Leases Leases

3 Months Ended

Mar. 31, 2022

Leases

We have entered into lease arrangements for office space, land, equipment, pipeline facilities and warehouses. These lease arrangements enable us to better conduct business operations in the regions in which we operate. Office space is

leased to provide adequate workspace for our employees in several locations throughout our service territories. We lease land at various locations throughout our service territories to enable us to inject natural gas into underground storage and distribution systems, for bulk storage capacity, for our propane operations and for storage of equipment used in repairs and maintenance of our infrastructure. We lease natural gas compressors to ensure timely and reliable transportation of natural gas to our customers. Additionally, we lease a pipeline to deliver natural gas to an industrial customer in Polk County, Florida. We also lease warehouses to store equipment and materials used in repairs and maintenance for our businesses.

Some of our leases are subject to annual changes in the Consumer Price Index (“CPI”). While lease liabilities are not re-measured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. A 100-basis-point increase in CPI would not have resulted in material additional annual lease costs. Most of our leases include options to renew, with renewal terms that can extend the lease term from one to 25 years or more. The exercise of lease renewal options is at our sole discretion. The amounts disclosed in our consolidated balance sheet at March 31, 2022, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options. Our existing leases are not subject to any restrictions or covenants that would preclude our ability to pay dividends, obtain financing or enter into additional leases. As of March 31, 2022, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations. The following table presents information related to our total lease cost included in our consolidated statements of income:


		Three Months Ended
		March 31,
( in thousands)	Classification	2022	2021
Operating lease cost (1)	Operations expense	$651	$523

(1) Includes short-term leases and variable lease costs, which are immaterial.

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at March 31, 2022 and December 31, 2021:


(in thousands)	Balance sheet classification	March 31, 2022		December 31, 2021
Assets
Operating lease assets	Operating lease right-of-use assets	$	16,231	$	10,139
Liabilities
Current
Operating lease liabilities	Other accrued liabilities	$	2,552	$	1,996
Noncurrent
Operating lease liabilities	Operating lease - liabilities	14,161		8,571
Total lease liabilities		$	16,713	$	10,567

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at March 31, 2022 and December 31, 2021:


	March 31, 2022		December 31, 2021
Weighted-average remaining lease term (in years)
Operating leases	8.76		8.10

Weighted-average discount rate
Operating leases	3.4	%	3.6	%

The following table presents additional information related to cash paid for amounts included in the measurement of lease liabilities included in our condensed consolidated statements of cash flows as of March 31, 2022 and 2021:


	Three Months Ended
	March 31,
(in thousands)	2022		2021
Operating cash flows from operating leases	$	609	$	471

The following table presents the future undiscounted maturities of our operating and financing leases at March 31, 2022 and for each of the next five years and thereafter:


(in thousands)	Operating Leases (1)
Remainder of 2022	$	2,195
2023	2,804
2024	2,592
2025	2,265
2026	1,758
2027	1,509
Thereafter	6,080
Total lease payments	19,203
Less: Interest	(2,490)
Present value of lease liabilities	$	16,713

(1) Operating lease payments include $2.1 million related to options to extend lease terms that are reasonably certain of being exercised.