The Company leases certain property, plant and equipment under operating leases, primarily consisting of railroad equipment leases, certain distribution center assets and real estate. Leases with an initial term of twelve months or less are not recorded on the balance sheet.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more. The exercise of lease renewal options is typically at the Company’s sole discretion. Certain leases also include options to purchase the leased property.

As a result of the underutilization of some of the Company’s assets, we rent or sublease certain assets to third parties, primarily consisting of a portion of our railroad equipment and distribution center assets. During the quarter ended September 30, 2019, as discussed in Note 1, one of the sublease agreements for the land in the Permian Basin that one of the Company’s distribution centers is located on expired and the sublessee did not renew. Efforts to locate a new sublessee have not been successful, and while the Company will continue to try to locate a sublessee prior to the lease expiration in December 2020, the Company abandoned this facility as of September 30, 2019. In addition, the Company has been unable to locate sublessees for two other leased assets that the Company is no longer using. These two facilities are located in the western portion of North Dakota in the Bakken region where the Company has not seen significant oilfield activity. Attempts to sublease the facilities, which were built to suit the Company’s specific needs at the time of construction, have been unsuccessful. Due to the location of these facilities, including the facilities in the Bakken and the Permian Basins, and the aforementioned industry conditions, the Company does not believe any of these three leased assets will be used by the Company during the lease term. As discussed in Note 1, these distribution center assets were previously considered a general corporate asset that was evaluated for impairment in aggregate with other long-lived assets because they were built to distribute various products manufactured from multiple asset groups and was not built to service any one single asset group. When the Company made the decision to abandon the facilities, we then evaluated these distribution center right of use assets separately as opposed to aggregated with other long-lived assets. As a result, the Company has recorded an impairment of these right-of use assets totaling $3,886 recorded within other operating expenses on the statement of operations for the quarter-ended September 30, 2019, all related to the Company’s oilfield and industrial technologies and services segment. The Company wrote these assets down to a salvage value of $0 because attempts to sublease the properties at nominal rental rates have been unsuccessful to date. Subsequent to September 30, 2019, the Company was notified that its largest frac sand client intends to discontinue purchases of frac sand under its existing contract with the Company. Although the Company plans to idle all of its sand operations in the fourth quarter of 2019, and will evaluate alternatives for the sand business, it expects to continue to incur a significant amount of fixed cash costs associated with the rail cars and distribution center dedicated to this contract. As a result, additional impairments of certain right of use assets are possible during the fourth quarter of 2019.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and noncurrent operating lease liabilities on our consolidated balance sheets.

Operating lease ROU 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 our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As of September 30, 2019, it is not reasonably certain that we will exercise any of these options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are accounted for as a single lease component, primarily related to railroad equipment leases.

	Three Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2019
Operating lease cost	$	3,837		$	11,806
Short-term lease cost		530			1,785
Sublease income ^(a)		(453	)		(2,562	)
Net lease cost	$	3,914		$	11,029

⁽^a⁾ As a result of the adoption of ASC 842, sublease income is classified within revenues for the three and nine months ended September 30, 2019. Prior to the adoption, sublease income was recorded as a reduction to cost of sales. Sublease income for the three and nine months ended September 30, 2019 excludes rental income from owned assets of $324 and $1,122, respectively, which is recorded within revenues.

Future minimum lease payments under non-cancellable leases as of September 30, 2019 were as follows:

2019	$	4,234
2020		16,742
2021		15,957
2022		12,060
2023		9,209
Thereafter		16,451
Total lease payments	$	74,653
Less: imputed interest		(17,130	)
Present value of lease liabilities	$	57,523

The adoption of ASC 842 resulted in the Company recording a right of use asset of $56,591 and a total lease liability of $64,877 on January 1, 2019. The Company also reduced its other long-term liabilities by approximately $6,500 and accrued expenses by approximately $1,800 as of January 1, 2019 given that deferred rent is now included within the total lease liability. These adjustments represented non-cash changes during the period ended March 31, 2019.

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,342	$	10,700
Leased assets obtained in exchange for new operating lease liabilities		54		54

For the nine months ended September 30, 2019, the weighted average remaining lease term was 5.4 years and the weighted average discount rate was 10.3%.