XML 22 R11.htm IDEA: XBRL DOCUMENT

LEASES

6 Months Ended

Jun. 30, 2019

Initial adoption of new ASU

Effective January 1, 2019, we adopted ASU 2016-02 “Leases” (Topic 842), which requires the recognition of lease assets and liabilities for items classified as operating leases under previous guidance. The original guidance required application on a modified retrospective basis with the earliest year presented. In August 2018, the FASB issued ASU 2018-11 “Targeted Improvements to ASC 842” that included an option to not restate comparative periods in transition and elect to use the effective date of Topic 842 as the date of initial application of transition, which we elected. Adoption of the new standard resulted in the recording of additional net operating lease assets and lease liabilities of $135.9 and $135.8, respectively, as of January 1, 2019. The difference between the additional lease assets and lease liabilities, net of the deferred tax impact, was recorded as an adjustment to retained earnings. The accounting for finance leases (capital leases under previous guidance) was substantially unchanged. The standard did not materially impact our statements of operations and cash flows.

The cumulative effect of applying Topic 842 to our Consolidated Condensed Balance Sheet was as follows:



	Balance at December 31, 2018 as Previously Reported			Topic 842 Adjustments			Balance at January 1, 2019
Current assets ¹	$	1,524.6		$	(1.3	)	$	1,523.3
Net property, plant and equipment ²	728.5			(5.1		)	723.4
Other assets ³	1,128.9			142.3			1,271.2
Total assets	$	3,382.0		$	135.9		$	3,517.9

Accrued expenses ⁴	$	262.7		$	(.4	)	$	262.3
Current portion of operating lease liabilities ³	—			32.0			32.0
All other current liabilities	553.0			—			553.0
Long-term liabilities ³	1,408.7			104.2			1,512.9
Retained earnings	2,613.8			.1			2,613.9
Other equity	(1,456.2		)	—			(1,456.2		)
Total liabilities and equity	$	3,382.0		$	135.9		$	3,517.9

¹This adjustment is to reclass prepaid rent balances to be presented within Other assets with the operating lease right-of-use assets.

²This adjustment is to reclass our finance lease right-of-use assets to be presented within Other assets with the operating lease right-of-use assets.

³This adjustment is to record the assets and liabilities arising from leases.

⁴This adjustment is to reclass lease liabilities to be presented within Current portion of operating lease liabilities.

Practical Expedients

For the initial adoption, we elected the available package of practical expedients not to reassess (i) whether a contract is or contains a lease, (ii) lease classification, and (iii) initial direct costs. These elections applied to leases that commenced before the effective date. We also elected an additional practical expedient to use hindsight when determining the lease term.

Both lease and non-lease components are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.

Lease Details

Substantially all our operating lease right-of-use assets and operating lease liabilities represent leases for certain operating facilities, warehouses, office space, trucking equipment, and various other assets. Finance lease balances represent substantially all our vehicle leases. We are not involved in any material sale and leaseback transactions, and our sublease arrangements were not material for the periods presented.

At the inception of a contract we assess whether a contract is, or contains, a lease. Our assessment is based on whether the contract involves the use of a distinct identified asset, whether we obtain the right to substantially all the economic benefit of the asset, and whether we have the right to direct the use of the asset.

Our leases have remaining lease terms that expire at various dates through 2032, some of which include options to extend or terminate the leases at our discretion. Where renewal or termination options are reasonably likely to be exercised, we recognize the option as part of the right-of-use asset and lease liability. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of the lease payments. We apply a portfolio approach for determining the incremental borrowing rate based on the applicable lease terms and the economic environment in the various regions where our operations are located.

At June 30, 2019, we do not have a material amount of leases that have not yet commenced.

Supplemental balance sheet information related to leases was as follows:



	June 30, 2019
Operating Leases
Operating lease right-of-use assets	$	169.8

Current portion of operating lease liabilities	38.5
Operating lease liabilities	131.4
Total operating lease liabilities	$	169.9

Finance Leases
Sundry	$	5.0

Current maturities of long-term debt	1.3
Long-term debt	3.5
Total finance lease liabilities	$	4.8

The components of lease expense were as follows:



	Six Months Ended		Three Months Ended
	June 30,		June 30,
	2019		2019
Operating lease cost:
Lease cost	$	21.8	$	11.4
Variable lease cost	5.7		2.8
Total operating lease cost	$	27.5	$	14.2

Short-term lease cost	$	2.2	$	1.1

Finance lease cost:
Amortization of right-of-use assets	$	1.5	$	.7
Interest on lease liabilities	.1		—
Total finance lease cost	$	1.6	$	.7

Total lease cost	$	31.3	$	16.0

Variable lease costs consist primarily of taxes, insurance, and common-area or other maintenance costs for our leased facilities and equipment which are paid based on actual costs incurred by the lessor.

Supplemental cash flow information related to leases was as follows:



	Six Months Ended June 30,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18.3
Operating cash flows from finance leases	$	.1
Financing cash flows from finance leases	$	1.5

Right-of-use assets obtained in exchange for new operating lease liabilities	$	31.8
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1.5

In connection with the ECS transaction discussed in Note 10, we acquired operating right-of-use assets of approximately $24.0 (including a favorable lease position of $2.4). The operating lease liability associated with these right-of-use assets was approximately $21.6. Finance right-of-use assets acquired in the ECS transaction and the related finance lease liabilities were immaterial.

The following table reconciles the undiscounted cash flows for the operating and finance leases at June 30, 2019 to the operating and finance lease liabilities recorded on the balance sheet:



	June 30, 2019
	Operating Leases			Finance Leases
2019 Remainder	$	22.3		$	1.3
2020	41.2			1.9
2021	36.5			1.2
2022	30.3			.6
2023	21.8			.1
2024 and thereafter	33.0			—
Total	185.1			5.1
Less: Interest	15.2			.3
Lease Liability	$	169.9		$	4.8

Weighted average remaining lease term (years)	5.0			2.7
Weighted average discount rate	3.3		%	3.4		%

Our future minimum lease commitments as of December 31, 2018, under Topic 840, the predecessor to Topic 842, were as follows:



	Operating Leases
2019	$	35.9
2020	30.7
2021	26.2
2022	19.9
2023	13.1
Thereafter	18.0
Total	$	143.8

LEASES