Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

7. LEASES

Effective January 1, 2019, we adopted ASC Topic 842, Leases, which requires the recording of operating lease ROU assets and operating lease liabilities. Finance leases were not materially impacted by the adoption of ASC Topic 842, as finance lease liabilities and the corresponding ROU assets were already recorded in the balance sheet under the previous guidance, ASC Topic 840.

We have operating and finance leases for corporate offices, warehouse buildings, sales offices, branch locations, vehicles, and certain equipment. Our leases have remaining lease terms of one to ten years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year. In addition to fixed lease payments, we incur variable lease charges that are recognized as incurred. These charges are primarily for maintenance and real estate taxes on leased facilities. Leases with an initial term of 12 months or less are not recorded in the balance sheet. We elected the package of transitional practical expedients which allows an entity not to reassess whether expired or existing contracts contain leases, lease classification of expired or existing leases, and whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. As guidance allows, this package can be elected separate of any other practical expedient. As a practical expedient, we elected as an accounting policy not to separate non-lease components from lease components for real estate properties and information technology agreements.

We have implemented internal controls and key system functionality to enable the preparation of financial information. The standard had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of income. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remains substantially unchanged.

ROU assets represent our right to use an underlying asset during the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the net present value of fixed lease payments over the lease term. The lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of our operating leases and finance leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Fixed operating lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

Adoption of ASU 2016-02 resulted in the recognition of $98.1 million in operating lease liabilities and $91.8 million of ROU assets, net of existing lease incentives and deferred rent liabilities at January 1, 2019.

The components of the lease expense for the year ended December 31, 2019 were as follows:

	Year Ended
	December 31, 2019
Operating lease cost	$	33.9
Finance lease cost:
Amortization of right-of-use assets		2.2
Interest on lease liabilities		0.7
Total finance lease cost		2.9
Variable lease cost		9.5
Total lease cost	$	46.3

Supplemental balance sheet information at December 31, 2019 related to leases was as follows:

	December 31, 2019
Operating leases:
Operating lease right-of-use assets	$	117.5
Current operating lease liabilities	$	28.6
Non-current operating lease liabilities		96.2
Total operating lease liabilities	$	124.8
Finance leases:
Property, at cost	$	18.3
Less – accumulated depreciation and amortization		9.9
Net property	$	8.4
Current obligations of finance leases	$	2.1
Finance leases, net of current obligations		7.8
Total finance lease liabilities	$	9.9
Weighted average remaining lease term:
Operating leases		5.0 years
Finance leases		5.1 years
Weighted average discount rate:
Operating leases		3.3	%
Finance leases		7.0	%

Supplemental cash flow and other information for the year ended December 31, 2019 related to leases was as follows:

	Year Ended
	December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	33.5
Operating cash flows from finance leases		0.7
Financing cash flows from finance leases		2.1
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	55.9
Finance leases		2.0

Future minimum lease payments under non-cancellable leases as of December 31, 2019 were as follows:

	December 31, 2019
	Operating ‎Leases		Finance ‎Leases
Future minimum lease payments
2020	$	32.2	$	2.7
2021		29.4		2.7
2022		23.6		2.1
2023		18.2		1.5
2024		13.4		1.3
Thereafter		19.0		1.7
Total future minimum lease payments	$	135.8	$	12.0
Less: imputed interest		(11.0)		(2.1)
Total lease obligation	$	124.8	$	9.9
Less: current obligations		(28.6)		(2.1)
Long-term lease obligation	$	96.2	$	7.8