SEC Company Response from Cheniere Energy Partners, L.P. (CQP) (CIK 0001383650) (CQP) — Jan 10, 2017
Cheniere Energy Partners, L.P. (CQP) (CIK 0001383650)
Date: Jan. 10, 2017 · CIK: 0001383650 · Accession: 0000003570-17-000011
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-192373
Referenced dates: December 15, 2016
Letter
VIA EDGAR AND HAND DELIVERY Securities and Exchange Commission Division of Corporation Finance Form 10-Q for the Quarterly Period Ended September 30, 2016 Filed February 19, 2016 and November 3, 2016 Forms 8-K filed January 15, 2016 and February 24, 2016 File Nos. 1-16383, 1-36234, 1-33366, and 333-192373
Dear Mr. Thompson:
Set forth below are the responses of Cheniere Energy, Inc., a Delaware corporation, Cheniere Energy Partners LP Holdings, LLC, a Delaware limited liability company, Cheniere Energy Partners, L.P., a Delaware limited partnership, and Sabine Pass Liquefaction, LLC, a Delaware limited liability company, (collectively, “we”), to the comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated December 15, 2016, with respect to Form 10-K for the Fiscal Year Ended December 31, 2015 filed February 19, 2016 (the “10-K”), Form 10-Q for the Quarterly Period Ended September 30, 2016 filed November 3, 2016 (the “10-Q”), and Forms 8-K filed January 15, 2016 and February 24, 2016 (the “8-Ks”) (File Nos. 1-16383, 1-36234, 1-33366, and 333-192373). For the Staff’s convenience, each of our responses is preceded by the exact text of the Staff’s corresponding comment in bold, italicized text. Capitalized terms used but not defined in this letter are intended to have the meanings ascribed to such terms in the 10-K, 10-Q or 8-Ks.
Form 10-K for Fiscal year Ended December 31, 2015
Cheniere Energy, Inc.
Summary of Critical Accounting Estimates
Goodwill, page 56
1.
Please clarify if you performed a quantitative analysis of goodwill impairment for fiscal 2015. If so, please disclose the percentage by which fair value exceeded carrying value as of the date of the most recent test.
Response: Cheniere Energy, Inc. and its management team (the “Company”) acknowledges the Staff's comment and respectfully advises the Staff that it utilized the qualitative evaluation allowed by Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment, as codified in FASB Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other - Goodwill, in evaluating whether it was more likely than not that the fair value of the reporting unit to which goodwill relates was less than its carrying amount as of October 1, 2015.
The Company has utilized the qualitative approach to assess its goodwill since October 2011. The percentage by which the reporting unit’s fair value exceeded its carrying value as of the most recent fair value calculation date was 23 percent.
The Company advises the Staff that its qualitative analysis at October 1, 2015 took into consideration the factors discussed in FASB ASC 350-20-35-3(c), in addition to other factors it deemed relevant in concluding it was not more likely than not that the fair value of the relevant reporting unit was less than its carrying value, and therefore, the first and second steps of the goodwill impairment test were not necessary.
Recognized goodwill is associated with the Company’s LNG terminal reporting unit whose business activities are principally comprised of development, construction and operation of liquefaction projects. The Company is currently developing and constructing natural gas liquefaction and export terminals in Louisiana and Texas. Each terminal includes a number of planned liquefaction trains (“Trains”), which convert natural gas into liquefied natural gas (“LNG”) so that it can be transported more economically across long distances. While the Company acknowledged the impact of falling oil and natural gas prices and other macroeconomic factors in the performance of its qualitative goodwill impairment assessment, approximately 87 percent of the expected aggregate nominal production capacity across the seven Trains under construction has been sold under long-term 20-year sale and purchase agreements (“SPAs”), equating to approximately $4.3 billion annually in fixed fees. Having such a significant portion of the expected aggregate nominal production capacity sold under long-term contracts with a portion of the LNG contract sales price based on a fixed fee substantially limits the Company’s exposure to fluctuating commodity prices. Under the SPAs, LNG pricing includes two components—(1) 115 percent of the NYMEX Henry Hub index for the month in which a cargo is scheduled plus (2) a fixed fee. The Company will purchase natural gas based on the applicable Henry Hub price and sell the LNG to the customer priced on the same index plus a fee. This fee covers the Company’s costs and shareholders’ return. The Company expects to generate a significant amount of predictable, stable cash flows annually, over the lives of the contracts, as the fixed fees are required to be paid even if customers elect to cancel or suspend deliveries of LNG cargoes. It is in contemplation of this fee structure, and other relevant factors considered pursuant to FASB ASC 350-20-35-3(c) or otherwise, that the Company concluded it was not more likely than not that the fair value of the LNG terminal reporting unit was less than its carrying value.
