Leases

6 Months Ended

Jun. 30, 2019

The Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. At contract inception, the Company determines a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, with an offsetting entry to recognize a right-of-use asset. Options to extend or terminate a lease are included when it is reasonably certain an option will be exercised. As a majority of the Company’s leases do not provide an implicit rate within the lease, an incremental borrowing rate is used which is based on information available at the commencement date.

The following table includes a summary of the Company's lease portfolio and Balance Sheet classification:



In millions	Classification	June 30, 2019		January 1, 2019
Assets
Operating lease right-of-use assets ⁽¹⁾	Other noncurrent assets	$	561.2	$	517.1
Liabilities
Operating lease current	Other current liabilities	171.1		160.3
Operating lease noncurrent	Other noncurrent liabilities	394.7		360.5

(1) Per ASC 842, prepaid lease payments and lease incentives are recorded as part of the right-of-use asset. The net impact was $4.6 million and $3.7 million at June 30, 2019 and January 1, 2019, respectively.

The Company elected the practical expedient as an accounting policy election by class of underlying asset to account for each separate lease component of a contract and its associated non-lease component as a single lease component. This practical expedient was applied to all underlying asset classes. In addition, the Company elected the practical expedient to utilize a portfolio approach for the vehicle, information technology and equipment asset classes as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

The following table includes lease costs and related cash flow information for the three and six months ended June 30, 2019:



In millions	Three months ended		Six months ended
Operating lease expense	$	50.6	$	100.3
Variable lease expense	7.0		14.4
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	50.2		99.6
Right-of-use assets obtained in exchange for new operating lease liabilities	43.8		101.6

Operating lease expense is recognized on a straight-line basis over the lease term. In addition, the Company has certain leases that contain variable lease payments which are based on an index, a rate referenced in the lease or on the actual usage of the leased asset. These payments are not included in the right-to-use asset or lease liability and are expensed as incurred as variable lease expense. The Company elected the practical expedient as an accounting policy election by class of underlying asset to not apply the balance sheet recognition criteria required in ASC 842 to leases with an initial lease term of twelve months or less. Payments for these leases are recognized on a straight-line basis over the lease term.

Maturities of lease obligations were as follows:



In millions	June 30, 2019
Operating leases
Remaining six months of 2019	$	100.2
2020	171.1
2021	131.3
2022	84.0
2023	55.4
After 2023	85.9
Total lease payments	$	627.9
Less: Interest	(62.1		)
Present value of lease liabilities	$	565.8

At June 30, 2019, the weighted average remaining lease term was 4.7 years years with a weighted average discount rate of 3.8%.

Prior Period Disclosures

As a result of adopting ASC 842 on January 1, 2019, the Company is required to present future minimum lease commitments for operating leases having initial or noncancellable lease terms in excess of one year that were previously disclosed in our 2018 Annual Report on Form 10-K and accounted for under previous lease guidance. Commitments as of December 31, 2018 were as follows:



In millions	December 31, 2018
Operating leases
2019	$	197.1
2020	152.0
2021	107.4
2022	68.4
2023	42.2
After 2023	42.7
Total	$	609.8