,417			—			4,360,417
Thereafter	2,325,000			—			32,509,802			—			34,834,802
Total lease payments	$	4,483,677		$	309,646		$	52,811,887		$	1,552,722		$	59,157,932
Less: interest	(1,647,216		)	(17,780		)	(22,265,580		)	(100,529		)	(24,031,105		)
Present value of lease liabilities	$	2,836,461		$	291,866		$	30,546,307		$	1,452,193		$	35,126,827

The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of March 31, 2020:



Remaining lease term and discount rate:	March 31, 2020
Weighted average remaining lease terms (years)
Lease facilities	6.11
Lease equipment	1.92
Lease plant	13.01
Lease railcar	1.54
Weighted average discount rate
Lease facilities	9.18	%
Lease equipment	8.00	%
Lease plant	9.37	%
Lease railcar	8.00	%

Significant Judgments

Significant judgments include the discount rates applied, the expected lease terms, lease renewal options and residual value guarantees. There are several leases with renewal options or purchase options. Using the practical expedient, the Company utilized existing lease classifications as of March 31, 2020 and 2019.

The purchase options are not expected to have a material impact on the lease obligation. There are several facility and plant leases which have lease renewal options from one to twenty years.

The largest facility lease has an initial term through 2032. That lease does not have an extension option. For the two plant leases both have multiple 5-year extension options for a total of 20 years. Two extension options have been included in the lease right to use asset and lease obligation at March 31, 2020 and 2019.

The Company will reassess the lease terms and purchase options when there is a significant change in circumstances or when the Company elects to exercise an option that had previously been determined that it was not reasonably certain to do so.

LEASES