Leases (Notes)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Lessee, Operating and Financing Leases [Text Block]

LEASES:

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (the New Standard), and all related amendments, which supersedes the previous lease guidance, using the transition method with the election not to adjust comparative periods. The New Standard requires lessees to recognize leases on their balance sheet as a right-of-use (ROU) asset with a corresponding lease liability. The adoption resulted in the recognition of ROU assets included in other assets and lease liabilities included in accrued expenses and other long-term liabilities of approximately $495 million in the Company's consolidated balance sheet, each as a result of the new requirement to recognize operating leases. No material cumulative-effect adjustment was recognized in retained earnings, and the adoption did not materially impact operating results, liquidity or the Company's debt-covenant compliance under these agreements. The Company continues to recognize its capital leases on the balance sheet but these leases are now referred to as "finance" leases, as required by the New Standard.

The Company enters into leases for railcars, locomotives and other equipment as well as real property. These leases may contain variable payments that vary with rate or index changes or include payment of a per car fee or per mile fee to use the track under variable lease contracts. The Company may receive rent holidays and other incentives provided by the lessor on lease agreements. On occasion, the Company subleases assets to other parties.

As of January 1, 2019, the Company adopted a number of practical expedients and exemptions included in the New Standard, which were intended to reduce the cost and complexity of complying with the transition requirements. The Company chose the following practical expedients and exemptions in setting its accounting policy elections for transition to:

1. Not recognize an asset and liability for leases of all asset classes with a term of 12 months or less;

2. Carry forward the historical lease classification and not reassess its existing contracts to determine whether the arrangements contained a lease or whether initial direct costs qualified for capitalization;

3. Not separate lease and non-lease components; and

4. Carry forward its current accounting treatment for land easements on existing agreements.

Lease contracts may include one or more renewal options, with renewal terms from one to fifty years or more. Leases may also include options to terminate the arrangement or options to purchase the underlying leased property. The exercise of lease options are generally at the discretion of the Company's management team. The Company determines the expected term of a lease and includes options that are reasonably certain to be exercised in the calculation of its ROU assets and lease liabilities.

The determination of whether a contract contains a lease, as well as the analysis regarding the allocation of consideration in a contract between lease and non-lease components, is performed on a case by case basis and considers the nature and interdependency of the individual assets in the arrangement. The Company generally accounts for lease assets as a single component as the assets in most agreements are highly interrelated and dependent upon each other to fulfill the arrangement.

As the implicit rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The following table summarizes the Company's leased assets and lease liabilities recorded in the consolidated balance sheet as of September 30, 2019 (dollars in thousands):

	Balance Sheet Location	September 30, 2019
Leased right-of-use assets:
Operating leased assets	Other assets	$	471,929
Finance leased assets, net	Property and equipment, net(a)	85,230
Total leased assets		$	557,159
Lease liabilities:
Current
Operating lease liabilities	Accrued expenses	$	60,624
Finance lease liabilities	Current portion of long-term debt	14,402
Non-current
Operating lease liabilities	Other long-term liabilities	411,153
Finance lease liabilities	Long-term debt, less current portion	64,309
Total lease liabilities		$	550,488

(a) Net of $30.1 million of accumulated amortization as of September 30, 2019, which was recognized in depreciation and amortization expense within the Company's consolidated statement of operations.

The following table summarizes the components of lease expense for the three and nine months ended September 30, 2019 (dollars in thousands):

	Location of Amount Recognized in Earnings	Three Months Ended			Nine Months Ended
		September 30, 2019			September 30, 2019
Finance leases:
Amortization of right-of-use assets	Depreciation and amortization	$	2,069		$	5,830
Interest on lease liability	Interest expense	881			2,554
Total finance lease cost		$	2,950		$	8,384
Operating leases:
Operating lease cost	Equipment rents/Trackage rights	$	22,292		$	66,976
Short-term lease cost	Equipment rents/Trackage rights	2,071			7,064
Variable lease cost	Equipment rents/Trackage rights	1,964			6,871
Sublease income (gross basis)	Operating revenues	(1,291		)	(3,541		)
Total operating lease cost		$	25,036		$	77,370
Total lease cost		$	27,986		$	85,754

The maturities of lease liabilities under the New Standard based on the Company's reasonably certain holding period for each lease were as follows as of September 30, 2019 (dollars in thousands):

	Finance Leases		Operating Leases
Maturity of lease liabilities:
2019 (remainder)	$	3,299	$	23,076
2020	19,373		72,851
2021	10,495		63,445
2022	14,650		52,080
2023	10,551		43,398
Thereafter	34,778		553,484
Total lease payments	93,146		808,334
Less: Imputed interest	14,435		336,557
Total lease liabilities	$	78,711	$	471,777

The following is a summary of future minimum lease payments based on the minimum non-cancelable lease term as required under previous guidance for capital and operating leases as of December 31, 2018 (dollars in thousands):

	Capital		Operating
2019	$	11,405	$	82,191
2020	17,261		63,062
2021	8,668		54,305
2022	9,625		44,739
2023	10,780		35,919
Thereafter	13,988		383,739
Total minimum payments	$	71,727	$	663,955

The following table presents supplemental cash flow and other information for the Company's leases as of and for the nine months ended September 30, 2019 (dollars in thousands):

	Nine Months Ended
	September 30, 2019
Cash flow information:
Cash paid for operating leases included in operating activities	$	69,533
Cash paid for finance leases included in operating activities	$	2,608
Cash paid for finance leases included in financing activities	$	9,694
Weighted average remaining lease term (in years):
Operating leases	26.8
Finance leases	8.1
Weighted average discount rate:
Operating leases	3.8		%
Finance leases	4.5		%
New leases:
Right-of-use assets obtained in exchange for operating lease liabilities	$	36,333
Right-of-use assets obtained in exchange for finance lease liabilities	$	27,592