Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.1
Leases
 3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases LEASES
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective approach. The Company elected the package of practical expedients available in the standard and as a result, did not reassess the lease classification of existing contracts or leases or the initial direct costs associated with existing leases. The Company has also elected the practical expedient to not separate lease components and non-lease components and will account for the leases as a single lease component for all classes of leases.
As a result of the adoption of ASC 842, the Company recognized an increase in lease ROU assets of $31,639, current portions of operating lease ROU liabilities of $5,084 and an increase to long-term portions of operating lease liabilities of $28,480. There was no net impact to the condensed consolidated statements of income or retained earnings for the adoption of ASC 842. No impairment was recognized on the ROU asset upon adoption. These adjustments are detailed as follows:
As of January 1, 2019
As Reported 842 Adjustment Adjusted Balances
Operating Leases:
Operating lease assets $ —    $ 31,639    $ 31,639   
Current portions of operating lease liabilities —    5,084    5,084   
Long-term portions of operating lease liabilities —    28,480    28,480   
Total operating lease liabilities $ —    $ 33,564    $ 33,564   
Weighted-average remaining lease term 10 years
Weighted-average discount rate 6.0  %
Financing Leases:
Energy assets, net    $ 38,263    $ —    $ 38,263   
Current portions of financing lease liabilities    4,956    —    4,956   
Long-term financing lease liabilities, net of current portions and of deferred financing fees    28,407    —    28,407   
Total financing lease liabilities $ 33,363    $ —    $ 33,363   
Weighted-average remaining lease term 18 years
Weighted-average discount rate 11.7  %

The Company enters into a variety of operating lease agreements through the normal course of its business including certain administrative offices. The leases are long-term, non-concealable real estate lease agreements, expiring at various dates through fiscal 2028. The agreements generally provide for fixed minimum rental payments and the payment of utilities, real estate taxes, insurance and repairs. The Company also leases certain land parcels related to our energy projects, expiring at various dates through fiscal 2045. The office and land leases make up a significant portion of the Company’s operating lease activity. Many of these leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for six months to seven years. Only renewal options that the Company believed were likely to be exercised were included in our lease calculations. Many land leases include minimum lease payments that increase when the related project becomes operational. In these cases, the commercial operation date was estimated by the Company and used to calculate the estimated minimum lease payments.
The Company also enters into leases for IT equipment and service agreements, automobiles, and other leases related to our construction projects such as equipment, mobile trailers and other temporary structures. The Company utilizes the portfolio approach for this class of lease. These leases are either short-term in nature or immaterial.
A portion of the Company’s real estate leases are generally subject to annual changes in the Consumer Price Index (“CPI”). The Company utilized each lease’s minimum lease payments to calculate the lease balances upon transition. The subsequent increases in rent based on changes in CPI were excluded and will be excluded for future leases from the calculation of the lease balances, but will be recorded to the condensed consolidated statements of income as part of our operating lease costs.
The Company has elected the practical expedient to not separate lease and non-lease components for existing leases for real estate and land leases. The Company has historical leases under ASC 840, Leases, which may have lease and non-lease components. Upon adoption of Topic 842, the Company has elected to continue to account for these historical leases as a single component, as permitted by Topic 842. As of January 1, 2019, as it relates to all prospective leases, the Company will allocate consideration to lease and non-lease components based on pricing information in the respective lease agreement, or, if this information is not available, the Company will make a good faith estimate based on the available pricing information at the time of the lease agreement.
The discount rate was calculated using an incremental borrowing rate based on financing rates on secured comparable notes with comparable terms and a synthetic credit rating calculated by a third party. The Company elected to apply the discount rate using the remaining lease term at the date of adoption.
The Company has a number of leases that are classified as financing leases, which relate to transactions that are considered sale-leasebacks under ASC 840. See the sale-leaseback section below for additional information on the Company’s financing leases.
