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Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

4.  LEASES

The Company has operating and financing leases for corporate offices, distribution centers, vehicles, and certain equipment. These leases have remaining lease terms of less than 1 year to 12 years and many of the leases have renewal options.  Because the Company is not reasonably certain to exercise the renewal options, the options are not considered in determining the lease term, and associated potential option payments are excluded from lease payments and right-of-use calculations.  Leases with an initial term of 12 months or less are likewise excluded from right-of-use calculations.

In addition to fixed payments, many of the Company’s lease contracts contain variable payments. Vehicle lease variable payments typically include mileage, and real estate leases include variable charges for taxes and common area maintenance.  Variable lease payments and payments for leases with an initial term of 12 months or less are recognized in the period incurred.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

(in millions):

2019

 

 

2019

 

Operating Lease Cost

$

3.0

 

 

$

9.3

 

 

 

 

 

 

 

 

 

Finance Lease Cost:

 

 

 

 

 

 

 

Amortization of right-of-use assets

$

0.5

 

 

$

1.4

 

Interest on lease liabilities

 

0.1

 

 

 

0.2

 

Total finance lease cost

$

0.6

 

 

$

1.6

 

The following lease assets and liabilities are included on the condensed consolidated balance sheet (in millions):

 

September 30,

 

 

2019

 

Operating Leases:

 

 

 

Operating lease right-of-use assets

$

39.5

 

 

 

 

 

Current maturities of operating lease right-of-use assets

 

9.6

 

Operating lease right-of-use liabilities, less current maturities

 

30.5

 

Total operating lease liabilities

$

40.1

 

 

 

 

 

Finance Leases:

 

 

 

Gross property, plant and equipment

$

10.0

 

Accumulated depreciation

 

(4.9

)

Property, plant and equipment, net

$

5.1

 

 

 

 

 

Current maturities of long-term lease liabilities

$

1.4

 

Long-term lease liabilities, less current maturities

 

2.9

 

Total finance lease liabilities

$

4.3

 

As of September 30, 2019, the weighted average remaining lease term for the Company’s operating leases was 5.6 years and for its financing leases was 3.6 years. These leases have weighted average discount rates of 5.8% and 5.2% for operating leases and financing leases, respectively. The rate implicit in the lease is used to discount leases when known. While the implicit rate is often known for finance leases, the Company is generally unable to calculate the implicit rate in operating leases because it does not have access to the lessor’s residual value estimates nor the amount of the lessor’s deferred initial direct costs.  When the implicit rate is not known, the Company uses the incremental borrowing rate for secured loans of similar term. The Company uses available data for unsecured loans to borrowers of similar credit to the Company and adjusts the rate to reflect the effect of providing collateral equivalent to the outstanding obligation balance.

The following cash flow items are included on the condensed consolidated statement of cash flows (in millions):

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2019

 

 

2019

 

Operating cash used for operating leases

$

3.0

 

 

$

9.1

 

Operating cash used for finance leases

 

0.1

 

 

 

0.2

 

Financing cash used for finance leases

 

0.4

 

 

 

1.3

 

Maturities of lease liabilities are as follows (in millions):

 

Finance

leases

 

 

Operating

leases

 

2019(1)

$

0.5

 

 

$

3.2

 

2020

 

1.5

 

 

 

11.0

 

2021

 

1.4

 

 

 

9.0

 

2022

 

1.0

 

 

 

6.8

 

2023

 

0.6

 

 

 

5.9

 

Thereafter

 

 

 

 

11.3

 

Total lease payments

$

5.0

 

 

$

47.2

 

Less: imputed interest

 

(0.7

)

 

 

(7.1

)

Total future lease obligation

$

4.3

 

 

$

40.1

 

 

 (1)

This amount excludes the nine months ended September 30, 2019

 

Disclosures Related to Periods Prior to Adoption of ASU 2016-02

Operating lease rent expense was $16.6 million and $14.8 million, and sublease income $0.5 million and $0.5 million, for the years ended December 31, 2018 and 2017, respectively.  Future minimum lease payments under non-cancelable rental and lease agreements with initial or remaining terms in excess of one year were as follows at December 31, 2018 (in millions):

 

 

Operating

 

 

Leases

 

2019

$

11.5

 

2020

 

8.8

 

2021

 

7.0

 

2022

 

4.8

 

2023

 

3.9

 

Thereafter

 

8.0

 

Total minimum lease payments

$

44.0

 

 

Certain leases also include options to purchase the leased property. Assets recorded under capital leases as of December 31, 2018 and December 31, 2017 were $8.5 million and $6.6 million, respectively.  These assets are recorded net of accumulated amortization of $2.9 million and $2.3 million as of December 31, 2018 and December 31, 2017, respectively.