Leases and Commitments

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Lessee, Operating Leases

Leases and Commitments

The company reviews new contracts to determine if the contracts include a lease. To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, the company has recognized those amounts as part of the right-of-use assets and lease liabilities. The company does not combine lease and certain non-lease components, such as common area maintenance, in the calculation of the lease assets and related liabilities. As most lease agreements do not provide an implicit rate, the company uses an incremental borrowing rate (IBR) based on information available at commencement date in determining the present value of lease payments and to help classify the lease as operating or financing. The company calculates its IBR based on the secured rates of the company's recent debt issuances, the credit rating of the company, changes in currencies, lease repayment timing as well as other publicly available data.

The company leases a portion of its facilities, transportation equipment, data processing equipment and certain other equipment. These leases have terms from 1 to 20 years and provide for renewal options. Generally, the company is required to pay taxes and normal expenses associated with operating the facilities and equipment. As of December 31, 2021, the company is committed under non-cancelable leases, which have initial or remaining terms in excess of one year and expire on various dates through 2040.

On April 23, 2015, the company sold and leased back, under four separate lease agreements, four properties located in Ohio and one property in Florida for net proceeds of $23,000,000, which were used to reduce debt under the North America Credit Facility. The initial total annual rent for the properties was $2,275,000 and can increase annually over the 20-year term of the leases based on the applicable geographical consumer price index (CPI). Each of the four lease agreements contains three 10-year renewals with the rent for each option term based on the greater of the then-current fair market rent for each property or the then- current rate and increasing annually by the applicable CPI. Under the terms of the lease agreements, the company is responsible for all taxes, insurance and utilities. The company is required to adequately maintain each of the properties and any leasehold improvements will be amortized over the lesser of the lives of the improvements or the remaining lease lives, consistent with any other company leases.

In connection with the transaction, the requirements for sale lease-back accounting were met. Accordingly, the company recorded the sale of the properties, removed the related property and equipment from the company's balance sheet, recognized an initial deferred gain of $7,414,000 and an immediate loss of $257,000 related to

one property and recorded new lease liabilities. Specifically, the company recorded four finance leases totaling $32,339,000 and one operating lease related to leased land, which was not a material component of the transaction. The gains on the sales of the properties were required to be deferred and recognized over the life of the leases as the property sold is being leased back. The deferred gain is classified under Other Long-Term Obligations on the consolidated balance sheet. The gains realized were $317,000 and $305,000 in 2021 and 2020, respectively.

Lease expenses for the year ended December 31, 2021 and December 31, 2020, respectively, were as follows (in thousands):

	2021		2020
Operating leases	$	7,394	$	8,138
Variable and short-term leases	3,541		3,968
Total operating leases	$	10,935	$	12,106
Finance lease interest cost	$	4,601	$	2,544
Finance lease depreciation	4,996		3,479
Total finance leases	$	9,597	$	6,023

Future minimum operating and finance lease commitments, as of December 31, 2021, are as follows (in thousands):

	Finance Leases		Operating Leases
2022	$	7,030	$	4,848
2023	6,943		2,887
2024	6,880		2,217
2025	6,765		1,798
2026	6,675		1,150
Thereafter	72,641		1,763
Total future minimum lease payments	106,934		14,663
Amounts representing interest	(40,189)		(2,212)
Present value of minimum lease payments	66,745		12,451
Less: current maturities of lease obligations	(3,009)		(4,217)
Long-term lease obligations	$	63,736	$	8,234

Supplemental cash flow amounts for the year ended December 31, 2021 and December 31, 2020, respectively, were as follows (in thousands):

Cash Activity: Cash paid in measurement of amounts for lease liabilities	December 31, 2021		December 31, 2020
Operating leases	$	11,089	$	12,527
Finance leases	8,166		5,316
Total	$	19,255	$	17,843
Non-Cash Activity: Right-of-use assets obtained in exchange for lease obligations	December 31, 2021		December 31, 2020
Operating leases	$	7,491	$	6,155
Finance leases	6,572		40,078
Total	$	14,063	$	46,233