Consolidated Balance Sheets, page 64
2.
Please tell us why your issued and outstanding share amounts are the same even though you have shares held in the treasury.
Response: The Company concurs with the Staff’s assertion that outstanding shares are limited to any authorized shares held by or sold to the Company’s shareholders, exclusive of treasury stock held by the Company. The Company’s disclosure of 235.6 million shares of common stock issued and outstanding at December 31, 2015, does not purport to represent total shares of common stock issued. Instead, the Company has disclosed those shares which are both issued and outstanding. The number of shares of common stock issued would include those which are outstanding as well as those held in treasury.
The Company acknowledges its requirement, pursuant to Rule 5-02.29 of Regulation S-X, to disclose “the number of shares issued or outstanding, as appropriate (see § 210.4-07), and the dollar amount thereof.” In order to clarify the disclosure, the Company will revise its disclosure of the number of shares of common stock issued to reflect the total amount of issued shares in future filings.
Consolidated Statements of Cash Flows, page 68
3.
We note total share-based compensation stated in Note -13 Share-Based Compensation, does not agree to amounts disclosed in the statement of cash flows for fiscal year 2015. Please advise or revise.
Response: The Company acknowledges the Staff’s comment. The Company’s share-based compensation is comprised of awards classified as either equity- or liability awards which are accounted for pursuant to FASB ASC 718, Compensation - Stock Compensation, for equity-based payments to employees. While Note 13 to the Company’s consolidated financial statements reflects share-based compensation for all such awards regardless of classification, share-based compensation reported within the Consolidated Statements of Cash Flows excludes from its scope settlements of cash-settled liability awards recognized as share-based compensation expense which amounted to approximately $4.2 million for the year ended December 31, 2015. There were no cash-settled liability awards for the years ended December 31, 2014 and 2013. This presentation had no impact on net cash used in operating activities.
FASB ASC 230-10-45-18, Statement of Cash Flows, notes that entities shall determine and report cash flows from operating activities by adjusting net income of a business entity to remove both (a) the effects of all deferrals of past operating cash receipts and payments and (b) all items that are included in net income that do not affect net cash provided from, or used for, operating activities. Given the absence of a prescribed reporting format, the Company believes entities have latitude in how they present an indirect method reconciliation. However, given the Company’s Consolidated Statements of Cash Flows separately reconcile net loss to net cash used in operating activities by removing all items which do not affect net cash, the Company respectfully believes its exclusion of cash-settled award information from the reconciliation between net loss and net cash used in operating activities complies with the requirements described in FASB ASC 230-10-45-18 in removing only the effects of non-cash share-based compensation activity.
In order to increase transparency of total share-based compensation, the Company revised its Consolidated Statements of Cash Flows presentation of total share-based compensation in quarterly reporting on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016, including comparative periods, such that amounts agree between statements and footnotes, and will revise the comparative period(s) in reporting as of and for the year ended December 31, 2016.
The Company concluded the comparative period adjustments were not material for additional disclosure in quarterly reporting on Form 10-Q pursuant to materiality analysis prescribed by Staff Accounting Bulletin (“SAB”) Topic 1.M, Materiality, as codified in FASB ASC 250-10-S55 and -10-S99, Accounting Changes and Error Corrections.
4.
Please tell us the nature of the other, net and other line items included in net cash used in operating activities and investing activities. Also, tell us your consideration of separately presenting material amounts include in those line items.
