Leases

3 Months Ended

Mar. 31, 2019

The Company leases certain property and equipment under noncancelable lease agreements. The Company determines if a contract or arrangement contains a lease at inception. All leases are evaluated and classified as either an operating or finance lease. A lease is classified as a finance lease if any of the following criteria are met: (i) ownership of the underlying asset transfers to the Company by the end of the lease term; (ii) the lease contains an option to purchase the underlying asset that the Company is reasonably expected to exercise; (iii) the lease term is for a major part of the remaining economic life of the underlying asset; (iv) the present value of the sum of lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value of the underlying asset; or (v) the underlying asset is of a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of the criteria to be classified as a finance lease is classified as an operating lease.

Operating leases are included in the captions Right-of-use assets, net, Current portion of operating lease liabilities, and Operating lease liabilities on the Condensed Consolidated Balance Sheets. ROU assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. As most of the Company’s leases do not provide an implicit rate for use in determining the present value of future payments, the Company uses an incremental borrowing rate that reflects the creditworthiness of the Company for a lending period commensurate to the term of the lease and the standard lending practices related to such loans in the respective jurisdiction where the underlying assets are located. This incremental borrowing rate reflects the creditworthiness of the Company for a lending period commensurate to the term of the lease and the standard lending practices related to such loans in the respective jurisdiction where the underlying assets are located. ROU assets also include any lease payments made and exclude any lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, including rent abatement periods and rent holidays.

Finance leases are included in the captions Property, plant and equipment, net; Current maturities of long-term debt and Long-term debt on the Condensed Consolidated Balance Sheets. Finance lease costs are split between depreciation expense related to the asset and interest expense on the lease liability, using the effective rate charged by the lessor.

The Company has lease agreements with lease and non-lease components, which the Company has elected to account for as a single lease component. Additionally, the Company has elected not to record short-term leases, those with expected terms of twelve months or less, on the Condensed Consolidated Balance Sheets. Certain lease agreements include fixed escalations, while others include rental payments adjusted periodically for inflation. There are no material residual value guarantees or material restrictive covenants. The Company's leases, excluding short-term leases, have remaining terms of less than one year to 24.5 years, some of which include options to extend for up to 10 years, and some of which include options to terminate within one year.

The components of lease expense were as follows:



	Three Months Ended
(In thousands)	March 31 2019
Finance leases:
Amortization expense	$	310
Interest on lease liabilities	4
Operating leases	4,608
Short-term leases	4,669
Variable lease expense	314
Total lease expense	$	9,905

Supplemental cash flow information related to leases was as follows:



	Three Months Ended
(In thousands)	March 31 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - Operating leases	$	4,670
Cash flows from financing activities - Finance leases	363
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (a)	$	53,750
Finance leases	373

(a) Includes ROU assets of $53.0 million that were recorded upon adoption at January 1, 2019.

Supplemental balance sheet information related to leases was as follows:



(In thousands)	March 31 2019
Operating Leases:
Operating lease right-of-use assets	$	49,584
Other current liabilities	12,936
Operating lease liabilities	37,037
Finance Leases:
Property, plant and equipment, net	$	1,286
Current maturities of long-term debt	1,054
Long-term debt	945

Supplemental additional information related to leases is as follows:



	March 31 2019
Other information:
Weighted average remaining lease term - Operating leases (in years)	4.42
Weighted average remaining lease term - Finance leases (in years)	2.01
Weighted average discount rate - Operating leases	6.9	%
Weighted average discount rate - Finance leases	4.1	%

Maturities of lease liabilities were as follows:



(In thousand)	Operating Leases			Finance Leases
Year Ending December 31^st:
2019 (excluding the three months ended March 31, 2019)	$	12,210		$	1,027
2020	12,943			631
2021	9,775			295
2022	7,563			117
2023	6,254			16
After 2023	21,576			2
Total lease payments	70,321			2,088
Less imputed interest	(20,348		)	(89		)
Total	$	49,973		$	1,999

As previously disclosed, under then in effect lease accounting in accordance with U.S. GAAP, future minimum payments under operating leases with noncancelable terms were as follows as of December 31, 2018:



(In thousands)
2019	$	13,985
2020	12,204
2021	9,448
2022	7,706
2023	6,201
After 2023	28,442

As of March 31, 2019, the Company has an additional operating lease for property that has not yet commenced with an estimated ROU asset and lease liability of approximately $5.0 million to be recognized upon the anticipated lease commencement in October 2019.

Leases