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Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases Leases
As discussed in note 3 to the consolidated financial statements, most of our equipment rental revenue is accounted for as lease revenue under Topic 842 (such revenue represented 79 percent of our total revenues for the year ended December 31, 2022). See note 3 for a discussion of our revenue accounting (such discussion includes lessor disclosures required under Topic 842).
We determine if an arrangement is a lease at inception. Our material lease contracts are generally for real estate or vehicles, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. We lease real estate and equipment under operating leases. We lease a significant portion of our branch locations, and also lease other premises used for purposes such as district and regional offices and service centers. Our finance lease obligations consist primarily of rental equipment (primarily vehicles) and building leases.
Operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease
payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Our lease terms may include options, at our sole discretion, to extend or terminate the lease that we are reasonably certain to exercise. The amount of payments associated with such options reflected in the “Maturity of lease liabilities” table below is not material. Most real estate leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. Lease expense is recognized on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense on such leases is recognized on a straight-line basis over the lease term. The primary leases we enter into with initial terms of 12 months or less are for equipment that we rent from vendors and then rent to our customers. We generate sublease revenue from such leases that we refer to as "re-rent revenue" as discussed in note 3 to the consolidated financial statements. Apart from the re-rent revenue discussed in note 3, we do not generate material sublease income.
We have lease agreements with lease and non-lease components, and, for our real estate operating leases, we account for the lease and non-lease components as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The tables below present financial information associated with our leases as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021 and 2020.
ClassificationDecember 31, 2022December 31, 2021
Assets
Operating lease assetsOperating lease right-of-use assets$819 $784 
Finance lease assetsRental equipment321 329 
Less accumulated depreciation(104)(102)
Rental equipment, net217 227 
Property and equipment, net:
Non-rental vehicles8 8 
Buildings25 23 
Less accumulated depreciation and amortization(20)(19)
Property and equipment, net13 12 
Total leased assets1,049 1,023 
Liabilities
Current
OperatingAccrued expenses and other liabilities211 202 
FinanceShort-term debt and current maturities of long-term debt51 53 
Long-term
OperatingOperating lease liabilities642 621 
FinanceLong-term debt72 82 
Total lease liabilities$976 $958 
Lease costClassificationYear Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Operating lease cost (1)Cost of equipment rentals, excluding depreciation (1)$494 $432 $366 
Selling, general and administrative expenses11 11 10 
Restructuring charge— 1 9 
Finance lease cost
Amortization of leased assetsDepreciation of rental equipment31 36 31 
Non-rental depreciation and amortization2 2 1 
Interest on lease liabilitiesInterest expense, net5 4 5 
Sublease income (2)(235)(194)(142)
Net lease cost$308 $292 $280 
_________________
(1)    Includes variable lease costs, which are immaterial. Cost of equipment rentals, excluding depreciation for the years ended December 31, 2022, 2021 and 2020 includes $195, $163 and $124, respectively, of short-term lease costs associated with equipment that we rent from vendors and then rent to our customers, as discussed further above. Apart from these costs, short-term lease costs are immaterial.
(2)    Primarily reflects re-rent revenue as discussed further above.
Maturity of lease liabilities (as of December 31, 2022)Operating leases (1)Finance leases (2)
2023$237 $53 
2024207 40 
2025171 24 
2026133 9 
202784 3 
Thereafter95 4 
Total927 133 
Less amount representing interest(74)(10)
Present value of lease liabilities$853 $123 
_________________
(1)    Reflects payments for non-cancelable operating leases with initial or remaining terms of one year or more as of December 31, 2022. The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.
(2)    The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.
Lease term and discount rateDecember 31, 2022December 31, 2021
Weighted-average remaining lease term (years)
Operating leases4.85.0
Finance leases2.83.2
Weighted-average discount rate
Operating leases3.7 %3.5 %
Finance leases3.5 %2.8 %
Other informationYear Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$244 $221 $207 
Operating cash flows from finance leases5 4 5 
Financing cash flows from finance leases57 69 53 
Leased assets obtained in exchange for new operating lease liabilities (1)237 299 202 
Leased assets obtained in exchange for new finance lease liabilities$47 $66 $64 
_________________
(1)    The increase in 2021 includes the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements.