Supplemental balance sheet information related to leases at March 31, 2020 and December 31, 2019 is as follows:
March 31, 2020 December 31, 2019
Operating Leases:
Operating lease assets $ 32,444    $ 32,791   
Current operating lease liabilities 5,360    5,802   
Long-term portions of operating lease liabilities 29,104    29,101   
Total operating lease liabilities $ 34,464    $ 34,903   
Weighted-average remaining lease term 11 years 11 years
Weighted-average discount rate 6.4  % 6.3  %
Financing Leases:
Energy assets, net    $ 35,602    $ 36,134   
Current portions of financing lease liabilities 4,906    4,997   
Long-term financing lease liabilities, less current portions and net of deferred financing fees    23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Weighted-average remaining lease term 17 years 17 years
Weighted-average discount rate 11.8  % 11.8  %

The costs related to our leases are as follows:
Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
Operating Lease:
Operating lease costs $ 1,826    $ 1,838   
Financing Lease:
Amortization expense 532    532   
Interest on lease liabilities 801    949   
Total lease costs $ 3,159    $ 3,319   
 The Company’s estimated minimum future lease obligations under our leases are as follows: 
  Operating Leases Financing Leases
Year ended December 31,  
2020 $ 5,816    $ 7,852   
2021 6,506    6,792   
2022 5,895    5,178   
2023 4,607    3,676   
2024 3,791    2,565   
Thereafter 22,723    24,080   
Total minimum lease payments $ 49,338    $ 50,143   
Less: interest 14,874    21,765   
Present value of lease liabilities $ 34,464    $ 28,378   
The Company has determined that certain power purchase agreements (“PPAs”) contain a lease component in accordance with ASC 840, Leases. The Company recognized $2,245 and $2,224 of operating lease revenue under these agreements during the three months ended March 31, 2020 and 2019, respectively, which was reflected in revenues on the condensed consolidated statements of income.
Sale-Leaseback
For solar photovoltaic (“solar PV”) projects that the Company has determined not to be integral equipment, the Company then determines if the leaseback should be classified as a financing lease or an operating lease. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company to be financing leases. For leasebacks classified as financing leases, the Company initially records a financing lease asset and financing lease obligation in its condensed consolidated balance sheets equal to the lower of the present value of the Company’s future minimum leaseback payments or the fair value of the solar PV project. For financing leasebacks, the Company defers any gain or loss, representing the excess or shortfall of cash received from the investor compared to the net book value of the asset in the Company’s condensed consolidated balance sheets at the time of the sale. The Company records the long term portion of any deferred gain or loss in other liabilities and other assets, respectively, and the current portion of any deferred gain and loss in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in its condensed consolidated balance sheets and amortizes the deferred amounts over the lease term in cost of revenues in its condensed consolidated statements of income. Net amortization expense in cost of revenues related to deferred gains and losses was $55 and $38 of net gains for the three months ended March 31, 2020 and 2019, respectively.
During the third quarter of 2018, the Company entered into an agreement with an investor which gives us the option to sell and contemporaneously lease back solar PV projects through August 2019 up to a maximum funding amount of $100.0 million. In January 2020, the Company amended the August 2018 agreement with the investor to extend the end date of the agreement to November 24, 2020 and increase the maximum funding amount up to $150.0 million. During the three months ended March 31, 2020, the Company did not complete any acquisitions of solar PV projects and $131.0 million remained available under the lending commitment.
A summary of amounts related to sale leasebacks in the Company’s condensed consolidated balance sheets is as follows:
March 31, December 31,
2020 2019
Financing lease assets, net $ 35,602    $ 36,134   
Deferred loss, short-term, net 115    115   
Deferred loss, long-term, net 1,773    1,801   
Total deferred loss $ 1,888    $ 1,916   
Financing lease liabilities, short-term 4,906    4,997   
Financing lease liabilities, long-term 23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Deferred gain, short-term, net 345    345   
Deferred gain, long-term, net 5,379    5,463   
Total deferred gain $ 5,724    $ 5,808   
Leases LEASES
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective approach. The Company elected the package of practical expedients available in the standard and as a result, did not reassess the lease classification of existing contracts or leases or the initial direct costs associated with existing leases. The Company has also elected the practical expedient to not separate lease components and non-lease components and will account for the leases as a single lease component for all classes of leases.