Response: The Company acknowledges the Staff’s request for additional information regarding other line items included in net cash used in operating and investing activities. Provided below is a summary of reported balances for ease of reference (in U.S. dollar thousands):
Year Ended December 31,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities - Other (1)
$
$
15,914
$
(2,631
)
Changes in operating assets and liabilities - Other, net (2)
39,980
1,977
(10,212
)
Cash flows from investing activities
Other (3)
(131,128
)
(66,862
)
(33,667
)
(1)
Other adjustments to reconcile net loss to net cash used in operating activities primarily consists of disposal costs associated with long-lived assets to be abandoned which were not a component of the Company’s liquefaction businesses and undistributed equity in losses or earnings associated with unconsolidated entities.
(2)
Other, net, adjustments included in the reconciliation of changes in operating assets and liabilities in the reconciliation of cash used in operating activities primarily consist of accrued interest expense, net of amounts capitalized, on convertible debt instruments which are payable in kind, and cash received from the lessors that are accounted for as lease incentives, offset by reductions in other current assets associated with operating activities, including prepaid expenses and margin deposits. Disclosure surrounding interest costs and cash paid during the year(s) for interest are disclosed separately in the consolidated financial statements.
(3)
Other cash flows from investing activities is primarily comprised of non-current asset advances made to municipalities for enhancements to water system asset infrastructure and other parties for road and pipeline infrastructure, as well as investments in or loans to unconsolidated entities.
The above presentation reflects the requirements described in FASB ASC 230.
In contemplation of the need to disaggregate this information for a financial statement user, the Company considered the usefulness of such information to a financial statement user, including quantitative and qualitative criteria prescribed by SAB Topic 1.M, as codified in FASB ASC 250-10-S55 and -10-S99.
Components of adjustments to reconcile net loss to net cash used in operating activities - other, and other, net, included in the reconciliation of net cash used in operating activities, represent no more than 8.3 percent of gross cash, cash equivalents and restricted cash1 used in operating activities during the comparative periods presented in the consolidated financial statements, and no single component represents more than five percent2 of gross cash, cash equivalents and restricted cash1 used in operating activities.
Other cash flows used in investing activities represents approximately one to two percent of gross cash, cash equivalents and restricted cash1 used in investing activities during the comparative periods presented in the consolidated financial statements. No single component represents more than five percent2 of gross cash, cash equivalents and restricted cash1 used in investing activities. Such cash flow or reconciling activities are not a principal source of cash flow activity of the Company and related balances are described in other disclosure in the consolidated financial statements. Accordingly, the Company does not believe it is probable that the judgment of a reasonable investor relying upon the consolidated financial statements would have been changed or influenced by additional disaggregation of the cash flow amounts. On this basis, the Company concluded cash flow or reconciling activity was not material for additional disaggregation.
Note 5 - Property, Plant and Equipment, page 78
5.
Please disclose actual depreciation expense for each year presented. Refer to ASC 360-10-50-1. Also, please explain why the changes in the accumulated depreciation accounts from December 31, 2014 to December 31, 2015 do not equal the amount of depreciation and amortization disclosed on the statements of operations and cash flows.
Response: The Company acknowledges the Staff’s request to reconcile depreciation and amortization between the Consolidated Statements of Cash Flows and Operations and the change in accumulated depreciation included in Note 5 to the consolidated financial statements, as well as the requirement to separately disclose actual depreciation expense for each year presented.
1 Consistent with the basis for which FASB ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, the Company believes a primary objective of the Consolidated Statements of Cash Flows is to provide relevant information about the sources and uses of the Company’s cash during a period and, therefore, it is most meaningful to consider the ultimate cash inflows and outflows of the Company, irrespective of whether those cash flows are to or from restricted cash accounts. Consequently, the Company’s assessment of materiality applied herein considers gross cash, cash equivalents and restricted cash. The Company intends to early adopt FASB ASU No. 2016-18 in reporting for the year ended December 31, 2016.
2 Contemplation of five percent considers balance sheet presentation requirements with other assets and liabilities outlined in Rule 5-02 of Regulation S-X which generally give rise to Consolidated Statements of Cash Flows activity. However, the Company’s assessment of materiality considers this as one of multiple inputs in assessing materiality.