Leases Leases
As discussed in note 3 to the consolidated financial statements, most of our equipment rental revenue is accounted for as lease revenue under Topic 842 (such revenue represented 79 percent of our total revenues for the year ended December 31, 2022). See note 3 for a discussion of our revenue accounting (such discussion includes lessor disclosures required under Topic 842).
We determine if an arrangement is a lease at inception. Our material lease contracts are generally for real estate or vehicles, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. We lease real estate and equipment under operating leases. We lease a significant portion of our branch locations, and also lease other premises used for purposes such as district and regional offices and service centers. Our finance lease obligations consist primarily of rental equipment (primarily vehicles) and building leases.
Operating leases result in the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease
payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Our lease terms may include options, at our sole discretion, to extend or terminate the lease that we are reasonably certain to exercise. The amount of payments associated with such options reflected in the “Maturity of lease liabilities” table below is not material. Most real estate leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. Lease expense is recognized on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense on such leases is recognized on a straight-line basis over the lease term. The primary leases we enter into with initial terms of 12 months or less are for equipment that we rent from vendors and then rent to our customers. We generate sublease revenue from such leases that we refer to as "re-rent revenue" as discussed in note 3 to the consolidated financial statements. Apart from the re-rent revenue discussed in note 3, we do not generate material sublease income.
We have lease agreements with lease and non-lease components, and, for our real estate operating leases, we account for the lease and non-lease components as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The tables below present financial information associated with our leases as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021 and 2020.
ClassificationDecember 31, 2022December 31, 2021
Assets
Operating lease assetsOperating lease right-of-use assets$819 $784 
Finance lease assetsRental equipment321 329 
Less accumulated depreciation(104)(102)
Rental equipment, net217 227 
Property and equipment, net:
Non-rental vehicles8 8 
Buildings25 23 
Less accumulated depreciation and amortization(20)(19)
Property and equipment, net13 12 
Total leased assets1,049 1,023 
Liabilities
Current
OperatingAccrued expenses and other liabilities211 202 
FinanceShort-term debt and current maturities of long-term debt51 53 
Long-term
OperatingOperating lease liabilities642 621 
FinanceLong-term debt72 82 
Total lease liabilities$976 $958 
Lease costClassificationYear Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Operating lease cost (1)Cost of equipment rentals, excluding depreciation (1)$494 $432 $366 
Selling, general and administrative expenses11 11 10 
Restructuring charge— 1 9 
Finance lease cost
Amortization of leased assetsDepreciation of rental equipment31 36 31 
Non-rental depreciation and amortization2 2 1 
Interest on lease liabilitiesInterest expense, net5 4 5 
Sublease income (2)(235)(194)(142)
Net lease cost$308 $292 $280 
_________________
(1)    Includes variable lease costs, which are immaterial. Cost of equipment rentals, excluding depreciation for the years ended December 31, 2022, 2021 and 2020 includes $195, $163 and $124, respectively, of short-term lease costs associated with equipment that we rent from vendors and then rent to our customers, as discussed further above. Apart from these costs, short-term lease costs are immaterial.
(2)    Primarily reflects re-rent revenue as discussed further above.
Maturity of lease liabilities (as of December 31, 2022)Operating leases (1)Finance leases (2)
2023$237 $53 
2024207 40 
2025171 24 
2026133 9 
202784 3 
Thereafter95 4 
Total927 133 
Less amount representing interest(74)(10)
Present value of lease liabilities$853 $123 
_________________
(1)    Reflects payments for non-cancelable operating leases with initial or remaining terms of one year or more as of December 31, 2022. The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.
(2)    The table above does not include any legally binding minimum lease payments for leases signed but not yet commenced, and such leases are not material in the aggregate.
Lease term and discount rateDecember 31, 2022December 31, 2021
Weighted-average remaining lease term (years)
Operating leases4.85.0
Finance leases2.83.2
Weighted-average discount rate
Operating leases3.7 %3.5 %
Finance leases3.5 %2.8 %
Other informationYear Ended December 31, 2022Year Ended December 31, 2021Year Ended December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$244 $221 $207 
Operating cash flows from finance leases5 4 5 
Financing cash flows from finance leases57 69 53 
Leased assets obtained in exchange for new operating lease liabilities (1)237 299 202 
Leased assets obtained in exchange for new finance lease liabilities$47 $66 $64 
_________________
(1)    The increase in 2021 includes the impact of the General Finance acquisition discussed in note 4 to the consolidated financial statements.