As a result of the adoption of ASC 842, the Company recognized an increase in lease ROU assets of $31,639, current portions of operating lease ROU liabilities of $5,084 and an increase to long-term portions of operating lease liabilities of $28,480. There was no net impact to the condensed consolidated statements of income or retained earnings for the adoption of ASC 842. No impairment was recognized on the ROU asset upon adoption. These adjustments are detailed as follows:
As of January 1, 2019
As Reported 842 Adjustment Adjusted Balances
Operating Leases:
Operating lease assets $ —    $ 31,639    $ 31,639   
Current portions of operating lease liabilities —    5,084    5,084   
Long-term portions of operating lease liabilities —    28,480    28,480   
Total operating lease liabilities $ —    $ 33,564    $ 33,564   
Weighted-average remaining lease term 10 years
Weighted-average discount rate 6.0  %
Financing Leases:
Energy assets, net    $ 38,263    $ —    $ 38,263   
Current portions of financing lease liabilities    4,956    —    4,956   
Long-term financing lease liabilities, net of current portions and of deferred financing fees    28,407    —    28,407   
Total financing lease liabilities $ 33,363    $ —    $ 33,363   
Weighted-average remaining lease term 18 years
Weighted-average discount rate 11.7  %

The Company enters into a variety of operating lease agreements through the normal course of its business including certain administrative offices. The leases are long-term, non-concealable real estate lease agreements, expiring at various dates through fiscal 2028. The agreements generally provide for fixed minimum rental payments and the payment of utilities, real estate taxes, insurance and repairs. The Company also leases certain land parcels related to our energy projects, expiring at various dates through fiscal 2045. The office and land leases make up a significant portion of the Company’s operating lease activity. Many of these leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for six months to seven years. Only renewal options that the Company believed were likely to be exercised were included in our lease calculations. Many land leases include minimum lease payments that increase when the related project becomes operational. In these cases, the commercial operation date was estimated by the Company and used to calculate the estimated minimum lease payments.
The Company also enters into leases for IT equipment and service agreements, automobiles, and other leases related to our construction projects such as equipment, mobile trailers and other temporary structures. The Company utilizes the portfolio approach for this class of lease. These leases are either short-term in nature or immaterial.
A portion of the Company’s real estate leases are generally subject to annual changes in the Consumer Price Index (“CPI”). The Company utilized each lease’s minimum lease payments to calculate the lease balances upon transition. The subsequent increases in rent based on changes in CPI were excluded and will be excluded for future leases from the calculation of the lease balances, but will be recorded to the condensed consolidated statements of income as part of our operating lease costs.
The Company has elected the practical expedient to not separate lease and non-lease components for existing leases for real estate and land leases. The Company has historical leases under ASC 840, Leases, which may have lease and non-lease components. Upon adoption of Topic 842, the Company has elected to continue to account for these historical leases as a single component, as permitted by Topic 842. As of January 1, 2019, as it relates to all prospective leases, the Company will allocate consideration to lease and non-lease components based on pricing information in the respective lease agreement, or, if this information is not available, the Company will make a good faith estimate based on the available pricing information at the time of the lease agreement.
The discount rate was calculated using an incremental borrowing rate based on financing rates on secured comparable notes with comparable terms and a synthetic credit rating calculated by a third party. The Company elected to apply the discount rate using the remaining lease term at the date of adoption.
The Company has a number of leases that are classified as financing leases, which relate to transactions that are considered sale-leasebacks under ASC 840. See the sale-leaseback section below for additional information on the Company’s financing leases.