Provided below is a reconciliation between reported depreciation and amortization included in the Consolidated Statements of Cash Flows and Operations and the change in ac
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CORRESP 1 filename1.htm Document Cheniere Energy, Inc. 700 Milam Street, Suite 1900 Houston, TX 77002 Tel: (713) 375-5000 Fax: (713) 375-6000 January 10, 2017 VIA EDGAR AND HAND DELIVERY Mr. William H. Thompson Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Re: Cheniere Energy, Inc. Cheniere Energy Partners LP Holdings, LLC Cheniere Energy Partners, L.P. Sabine Pass Liquefaction, LLC Form 10-K for the Fiscal Year Ended December 31, 2015 Form 10-Q for the Quarterly Period Ended September 30, 2016 Filed February 19, 2016 and November 3, 2016 Forms 8-K filed January 15, 2016 and February 24, 2016 File Nos. 1-16383, 1-36234, 1-33366, and 333-192373 Dear Mr. Thompson: Set forth below are the responses of Cheniere Energy, Inc., a Delaware corporation, Cheniere Energy Partners LP Holdings, LLC, a Delaware limited liability company, Cheniere Energy Partners, L.P., a Delaware limited partnership, and Sabine Pass Liquefaction, LLC, a Delaware limited liability company, (collectively, “we”), to the comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated December 15, 2016, with respect to Form 10-K for the Fiscal Year Ended December 31, 2015 filed February 19, 2016 (the “10-K”), Form 10-Q for the Quarterly Period Ended September 30, 2016 filed November 3, 2016 (the “10-Q”), and Forms 8-K filed January 15, 2016 and February 24, 2016 (the “8-Ks”) (File Nos. 1-16383, 1-36234, 1-33366, and 333-192373). For the Staff’s convenience, each of our responses is preceded by the exact text of the Staff’s corresponding comment in bold, italicized text. Capitalized terms used but not defined in this letter are intended to have the meanings ascribed to such terms in the 10-K, 10-Q or 8-Ks. Form 10-K for Fiscal year Ended December 31, 2015 Cheniere Energy, Inc. Summary of Critical Accounting Estimates Goodwill, page 56 1. Please clarify if you performed a quantitative analysis of goodwill impairment for fiscal 2015. If so, please disclose the percentage by which fair value exceeded carrying value as of the date of the most recent test. Response: Cheniere Energy, Inc. and its management team (the “Company”) acknowledges the Staff's comment and respectfully advises the Staff that it utilized the qualitative evaluation allowed by Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment, as codified in FASB Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other - Goodwill, in evaluating whether it was more likely than not that the fair value of the reporting unit to which goodwill relates was less than its carrying amount as of October 1, 2015. The Company has utilized the qualitative approach to assess its goodwill since October 2011. The percentage by which the reporting unit’s fair value exceeded its carrying value as of the most recent fair value calculation date was 23 percent. The Company advises the Staff that its qualitative analysis at October 1, 2015 took into consideration the factors discussed in FASB ASC 350-20-35-3(c), in addition to other factors it deemed relevant in concluding it was not more likely than not that the fair value of the relevant reporting unit was less than its carrying value, and therefore, the first and second steps of the goodwill impairment test were not necessary. Recognized goodwill is associated with the Company’s LNG terminal reporting unit whose business activities are principally comprised of development, construction and operation of liquefaction projects. The Company is currently developing and constructing natural gas liquefaction and export terminals in Louisiana and Texas. Each terminal includes a number of planned liquefaction trains (“Trains”), which convert natural gas into liquefied natural gas (“LNG”) so that it can be transported more economically across long distances. While the Company acknowledged the impact of falling oil and natural gas prices and other macroeconomic factors in the performance of its qualitative goodwill impairment assessment, approximately 87 percent of the expected aggregate nominal production capacity across the seven Trains under construction has been sold under long-term 20-year sale and purchase agreements (“SPAs”), equating to approximately $4.3 billion annually in fixed fees. Having such a significant portion of the expected aggregate nominal production capacity sold under long-term contracts with a portion of the LNG contract sales price based on a fixed fee substantially limits the Company’s exposure to fluctuating commodity prices. Under the SPAs, LNG pricing includes two components—(1) 115 percent of the NYMEX Henry Hub index for the month in which a cargo is scheduled plus (2) a fixed fee. The Company will purchase natural gas based on the applicable Henry Hub price and sell the LNG to the customer priced on the same index plus a fee. This fee covers the Company’s costs and shareholders’ return. The Company expects to generate a significant amount of predictable, stable cash flows annually, over the lives of the contracts, as the fixed fees are required to be