17.  Commitments and Contingencies

 

Operating Leases

 

As of December 31, 2016 and 2015, the Company has several non-cancelable operating leases (as lessor and as lessee), primarily associated with sale/leaseback transactions that are partially secured by restricted cash (see also Note 1, Nature of Operations) as summarized below that expire over the next six years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. Leases where the Company is the lessor contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote.

 

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2016 are (in thousands):

 

 

Rental expense for all operating leases were $13.2 million, $6.2 million, and $1.5 million for years ended December 31, 2016, 2015, and 2014 respectively.

 

At December 31, 2016 and 2015, prepaid rent and security deposits associated with sale/leaseback transactions were $11.8 million and $12.1 million, respectively.  At December 31, 2016, $1.9 million of the amount is included in prepaid expenses and other current assets and $9.9 million was included in other assets on the consolidated balance sheet.  At December 31, 2015, $2.0 million of this amount was included in prepaid expenses and other current assets and $10.1 million was included in other assets on the consolidated balance sheet.

 

 

Finance Obligation

 

During the year ended December 31, 2016, the Company entered into sale/leaseback transactions, which were accounted for as capital leases and reported as part of finance obligations on the Company’s consolidated balance sheet.  These transactions represented project financing as referenced in Note 9, Short-term Borrowing.  The outstanding balance of these finance obligations at December 31, 2016 was $29.4 million.  The fair value of the finance obligation approximates the carrying value as of December 31, 2016.

 

Future minimum lease payments under non-cancelable capital leases (with initial or remaining lease terms in excess of one year) as of December 31, 2016 are (in thousands):

 

 

During the year ended December 31, 2015, the Company received cash for future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation.  The outstanding balance of this obligation at December 31, 2016 and December 31, 2015 is $12.8 million and $15.1 million, respectively.  The amount is amortized using the effective interest method.  The fair value of this finance obligation approximates the carrying value as of December 31, 2016.

 

The Company has a capital lease associated with its property in Latham, New York.  Liabilities relating to this agreement of $2.4 million and $2.5 million have been recorded as a finance obligation, in the accompanying consolidated balance sheets as of December 31, 2016 and December 31, 2015, respectively.  The fair value of this finance obligation approximates the carrying value as of December 31, 2016.

 

Restricted Cash

 

The Company has entered into sale/leaseback agreements associated with its products and services.  In connection with these agreements, cash of $53.6 million is required to be restricted as security and will be released over the lease term. The Company has additional letters of credit backed by security deposits as disclosed in the Operating Leases section above.

 

The Company also has letters of credit in the aggregate amount of $1.0 million associated with an agreement to provide hydrogen infrastructure and hydrogen to a customer at its distribution center and with a finance obligation from the sale/leaseback of its building.  Cash collateralizing these letters of credit is considered restricted cash.

 

Litigation

 

Legal matters are defended and handled in the ordinary course of business.  The Company has established accruals for matters for which management considers a loss to be probable and reasonably estimable. It is the opinion of management that facts known at the present time do not indicate that such litigation, after taking into account insurance coverage and the aforementioned accruals, will have a material adverse impact on our results of operations, financial position, or cash flows.

 

Concentrations of credit risk

 

Concentrations of credit risk with respect to receivables exist due to the limited number of select customers with whom the Company has initial commercial sales arrangements. To mitigate credit risk, the Company performs appropriate evaluation of a prospective customer’s financial condition.

 

At December 31, 2016, two customers comprise approximately 59.9% of the total accounts receivable balance, with each customer individually representing 40.0% and 19.9% of total accounts receivable, respectively. At December 31, 2015, two customers comprise approximately 50.9% of the total accounts receivable balance, with each customer individually representing 38.5% and 12.4% of total accounts receivable, respectively.

 

For the years ended December 31, 2016 and 2015, 34.1% and 56.7%, respectively, of total consolidated revenues were associated primarily with Walmart.  For the year ended December 31, 2014, 37.2% of total consolidated revenues were associated primarily with Walmart and Volkswagen, representing 24.1% and 13.1% of total consolidated revenues, respectively.