Supplemental balance sheet information related to leases at March 31, 2020 and December 31, 2019 is as follows:
March 31, 2020 December 31, 2019
Operating Leases:
Operating lease assets $ 32,444    $ 32,791   
Current operating lease liabilities 5,360    5,802   
Long-term portions of operating lease liabilities 29,104    29,101   
Total operating lease liabilities $ 34,464    $ 34,903   
Weighted-average remaining lease term 11 years 11 years
Weighted-average discount rate 6.4  % 6.3  %
Financing Leases:
Energy assets, net    $ 35,602    $ 36,134   
Current portions of financing lease liabilities 4,906    4,997   
Long-term financing lease liabilities, less current portions and net of deferred financing fees    23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Weighted-average remaining lease term 17 years 17 years
Weighted-average discount rate 11.8  % 11.8  %

The costs related to our leases are as follows:
Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
Operating Lease:
Operating lease costs $ 1,826    $ 1,838   
Financing Lease:
Amortization expense 532    532   
Interest on lease liabilities 801    949   
Total lease costs $ 3,159    $ 3,319   
 The Company’s estimated minimum future lease obligations under our leases are as follows: 
  Operating Leases Financing Leases
Year ended December 31,  
2020 $ 5,816    $ 7,852   
2021 6,506    6,792   
2022 5,895    5,178   
2023 4,607    3,676   
2024 3,791    2,565   
Thereafter 22,723    24,080   
Total minimum lease payments $ 49,338    $ 50,143   
Less: interest 14,874    21,765   
Present value of lease liabilities $ 34,464    $ 28,378   
The Company has determined that certain power purchase agreements (“PPAs”) contain a lease component in accordance with ASC 840, Leases. The Company recognized $2,245 and $2,224 of operating lease revenue under these agreements during the three months ended March 31, 2020 and 2019, respectively, which was reflected in revenues on the condensed consolidated statements of income.
Sale-Leaseback
For solar photovoltaic (“solar PV”) projects that the Company has determined not to be integral equipment, the Company then determines if the leaseback should be classified as a financing lease or an operating lease. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company to be financing leases. For leasebacks classified as financing leases, the Company initially records a financing lease asset and financing lease obligation in its condensed consolidated balance sheets equal to the lower of the present value of the Company’s future minimum leaseback payments or the fair value of the solar PV project. For financing leasebacks, the Company defers any gain or loss, representing the excess or shortfall of cash received from the investor compared to the net book value of the asset in the Company’s condensed consolidated balance sheets at the time of the sale. The Company records the long term portion of any deferred gain or loss in other liabilities and other assets, respectively, and the current portion of any deferred gain and loss in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in its condensed consolidated balance sheets and amortizes the deferred amounts over the lease term in cost of revenues in its condensed consolidated statements of income. Net amortization expense in cost of revenues related to deferred gains and losses was $55 and $38 of net gains for the three months ended March 31, 2020 and 2019, respectively.
During the third quarter of 2018, the Company entered into an agreement with an investor which gives us the option to sell and contemporaneously lease back solar PV projects through August 2019 up to a maximum funding amount of $100.0 million. In January 2020, the Company amended the August 2018 agreement with the investor to extend the end date of the agreement to November 24, 2020 and increase the maximum funding amount up to $150.0 million. During the three months ended March 31, 2020, the Company did not complete any acquisitions of solar PV projects and $131.0 million remained available under the lending commitment.
A summary of amounts related to sale leasebacks in the Company’s condensed consolidated balance sheets is as follows:
March 31, December 31,
2020 2019
Financing lease assets, net $ 35,602    $ 36,134   
Deferred loss, short-term, net 115    115   
Deferred loss, long-term, net 1,773    1,801   
Total deferred loss $ 1,888    $ 1,916   
Financing lease liabilities, short-term 4,906    4,997   
Financing lease liabilities, long-term 23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Deferred gain, short-term, net 345    345   
Deferred gain, long-term, net 5,379    5,463   
Total deferred gain $ 5,724    $ 5,808   
Leases LEASES
On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), using the modified retrospective approach. The Company elected the package of practical expedients available in the standard and as a result, did not reassess the lease classification of existing contracts or leases or the initial direct costs associated with existing leases. The Company has also elected the practical expedient to not separate lease components and non-lease components and will account for the leases as a single lease component for all classes of leases.