paid even if customers elect to cancel or suspend deliveries of LNG cargoes. It is in contemplation of this fee structure, and other relevant factors considered pursuant to FASB ASC 350-20-35-3(c) or otherwise, that the Company concluded it was not more likely than not that the fair value of the LNG terminal reporting unit was less than its carrying value. Consolidated Balance Sheets, page 64 2. Please tell us why your issued and outstanding share amounts are the same even though you have shares held in the treasury. Response: The Company concurs with the Staff’s assertion that outstanding shares are limited to any authorized shares held by or sold to the Company’s shareholders, exclusive of treasury stock held by the Company. The Company’s disclosure of 235.6 million shares of common stock issued and outstanding at December 31, 2015, does not purport to represent total shares of common stock issued. Instead, the Company has disclosed those shares which are both issued and outstanding. The number of shares of common stock issued would include those which are outstanding as well as those held in treasury. The Company acknowledges its requirement, pursuant to Rule 5-02.29 of Regulation S-X, to disclose “the number of shares issued or outstanding, as appropriate (see § 210.4-07), and the dollar amount thereof.” In order to clarify the disclosure, the Company will revise its disclosure of the number of shares of common stock issued to reflect the total amount of issued shares in future filings. Consolidated Statements of Cash Flows, page 68 3. We note total share-based compensation stated in Note -13 Share-Based Compensation, does not agree to amounts disclosed in the statement of cash flows for fiscal year 2015. Please advise or revise. Response: The Company acknowledges the Staff’s comment. The Company’s share-based compensation is comprised of awards classified as either equity- or liability awards which are accounted for pursuant to FASB ASC 718, Compensation - Stock Compensation, for equity-based payments to employees. While Note 13 to the Company’s consolidated financial statements reflects share-based compensation for all such awards regardless of classification, share-based compensation reported within the Consolidated Statements of Cash Flows excludes from its scope settlements of cash-settled liability awards recognized as share-based compensation expense which amounted to approximately $4.2 million for the year ended December 31, 2015. There were no cash-settled liability awards for the years ended December 31, 2014 and 2013. This presentation had no impact on net cash used in operating activities. FASB ASC 230-10-45-18, Statement of Cash Flows, notes that entities shall determine and report cash flows from operating activities by adjusting net income of a business entity to remove both (a) the effects of all deferrals of past operating cash receipts and payments and (b) all items that are included in net income that do not affect net cash provided from, or used for, operating activities. Given the absence of a prescribed reporting format, the Company believes entities have latitude in how they present an indirect method reconciliation. However, given the Company’s Consolidated Statements of Cash Flows separately reconcile net loss to net cash used in operating activities by removing all items which do not affect net cash, the Company respectfully believes its exclusion of cash-settled award information from the reconciliation between net loss and net cash used in operating activities complies with the requirements described in FASB ASC 230-10-45-18 in removing only the effects of non-cash share-based compensation activity. In order to increase transparency of total share-based compensation, the Company revised its Consolidated Statements of Cash Flows presentation of total share-based compensation in quarterly reporting on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016, including comparative periods, such that amounts agree between statements and footnotes, and will revise the comparative period(s) in reporting as of and for the year ended December 31, 2016. The Company concluded the comparative period adjustments were not material for additional disclosure in quarterly reporting on Form 10-Q pursuant to materiality analysis prescribed by Staff Accounting Bulletin (“SAB”) Topic 1.M, Materiality, as codified in FASB ASC 250-10-S55 and -10-S99, Accounting Changes and Error Corrections. 