Leases (Notes)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Lessee, Operating and Financing Leases [Text Block]

The Company utilizes lease agreements to meet its operating needs. These leases support global staff via the use of office space, warehouses, vehicles and information technology (IT) equipment. The Company utilizes both operating and finance leases in its portfolio of leased assets, however, the majority of these leases are classified as operating. A significant portion of the volume of the lease portfolio is in fleet vehicles and IT office equipment; however, real estate leases constitute a majority of the value of the ROU assets. Lease agreements are utilized worldwide, with the largest location concentration in the United States, Germany and India.

The Company has made the following elections related to the adoption of ASU No. 2016-02 Leases (Topic 842):

• The Company elected the option to apply the transition requirements in ASC 842 at the effective date of January 1, 2019.

• The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its ASC 840 assessment regarding definition of a lease, lease classification and initial direct costs.

• The practical expedient related to land easements is not applicable as the Company currently does not utilize any easements.

• The Company declined the hindsight practical expedient to determine the lease term and ROU asset impairment for existing leases. The decision to decline the hindsight practical expedient resulted in relying on assessments made under ASC 840 during transition and re-assessing under ASC 842 going forward.

• The Company declined the short-term lease exception, therefore recognizing all leases in the ROU asset and lease liability balances. Consistent with ASC 842 requirements, leases that are one month or less are not included in the balance.

• 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 it as a single lease component, recognized on the balance sheet. This election has been made for all classes of underlying assets.

• The Company elected to use a grouping/portfolio approach on applying discount rates to leases at transition, for certain groups of leases where it was determined that using this approach would not differ materially from a lease-by-lease approach.

The Company's lease population has initial lease terms ranging from less than one year to approximately ten years. Some leases include one or more options to renew, with renewal terms that can extend the lease term from six months to 15 years. We assess these renewal/extension options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of our lease terms for accounting purposes do not include renewal periods. For leases where the Company is reasonably certain to renew, those optional periods are included within the lease term and, therefore, the measurement of the ROU asset and lease liability. Some of the vehicle and IT equipment leases also include options to purchase the leased asset, typically at end of term at fair market value. Some of our leases include options to terminate the lease early. This allows the contract parties to terminate their obligations under the lease contract, sometimes in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract, and for those leases where the Company is reasonably certain to use these options, the term and payments recognized in the measurement of ROU assets and lease liabilities has been updated accordingly. Additionally, there are several open-ended lease arrangements where the Company controls the option to continue or terminate the arrangement at any time after the first year. For these arrangements, the Company has used analysis of a mix of historical use and future economic incentive to determine the reasonable expected holding period. This term is used for measurement of ROU assets and lease liabilities.

The following table summarizes the weighted-average remaining lease terms and discount rates related to the Company's lease population:

	Six Months Ended
	June 30, 2019
Weighted-average remaining lease terms (in years)
Operating leases	4.1
Finance leases	2.6
Weighted-average discount rate
Operating leases	13.8	%
Finance leases	26.7	%

The weighted-average discount rates used for operating and finance leases varies due to the jurisdictional composition. The Company has an immaterial amount of finance leases that are primarily comprised of leases in Turkey which have higher interest rates.

Certain lease agreements include payments based on a variety of global indexes or rates. These payment amounts have been projected using the index or rate as of lease commencement or the transition date and measured in ROU assets and lease liabilities. Other leases contain variable payments that are based on actual usage of the underlying assets and therefore are not measured in assets or liabilities as the variable payments are not based on an index or a rate. For real estate leases, these payments are most often tied to non-committed maintenance or utilities charges, and for equipment leases, to actual output or hours in operation. These amounts typically become known when the invoice is received, which is when expense is recognized. In rare circumstances, our lease agreements may contain residual value guarantees. Our lease agreements do not contain any restrictions or covenants, such as those relating to dividends or incurring additional financial obligations.

As of June 30, 2019, the Company did not have any material leases that have not yet commenced but that create significant rights and obligations.

The Company determines whether an arrangement is or includes a lease at contract inception. All contracts containing the right to use an underlying asset are reviewed to confirm that the contract meets the definition of a lease. ROU assets and liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.

As most 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. In order to apply the incremental borrowing rate, a rate table was developed to assign the appropriate rate to each lease based on lease term and currency of payments. For leases with large numbers of underlying assets, a portfolio approach with a collateralized rate was utilized. Assets were grouped based on similar lease terms and economic environments in a manner whereby the Company reasonably expects that the application does not differ materially from a lease-by-lease approach.

The following table summarizes the components of lease expense:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Lease expense
Operating lease expense	$	21.5	$	42.1
Finance lease expense
Amortization of ROU lease assets	$	0.2	$	0.3
Interest on lease liabilities	$	0.1	$	0.2
Variable lease expense	$	5.0	$	8.2

The following table summarizes the maturities of lease liabilities:

	Operating			Finance
2019 (excluding the six months ended June 30, 2019)	$	50.3		$	0.4
2020	61.3			0.9
2021	39.2			0.9
2022	22.9			—
2023	14.8			—
Thereafter	25.5			—
Total	214.0			2.2
Less: Present value discount	(48.1		)	(0.7		)
Lease liability	$	165.9		$	1.5

The following table summarizes the cash flow information related to leases:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating - operating cash flows	$	19.4	$	41.3
Finance - financing cash flows	$	0.1	$	0.2
Finance - operating cash flows	$	0.1	$	0.2
ROU lease assets obtained in the exchange for lease liabilities
Operating leases	$	26.1	$	40.8
Finance leases	$	0.1	$	2.1

The following table summarizes the balance sheet information related to leases:

	June 30, 2019
Assets
Operating	$	165.3
Finance	1.7
Total leased assets	$	167.0
Current liabilities
Operating	$	62.7
Finance	0.2
Noncurrent liabilities
Operating	103.2
Finance	1.3
Total lease liabilities	$	167.4

Finance leases are included in other assets, other current liabilities and other liabilities on the condensed consolidated balance sheets.