As a result of the adoption of ASC 842, the Company recognized an increase in lease ROU assets of $31,639, current portions of operating lease ROU liabilities of $5,084 and an increase to long-term portions of operating lease liabilities of $28,480. There was no net impact to the condensed consolidated statements of income or retained earnings for the adoption of ASC 842. No impairment was recognized on the ROU asset upon adoption. These adjustments are detailed as follows:
As of January 1, 2019
As Reported 842 Adjustment Adjusted Balances
Operating Leases:
Operating lease assets $ —    $ 31,639    $ 31,639   
Current portions of operating lease liabilities —    5,084    5,084   
Long-term portions of operating lease liabilities —    28,480    28,480   
Total operating lease liabilities $ —    $ 33,564    $ 33,564   
Weighted-average remaining lease term 10 years
Weighted-average discount rate 6.0  %
Financing Leases:
Energy assets, net    $ 38,263    $ —    $ 38,263   
Current portions of financing lease liabilities    4,956    —    4,956   
Long-term financing lease liabilities, net of current portions and of deferred financing fees    28,407    —    28,407   
Total financing lease liabilities $ 33,363    $ —    $ 33,363   
Weighted-average remaining lease term 18 years
Weighted-average discount rate 11.7  %

The Company enters into a variety of operating lease agreements through the normal course of its business including certain administrative offices. The leases are long-term, non-concealable real estate lease agreements, expiring at various dates through fiscal 2028. The agreements generally provide for fixed minimum rental payments and the payment of utilities, real estate taxes, insurance and repairs. The Company also leases certain land parcels related to our energy projects, expiring at various dates through fiscal 2045. The office and land leases make up a significant portion of the Company’s operating lease activity. Many of these leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for six months to seven years. Only renewal options that the Company believed were likely to be exercised were included in our lease calculations. Many land leases include minimum lease payments that increase when the related project becomes operational. In these cases, the commercial operation date was estimated by the Company and used to calculate the estimated minimum lease payments.
The Company also enters into leases for IT equipment and service agreements, automobiles, and other leases related to our construction projects such as equipment, mobile trailers and other temporary structures. The Company utilizes the portfolio approach for this class of lease. These leases are either short-term in nature or immaterial.
A portion of the Company’s real estate leases are generally subject to annual changes in the Consumer Price Index (“CPI”). The Company utilized each lease’s minimum lease payments to calculate the lease balances upon transition. The subsequent increases in rent based on changes in CPI were excluded and will be excluded for future leases from the calculation of the lease balances, but will be recorded to the condensed consolidated statements of income as part of our operating lease costs.
The Company has elected the practical expedient to not separate lease and non-lease components for existing leases for real estate and land leases. The Company has historical leases under ASC 840, Leases, which may have lease and non-lease components. Upon adoption of Topic 842, the Company has elected to continue to account for these historical leases as a single component, as permitted by Topic 842. As of January 1, 2019, as it relates to all prospective leases, the Company will allocate consideration to lease and non-lease components based on pricing information in the respective lease agreement, or, if this information is not available, the Company will make a good faith estimate based on the available pricing information at the time of the lease agreement.
The discount rate was calculated using an incremental borrowing rate based on financing rates on secured comparable notes with comparable terms and a synthetic credit rating calculated by a third party. The Company elected to apply the discount rate using the remaining lease term at the date of adoption.
The Company has a number of leases that are classified as financing leases, which relate to transactions that are considered sale-leasebacks under ASC 840. See the sale-leaseback section below for additional information on the Company’s financing leases.
