Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

Note 12 – Leases

In February 2016, the FASB issued ASU 2016-02, ASC 842 Leases to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). On January 1, 2019, the Company adopted the accounting pronouncement issued using the modified retrospective method. The Company elected the “package of practical expedients” permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. In addition, the Company elected not to utilize the hindsight practical expedient to determine the lease term for existing leases. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company did not recognize right-of-use assets or lease liabilities, including not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components. Adoption of the new standard resulted in the recording of additional operating right-of-use assets and operating lease liabilities of approximately $4.3 million and $4.3 million, respectively, as of January 1, 2019. The adoption of this standard did not impact the Company’s retained earnings liquidity, results of operations or its compliance with its debt covenants. The Company modified existing controls and processes to support the adoption of the new lease accounting standard that the Company adopted as of January 1, 2019.

From time to time, the Company enters into leases primarily for the electrical construction operation’s equipment needs and to a lesser extent office facilities. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of equipment rather than purchasing them. The Company’s leases have remaining terms ranging from months to seven years, some of which may include options to extend the lease term. Currently, all of the Company’s leases contain fixed payment terms. Additionally, all of our month-to-month leases are cancelable by the Company, at any time and are not included in our right-of-use asset or liability. At September 30, 2019, the Company had no leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term leases and many of its short-term rental arrangements. The Company has concluded that it is not reasonably certain that such options will be exercised as the Company does not have a compelling economic reason at lease commencement to exercise the option. However, the Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive.

Financing Leases

The Company currently does not have any leases that are classified as financing leases under ASC 842 Leases.

Operating Right-of-Use Leases

Operating right-of-use leases are reported under “Operating right-of-use assets,” on the Company’s consolidated balance sheet. The current portion operating lease liabilities are reported under “Current portion of operating lease liability” and the non-current portion is reported under “Other accrued liabilities,” respectively on the Company’s consolidated balance sheet. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate to calculate present value, the Company determines this rate, by estimating the Company’s incremental borrowing rate, at the lease commencement date. The majority of the operating right-of-use leases are for equipment used in the electrical construction operations. The incremental borrowing rate used for these leases is based on the interest rate of the outstanding notes payable at the date of lease execution, which reflects the rate the Company would incur to finance the equipment. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The following table presents a summary of the Company’s lease assets and lease liabilities as of September 30, 2019:

 

 

 

Classification

 

September 30, 2019

 

Lease Assets

 

 

 

 

 

 

Operating lease assets

 

Operating lease right-of-use assets

 

$

5,831,810

 

 

 

 

 

 

 

 

Lease Liabilities

 

 

 

 

 

 

Current operating lease liabilities

 

Current portion of operating lease liability

 

$

2,158,058

 

Non-current operating lease liabilities

 

Other accrued liabilities

 

 

3,655,143

 

Total lease liabilities

 

 

 

$

5,813,201

 

 

The total weighted-average incremental borrowing rate and remaining lease term for the Company’s operating leases was 4.22% and 5.10 years, respectively, as of September 30, 2019. Operating lease costs for the three and nine months ended September 30, 2019 were $0.9 million and $2.9 million, respectively and approximate the cash payments for these periods.

The following table presents the Company’s maturity analysis of its operating lease liabilities as of September 30, 2019:

 

 

 

 

 

September 30, 2019

 

2019

 

 

 

$

889,139

 

2020

 

 

 

 

1,567,777

 

2021

 

 

 

 

765,332

 

2022

 

 

 

 

753,204

 

2023 and beyond

 

 

 

 

2,503,806

 

Total lease payments

 

 

 

$

6,479,258

 

Less: interest

 

 

 

 

(666,057

)

Present value of lease liabilities

 

 

 

$

5,813,201

 

The following table provides the future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018:

 

 

 

 

 

December 31, 2018

 

2019

 

 

 

$

3,613,980

 

2020

 

 

 

 

910,778

 

2021

 

 

 

 

88,469

 

2022 and beyond

 

 

 

 

114,466

 

Total minimum operating lease payments

 

 

 

$

4,727,693