Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

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 as Right-of-use assets, net, Current portion of operating lease liabilities, and Operating lease liabilities on the Company's 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. 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 as Property, plant and equipment, net; Current maturities of long-term debt and Long-term debt on the Company's 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 both 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 Company's 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 31.1 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		Nine Months Ended
(In thousands)	September 30 2019		September 30 2019
Finance leases:
Amortization expense	$	325	$	911
Interest on lease liabilities	27		68
Operating leases	4,391		11,518
Short-term leases	6,619		16,006
Variable lease expense	140		361
Total lease expense from continuing operations	$	11,502	$	28,864

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
(In thousands)	September 30 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - Operating leases	$	10,881
Cash flows from financing activities - Finance leases	953
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (a)	$	57,607
Finance leases	1,671

(a) Includes ROU assets of approximately $34 million that were recorded upon adoption at January 1, 2019 and $21.3 million that were recorded upon the acquisition of Clean Earth. See Note 2, Recently Adopted and Recently Issued Accounting Standards, and Note 3, Acquisitions and Dispositions, for additional information.

Supplemental balance sheet information related to leases was as follows: 

(In thousands)	September 30 2019
Operating Leases:
Operating lease right-of-use assets	$	47,662
Current portion of operating lease liabilities	12,145
Operating lease liabilities	32,772
Finance Leases:
Property, plant and equipment, net	$	2,346
Current maturities of long-term debt	1,125
Long-term debt	1,144

Supplemental additional information related to leases is as follows:

	September 30 2019
Other information:
Weighted average remaining lease term - Operating leases (in years)	9.89
Weighted average remaining lease term - Finance leases (in years)	2.99
Weighted average discount rate - Operating leases	4.3	%
Weighted average discount rate - Finance leases	4.5	%

Maturities of lease liabilities were as follows:

(In thousand)	Operating Leases			Finance Leases
Year Ending December 31st:
2019 (excluding the nine months ended September 30, 2019)	$	4,192		$	298
2020	13,564			893
2021	10,077			653
2022	6,242			423
2023	4,430			140
After 2023	25,907			34
Total lease payments	64,412			2,441
Less: Imputed interest	(19,495		)	(172		)
Total	$	44,917		$	2,269

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) (b)
2019	$	10,761
2020	8,938
2021	6,235
2022	4,602
2023	3,083
After 2023	17,170

(b) These amounts do not include operating lease obligations of Clean Earth as of December 31, 2018.

As of September 30, 2019, the Company has additional operating leases for property and equipment that have not yet commenced with estimated ROU assets and lease liabilities of approximately $1 million to be recognized upon the anticipated lease commencements in the fourth quarter of 2019.

Leases

Leases

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 as Right-of-use assets, net, Current portion of operating lease liabilities, and Operating lease liabilities on the Company's 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. 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 as Property, plant and equipment, net; Current maturities of long-term debt and Long-term debt on the Company's 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 both 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 Company's 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 31.1 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		Nine Months Ended
(In thousands)	September 30 2019		September 30 2019
Finance leases:
Amortization expense	$	325	$	911
Interest on lease liabilities	27		68
Operating leases	4,391		11,518
Short-term leases	6,619		16,006
Variable lease expense	140		361
Total lease expense from continuing operations	$	11,502	$	28,864

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
(In thousands)	September 30 2019
Cash paid for amounts included in the measurement of lease liabilities:
Cash flows from operating activities - Operating leases	$	10,881
Cash flows from financing activities - Finance leases	953
Right-of-use assets obtained in exchange for lease obligations:
Operating leases (a)	$	57,607
Finance leases	1,671

(a) Includes ROU assets of approximately $34 million that were recorded upon adoption at January 1, 2019 and $21.3 million that were recorded upon the acquisition of Clean Earth. See Note 2, Recently Adopted and Recently Issued Accounting Standards, and Note 3, Acquisitions and Dispositions, for additional information.

Supplemental balance sheet information related to leases was as follows: 

(In thousands)	September 30 2019
Operating Leases:
Operating lease right-of-use assets	$	47,662
Current portion of operating lease liabilities	12,145
Operating lease liabilities	32,772
Finance Leases:
Property, plant and equipment, net	$	2,346
Current maturities of long-term debt	1,125
Long-term debt	1,144

Supplemental additional information related to leases is as follows:

	September 30 2019
Other information:
Weighted average remaining lease term - Operating leases (in years)	9.89
Weighted average remaining lease term - Finance leases (in years)	2.99
Weighted average discount rate - Operating leases	4.3	%
Weighted average discount rate - Finance leases	4.5	%

Maturities of lease liabilities were as follows:

(In thousand)	Operating Leases			Finance Leases
Year Ending December 31st:
2019 (excluding the nine months ended September 30, 2019)	$	4,192		$	298
2020	13,564			893
2021	10,077			653
2022	6,242			423
2023	4,430			140
After 2023	25,907			34
Total lease payments	64,412			2,441
Less: Imputed interest	(19,495		)	(172		)
Total	$	44,917		$	2,269

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) (b)
2019	$	10,761
2020	8,938
2021	6,235
2022	4,602
2023	3,083
After 2023	17,170

(b) These amounts do not include operating lease obligations of Clean Earth as of December 31, 2018.

As of September 30, 2019, the Company has additional operating leases for property and equipment that have not yet commenced with estimated ROU assets and lease liabilities of approximately $1 million to be recognized upon the anticipated lease commencements in the fourth quarter of 2019.