LEASES

Centrus leases facilities and equipment under operating leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company has facility leases with terms greater than 12 months, and the Company records the related asset and obligation at the present value of lease payments over the term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Refer to Note 1, Basis of Presentation, for information regarding the Company’s adoption of Topic 842 on January 1, 2019.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets exclude lease incentives. Lease terms reflect options to extend or terminate the lease when it is reasonably certain that those options will be exercised. The depreciable life of lease assets and leasehold improvements is limited by the expected lease term. The weighted-average remaining lease term was 4.0 years at September 30, 2019, with maturity dates ranging from July 2021 to September 2027, and the weighted-average discount rate was 12.1%. Lease expense amounted to $0.8 million in the three months and $1.9 million for the nine months ended September 30, 2019. Lease expense was $0.9 million in the three months ended and $2.6 million for the nine months ended September 30, 2018. Lease expense primarily related to operating leases and for the nine months ended September 30, 2019 includes a $0.5 million credit from DOE for true up of prior year lease expense. Other amounts related to short-term lease expense were insignificant. Operating lease expense is included in Cost of Sales, Selling, General and Administrative Expenses and Advance Technology Costs on the Statement of Operations. Cash paid for amounts included in operating cash flows for operating leases was $0.8 million in the three months and $2.1 million for the nine months ended September 30, 2019.

The Company leases gas centrifuge enrichment plant facilities and related personal property in Piketon, Ohio from DOE. On May 31, 2019, in connection with the HALEU Letter Agreement, DOE and the Company amended the lease agreement, which was scheduled to expire by its terms on June 30, 2019. The lease was renewed and extended until May 31, 2022, provided, however, that the lease may be terminated early upon completion of the work under the HALEU Agreement. Any facilities or equipment constructed or installed under contract with DOE will be owned by DOE and may be returned to DOE in an “as is” condition at the end of the lease term, and DOE would be responsible for its decontamination and decommissioning. The Company accounted for the amendment as a modification and reassessed its classification. The Company classified the lease as an operating lease as the lease does not contain a transfer of ownership or purchase option, the fair value of the underlying asset cannot be practicably determined, and the economic life of the asset is indeterminate. The remeasurement of the remaining future lease payments through May 31, 2022 resulted in the recording of $2.9 million of additional lease assets and liabilities related to the modification. The modification resulted in an insignificant impact on the consolidated statement of operations.

Centrus had a lease with DOE for centrifuge testing facilities in Oak Ridge through December 2019. In connection with the completion of work performed for decontamination and decommissioning of the facility, the Company terminated the lease on September 30, 2019. The Company derecognized the remaining lease asset and related liability of $0.2 million. There was no gain or loss associated with the termination of the lease.

Operating Lease Assets and Liabilities

The table below presents the lease-related assets and liabilities recorded on the balance sheet (in millions).



	September 30, 2019		Classification on the Balance Sheet
Lease assets	$	6.4	Other long-term assets
Lease liabilities:
Current	2.0		Accounts payable and accrued liabilities
Noncurrent	6.8		Other long-term liabilities
Total lease liabilities	$	8.8

Maturity of Operating Lease Liabilities

The table below reconciles undiscounted payments for operating leases with terms greater than 12 months to the operating lease liabilities recorded on the balance sheet (in millions).



Remainder of 2019	$	0.7
2020	2.6
2021	2.6
2022	1.7
2023	1.0
Thereafter	3.8
Total lease payments	12.4
Less imputed interest	3.6
Present value of lease payments	$	8.8

Minimum Lease Payments

Prior to the adoption of Topic 842, future estimated minimum lease payments as of December 31, 2018 for leases with remaining terms in excess of one year were as follows (in millions):



2019	$	0.9
2020	0.9
2021	0.9
2022	1.0
2023	1.0
Thereafter	3.8
	$	8.5