4. Please tell us the nature of the other, net and other line items included in net cash used in operating activities and investing activities. Also, tell us your consideration of separately presenting material amounts include in those line items. Response: The Company acknowledges the Staff’s request for additional information regarding other line items included in net cash used in operating and investing activities. Provided below is a summary of reported balances for ease of reference (in U.S. dollar thousands): Year Ended December 31, 2015 2014 2013 Cash flows from operating activities Adjustments to reconcile net loss to net cash used in operating activities - Other (1) $ 959 $ 15,914 $ (2,631 ) Changes in operating assets and liabilities - Other, net (2) 39,980 1,977 (10,212 ) Cash flows from investing activities Other (3) (131,128 ) (66,862 ) (33,667 ) (1) Other adjustments to reconcile net loss to net cash used in operating activities primarily consists of disposal costs associated with long-lived assets to be abandoned which were not a component of the Company’s liquefaction businesses and undistributed equity in losses or earnings associated with unconsolidated entities. (2) Other, net, adjustments included in the reconciliation of changes in operating assets and liabilities in the reconciliation of cash used in operating activities primarily consist of accrued interest expense, net of amounts capitalized, on convertible debt instruments which are payable in kind, and cash received from the lessors that are accounted for as lease incentives, offset by reductions in other current assets associated with operating activities, including prepaid expenses and margin deposits. Disclosure surrounding interest costs and cash paid during the year(s) for interest are disclosed separately in the consolidated financial statements. (3) Other cash flows from investing activities is primarily comprised of non-current asset advances made to municipalities for enhancements to water system asset infrastructure and other parties for road and pipeline infrastructure, as well as investments in or loans to unconsolidated entities. The above presentation reflects the requirements described in FASB ASC 230. In contemplation of the need to disaggregate this information for a financial statement user, the Company considered the usefulness of such information to a financial statement user, including quantitative and qualitative criteria prescribed by SAB Topic 1.M, as codified in FASB ASC 250-10-S55 and -10-S99. Components of adjustments to reconcile net loss to net cash used in operating activities - other, and other, net, included in the reconciliation of net cash used in operating activities, represent no more than 8.3 percent of gross cash, cash equivalents and restricted cash1 used in operating activities during the comparative periods presented in the consolidated financial statements, and no single component represents more than five percent2 of gross cash, cash equivalents and restricted cash1 used in operating activities. Other cash flows used in investing activities represents approximately one to two percent of gross cash, cash equivalents and restricted cash1 used in investing activities during the comparative periods presented in the consolidated financial statements. No single component represents more than five percent2 of gross cash, cash equivalents and restricted cash1 used in investing activities. Such cash flow or reconciling activities are not a principal source of cash flow activity of the Company and related balances are described in other disclosure in the consolidated financial statements. Accordingly, the Company does not believe it is probable that the judgment of a reasonable investor relying upon the consolidated financial statements would have been changed or influenced by additional disaggregation of the cash flow amounts. On this basis, the Company concluded cash flow or reconciling activity was not material for additional disaggregation. Note 5 - Property, Plant and Equipment, page 78 5. Please disclose actual depreciation expense for each year presented. Refer to ASC 360-10-50-1. Also, please explain why the changes in the accumulated depreciation accounts from December 31, 2014 to December 31, 2015 do not equal the amount of depreciation and amortization disclosed on the statements of operations and cash flows. Response: The Company acknowledges the Staff’s request to reconcile depreciation and amortization between the Consolidated Statements of Cash Flows and Operations and the change in accumulated depreciation included in Note 5 to the consolidated financial statements, as well as the requirement to separately disclose actual depreciation expense for each year presented. 1 Consistent with the basis for which FASB ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, the Company believes a primary objective of the Consolidated Statements of Cash Flows is to provide relevant information about the sources and uses of the Company’s cash during a period and, therefore, it is most meaningful to consider the ultimate cash inflows and outflows of the Company, irrespective of whether those cash flows are to or from restricted cash accounts. Consequently, the Company’s assessment of materiality applied herein considers gross cash, cash equivalents and restricted cash. The Company intends to early adopt FASB ASU No. 2016-18 in reporting for the year ended December 31, 2016. 2 Contemplation of five percent considers balance sheet presentation requirements with other assets and liabilities outlined in Rule 5-02 of Regulation S-X which generally give rise to Consolidated Statements of Cash Flows activity. However, the Company’s assessment of materiality considers this as one of multiple inputs in assessing materiality. Provided below is a reconciliation between reported depreciation and amortization included in the Consolidated Statements of Cash Flows and Operations and the change in ac