Supplemental balance sheet information related to leases at March 31, 2020 and December 31, 2019 is as follows:
March 31, 2020 December 31, 2019
Operating Leases:
Operating lease assets $ 32,444    $ 32,791   
Current operating lease liabilities 5,360    5,802   
Long-term portions of operating lease liabilities 29,104    29,101   
Total operating lease liabilities $ 34,464    $ 34,903   
Weighted-average remaining lease term 11 years 11 years
Weighted-average discount rate 6.4  % 6.3  %
Financing Leases:
Energy assets, net    $ 35,602    $ 36,134   
Current portions of financing lease liabilities 4,906    4,997   
Long-term financing lease liabilities, less current portions and net of deferred financing fees    23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Weighted-average remaining lease term 17 years 17 years
Weighted-average discount rate 11.8  % 11.8  %

The costs related to our leases are as follows:
Three Months Ended March 31, 2020 Three Months Ended March 31, 2019
Operating Lease:
Operating lease costs $ 1,826    $ 1,838   
Financing Lease:
Amortization expense 532    532   
Interest on lease liabilities 801    949   
Total lease costs $ 3,159    $ 3,319   
 The Company’s estimated minimum future lease obligations under our leases are as follows: 
  Operating Leases Financing Leases
Year ended December 31,  
2020 $ 5,816    $ 7,852   
2021 6,506    6,792   
2022 5,895    5,178   
2023 4,607    3,676   
2024 3,791    2,565   
Thereafter 22,723    24,080   
Total minimum lease payments $ 49,338    $ 50,143   
Less: interest 14,874    21,765   
Present value of lease liabilities $ 34,464    $ 28,378   
The Company has determined that certain power purchase agreements (“PPAs”) contain a lease component in accordance with ASC 840, Leases. The Company recognized $2,245 and $2,224 of operating lease revenue under these agreements during the three months ended March 31, 2020 and 2019, respectively, which was reflected in revenues on the condensed consolidated statements of income.
Sale-Leaseback
For solar photovoltaic (“solar PV”) projects that the Company has determined not to be integral equipment, the Company then determines if the leaseback should be classified as a financing lease or an operating lease. All solar PV projects sold to date under the sale-leaseback program have been determined by the Company to be financing leases. For leasebacks classified as financing leases, the Company initially records a financing lease asset and financing lease obligation in its condensed consolidated balance sheets equal to the lower of the present value of the Company’s future minimum leaseback payments or the fair value of the solar PV project. For financing leasebacks, the Company defers any gain or loss, representing the excess or shortfall of cash received from the investor compared to the net book value of the asset in the Company’s condensed consolidated balance sheets at the time of the sale. The Company records the long term portion of any deferred gain or loss in other liabilities and other assets, respectively, and the current portion of any deferred gain and loss in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in its condensed consolidated balance sheets and amortizes the deferred amounts over the lease term in cost of revenues in its condensed consolidated statements of income. Net amortization expense in cost of revenues related to deferred gains and losses was $55 and $38 of net gains for the three months ended March 31, 2020 and 2019, respectively.
During the third quarter of 2018, the Company entered into an agreement with an investor which gives us the option to sell and contemporaneously lease back solar PV projects through August 2019 up to a maximum funding amount of $100.0 million. In January 2020, the Company amended the August 2018 agreement with the investor to extend the end date of the agreement to November 24, 2020 and increase the maximum funding amount up to $150.0 million. During the three months ended March 31, 2020, the Company did not complete any acquisitions of solar PV projects and $131.0 million remained available under the lending commitment.
A summary of amounts related to sale leasebacks in the Company’s condensed consolidated balance sheets is as follows:
March 31, December 31,
2020 2019
Financing lease assets, net $ 35,602    $ 36,134   
Deferred loss, short-term, net 115    115   
Deferred loss, long-term, net 1,773    1,801   
Total deferred loss $ 1,888    $ 1,916   
Financing lease liabilities, short-term 4,906    4,997   
Financing lease liabilities, long-term 23,472    23,500   
Total financing lease liabilities $ 28,378    $ 28,497   
Deferred gain, short-term, net 345    345   
Deferred gain, long-term, net 5,379    5,463   
Total deferred gain $ 5,724    $ 5,808