Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

LEASES

The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with ASC 842. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company has no significant lease agreements in place for which the Company is a lessor, and substantially all of the Company's leases for which the Company is a lessee are classified as operating leases. Total rental expense for the six months ended June 30, 2019, was $21.6 million and is classified within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. Rental expense related to short-term leases, variable lease payments or other leases or lease components not included within the ROU asset or lease liability totaled $4.9 million for the six months ended June 30, 2019. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheet as of June 30, 2019.

Upon adoption of ASC 842, the Company utilized the following elections and practical expedients:

• The Company elected to not separate non-lease components from lease components and instead to account for each separate lease component, and the non-lease components associated with that lease component, as a single lease component.

• If at the lease commencement date, a lease had a term of less than 12 months and did not include a purchase option that was reasonably certain to be exercised, the Company elected not to apply ASC 842 recognition requirements. Nonetheless, the Company will include leases of less than 12 months within the updated footnote disclosures where applicable.

• If the Company enters into a large number of leases in the same month with the same terms and conditions, these will be looked at as a group (portfolio) assuming the lease model under this approach will not materially differ from applying ASC 842 to each individual lease.

• The Company elected to not reassess arrangements entered into prior than January 1, 2019, in terms of whether an arrangement is or contained a lease, the lease classification applied or to separate initial direct costs.

• The Company elected to use hindsight in determining the lease term for lease contracts that have historically been renewed or amended.

When available, the Company will utilize the rate implicit in the lease as the discount rate to determine the lease liability in accordance with ASC 842. However, if this rate is not available, the Company will use its incremental borrowing rate as the discount rate, which is the rate at inception of the lease the Company would hypothetically incur to borrow over a similar term the funds needed to purchase the leased asset.

As a lessee, the Company categorizes its leases into two general categories: real estate leases and equipment leases.

The Company’s real estate lease portfolio includes leased production and assembly facilities, warehouses and distribution centers, office space and to a lesser degree, employee housing. The terms and conditions of real estate leases can vary significantly from lease to lease. The Company has assessed the specific terms and conditions of each real estate lease to determine the amount of the lease payments and the length of the lease term, which includes the minimum period over which lease payments are required plus any renewal options that are both within the Company's control to exercise and reasonably certain of being exercised upon lease commencement. In determining whether or not a renewal option is reasonably certain of being exercised, the Company assesses all relevant factors to determine if sufficient incentives exist as of lease commencement to conclude renewal is reasonably certain. There are no material residual value guarantees provided by the Company nor any restrictions or covenants imposed by the real estate leases to which the Company is a party. In determining the lease liability, the Company utilizes its incremental borrowing rate to discount the future lease payments over the lease term to present value. The Company does incur variable lease payments for certain of its real estate leases, such as reimbursements of property taxes, maintenance and other operational costs to the lessor. In general, these variable lease payments are not captured as part of the lease liability or ROU asset, but are expensed as incurred.

The Company’s equipment leases include vehicles, material handling equipment, other machinery and equipment utilized in the Company's production and assembly facilities, warehouses and distribution centers, laptops and other IT equipment, as well as other miscellaneous leased equipment. Most of the equipment leases are for terms ranging from two to five years, although terms and conditions can vary from lease to lease. The Company applies similar estimates and judgments to its equipment lease portfolio in determining the lease payments and lease term as it does to its real estate lease portfolio. There are no material residual value guarantees provided by the Company nor any restrictions or covenants imposed by the equipment leases to which the Company is a party. In determining the lease liability, the Company utilizes its incremental borrowing rate to discount the future lease payments over the lease term to present value. The Company does not typically incur variable lease payments related to its equipment leases.

The amounts included within the Condensed and Consolidated Balance Sheet related to the Company's ROU asset and lease liability at June 30, 2019, were as follows:

In millions	Balance Sheet classification	Real estate			Equipment			Total
ROU asset	Other noncurrent assets	$	60.8		$	20.8		$	81.6
Lease liability - current	Accrued expenses and other current liabilities	15.3			10.4			25.7
Lease liability - noncurrent	Other noncurrent liabilities	45.5			10.4			55.9
Other information:
Weighted-average remaining term (years)		6.8 years			2.4 years
Weighted-average discount rate		4.6		%	4.1		%

The following table summarizes additional information related to the Company's lease liability for the six months ended June 30, 2019:

In millions	Real estate		Equipment		Total
Cash paid for amounts included in the measurement of lease liabilities	$	9.6	$	7.1	$	16.7
ROU assets obtained in exchange for new lease liabilities	7.0		6.2		13.2

The Company frequently enters into both real estate and equipment leases in the normal course of business. While there have been lease agreements entered into that have not yet commenced as of June 30, 2019, none of these leases provide new rights or obligations to the Company that are material individually or in the aggregate.

Future Repayments

Future minimum rental commitments for the subsequent five years under non-cancellable operating leases with terms in excess of one year as of December 31, 2018 were as follows:

In millions	Total
2019	$	30.3
2020	21.5
2021	14.1
2022	9.3
2023	5.5

Scheduled minimum lease payments required under non-cancellable operating leases for both the real estate and equipment lease portfolios for the remainder of 2019 and each of the years thereafter as of June 30, 2019, are as follows:

In millions	Remainder of 2019		2020		2021		2022		2023		Thereafter		Total
Real estate leases	$	9.3	$	15.7	$	12.5	$	9.4	$	5.7	$	18.8	$	71.4
Equipment leases	6.3		8.4		4.8		1.7		0.6		—		21.8
Total	$	15.6	$	24.1	$	17.3	$	11.1	$	6.3	$	18.8	$	93.2

The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of June 30, 2019, is due to imputed interest of $11.6 million.