Leases

9 Months Ended

Sep. 30, 2023

3. LEASES

The Company leases certain property and equipment used for operations to limit its exposure to risks related to ownership. The major leased asset categories include: real estate, delivery equipment, material handling equipment and computer and office equipment. As of September 30, 2023, the Company operated from approximately 95 distribution centers of which approximately 90 were leased. These facilities are strategically located throughout the U.S. and Mexico in order to efficiently serve the customer base in the surrounding areas while also facilitating expedited delivery services for special orders. The Company also leases various office spaces for corporate and sales functions.

The components of lease expense were as follows:


(in millions)		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Classification	Financial Statement Classification	2023		2022		2023		2022
Short-term lease expense(1)	Operating expenses	$	1.3	$	0.8	$	4.4	$	2.4

Operating lease expense(2)	Operating expenses	$	22.3	$	21.2	$	65.6	$	69.3




Finance lease expense:
Amortization of right-of-use assets	Depreciation and amortization	$	2.7	$	2.6	$	8.0	$	9.1
Interest expense	Interest expense, net	0.5		0.4		1.3		1.5
Total finance lease expense		$	3.2	$	3.0	$	9.3	$	10.6


Total Lease Cost		$	26.8	$	25.0	$	79.3	$	82.3

(1) Short-term lease expense is comprised of expenses related to leases with a term of twelve months or less, which includes expenses related to month-to-month leases.

(2) Sublease income and variable lease expense are not included in the above table as the amounts were not significant for the periods presented.

Supplemental balance sheets and other information were as follows:


(in millions, except weighted-average data)		September 30, 2023			December 31, 2022
Lease Classification	Financial Statement Classification
Operating Leases:
Operating lease right-of-use assets	Other non-current assets	$	305.7		$	304.3

Operating lease obligations - current	Other accrued liabilities	$	72.1		$	67.9
Operating lease obligations - non-current	Other non-current liabilities	262.0			266.0
Total operating lease obligations		$	334.1		$	333.9

Weighted-average remaining lease term in years		5.2			5.9
Weighted-average discount rate		5.0		%	4.6		%

Finance Leases:
Finance lease right-of-use assets	Property and equipment	$	37.0		$	29.7

Finance lease obligations - current	Current portion of debt	$	9.2		$	8.8
Finance lease obligations - non-current	Long-term debt, net of current portion	31.3			24.1
Total finance lease obligations		$	40.5		$	32.9

Weighted-average remaining lease term in years		4.4			3.7
Weighted-average discount rate		5.2		%	4.2		%

Cash paid for amounts included in the measurement of lease liabilities was as follows:


(in millions)		Nine Months Ended September 30,
Lease Classification	Financial Statement Classification	2023		2022
Operating Leases:
Operating cash flows from operating leases	Operating activities	$	65.8	$	70.3

Finance Leases:
Operating cash flows from finance leases	Operating activities	$	1.3	$	1.5
Financing cash flows from finance leases	Financing activities	7.3		9.1

Lease Commitments

Future minimum lease payments at September 30, 2023 were as follows:



(in millions)	Finance Leases		Operating Leases (1)
2023 (excluding the nine months ended September 30, 2023)	$	2.9	$	22.0
2024	10.9		86.0
2025	10.4		75.5
2026	7.7		69.2
2027	5.0		50.1
2028	3.7		30.4
Thereafter	5.8		46.2
Total future minimum lease payments	46.4		379.4
Amount representing interest	(5.9)		(45.3)
Total future minimum lease payments, net of interest	$	40.5	$	334.1

(1) Future sublease income of $1.3 million is excluded from the operating leases amount in the table above.

Total future minimum lease payments at September 30, 2023 for finance and operating leases, including the amount representing interest, are comprised of $378.2 million for real estate leases and $47.6 million for non-real estate leases.

At September 30, 2023, the Company had committed to additional future obligations of approximately $49.3 million for a real estate operating lease that has not yet commenced and therefore is not included in the table above. This lease is expected to commence within the next six months with a lease term of approximately ten years.

LEASES