Leases (Notes)

9 Months Ended

Sep. 30, 2020

Lessee, Operating and Financing Leases [Text Block]

Leases

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 right-of-use (ROU) assets. Lease agreements are utilized worldwide, with the largest location concentration in the United States, Germany and India. 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.

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


	September 30, 2020		September 30, 2019
Weighted-average remaining lease terms (in years)
Operating leases	4.2		4.8
Finance leases	3.8		2.4
Weighted-average discount rate
Operating leases	11.5	%	12.2	%
Finance leases	10.9	%	24.1	%

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. In 2019, the Company's finance leases were primarily comprised of leases in Turkey, which have higher interest rates. The weighted-average discount rate for finance leases decreased in 2020 compared to 2019 due to an increase in finance leases globally that had rates lower than the rates for Turkish leases.

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, the Company's lease agreements may contain residual value guarantees. The Company's lease agreements do not contain any restrictions or covenants, such as those relating to dividends or incurring additional financial obligations.

As of September 30, 2020, 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 explicit rate, the Company uses its 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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Lease expense
Operating lease expense	$	24.6	$	23.2	$	71.9	$	65.3
Finance lease expense
Amortization of ROU lease assets	$	0.4	$	0.1	$	1.1	$	0.4
Interest on lease liabilities	$	0.1	$	0.1	$	0.4	$	0.3
Variable lease expense	$	1.9	$	3.2	$	6.5	$	11.4

The following table summarizes the maturities of lease liabilities:


	Operating		Finance
2020 (excluding the nine months ended September 30, 2020)	$	25.5	$	0.6
2021	55.1		2.0
2022	34.6		1.3
2023	21.4		0.6
2024	15.3		0.5
Thereafter	25.1		0.8
Total	177.0		5.8
Less: Present value discount	(35.7)		(0.9)
Lease liability	$	141.3	$	4.9

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating - operating cash flows	$	28.3	$	22.3	$	72.3	$	63.6
Finance - financing cash flows	$	0.4	$	0.1	$	1.2	$	0.3
Finance - operating cash flows	$	0.2	$	0.2	$	0.6	$	0.4
ROU lease assets obtained in the exchange for lease liabilities
Operating leases	$	9.9	$	8.5	$	17.6	$	49.3
Finance leases	$	0.1	$	0.2	$	4.0	$	2.3

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


	September 30, 2020		December 31, 2019
Assets
Operating	$	139.6	$	167.5
Finance	5.1		2.4
Total leased assets	$	144.7	$	169.9

Current liabilities
Operating	$	52.2	$	62.8
Finance	1.7		0.9
Noncurrent liabilities
Operating	89.1		106.4
Finance	3.2		1.4
Total lease liabilities	$	146.2	$	171.5

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