Weighted-average remaining lease terms and discount rates for finance and operating leases are as follows as of December 31, 2021 and December 31, 2020, respectively,:

	December 31, 2021	December 31, 2020
Weighted-average remaining lease term - finance leases	15.8 years	17.0 years
Weighted-average remaining lease term - operating leases	5.0 years	4.6 years
Weighted-average discount rate - finance leases	6.43%	6.41%
Weighted-average discount rate - operating leases	7.1%	7.82%

Lessee, Finance Leases

Leases and Commitments

The company reviews new contracts to determine if the contracts include a lease. To the extent a lease agreement includes an extension option that is reasonably certain to be exercised, the company has recognized those amounts as part of the right-of-use assets and lease liabilities. The company does not combine lease and certain non-lease components, such as common area maintenance, in the calculation of the lease assets and related liabilities. As most lease agreements do not provide an implicit rate, the company uses an incremental borrowing rate (IBR) based on information available at commencement date in determining the present value of lease payments and to help classify the lease as operating or financing. The company calculates its IBR based on the secured rates of the company's recent debt issuances, the credit rating of the company, changes in currencies, lease repayment timing as well as other publicly available data.

The company leases a portion of its facilities, transportation equipment, data processing equipment and certain other equipment. These leases have terms from 1 to 20 years and provide for renewal options. Generally, the company is required to pay taxes and normal expenses associated with operating the facilities and equipment. As of December 31, 2021, the company is committed under non-cancelable leases, which have initial or remaining terms in excess of one year and expire on various dates through 2040.

On April 23, 2015, the company sold and leased back, under four separate lease agreements, four properties located in Ohio and one property in Florida for net proceeds of $23,000,000, which were used to reduce debt under the North America Credit Facility. The initial total annual rent for the properties was $2,275,000 and can increase annually over the 20-year term of the leases based on the applicable geographical consumer price index (CPI). Each of the four lease agreements contains three 10-year renewals with the rent for each option term based on the greater of the then-current fair market rent for each property or the then- current rate and increasing annually by the applicable CPI. Under the terms of the lease agreements, the company is responsible for all taxes, insurance and utilities. The company is required to adequately maintain each of the properties and any leasehold improvements will be amortized over the lesser of the lives of the improvements or the remaining lease lives, consistent with any other company leases.

In connection with the transaction, the requirements for sale lease-back accounting were met. Accordingly, the company recorded the sale of the properties, removed the related property and equipment from the company's balance sheet, recognized an initial deferred gain of $7,414,000 and an immediate loss of $257,000 related to

one property and recorded new lease liabilities. Specifically, the company recorded four finance leases totaling $32,339,000 and one operating lease related to leased land, which was not a material component of the transaction. The gains on the sales of the properties were required to be deferred and recognized over the life of the leases as the property sold is being leased back. The deferred gain is classified under Other Long-Term Obligations on the consolidated balance sheet. The gains realized were $317,000 and $305,000 in 2021 and 2020, respectively.

Lease expenses for the year ended December 31, 2021 and December 31, 2020, respectively, were as follows (in thousands):

	2021		2020
Operating leases	$	7,394	$	8,138
Variable and short-term leases	3,541		3,968
Total operating leases	$	10,935	$	12,106
Finance lease interest cost	$	4,601	$	2,544
Finance lease depreciation	4,996		3,479
Total finance leases	$	9,597	$	6,023

Future minimum operating and finance lease commitments, as of December 31, 2021, are as follows (in thousands):

	Finance Leases		Operating Leases
2022	$	7,030	$	4,848
2023	6,943		2,887
2024	6,880		2,217
2025	6,765		1,798
2026	6,675		1,150
Thereafter	72,641		1,763
Total future minimum lease payments	106,934		14,663
Amounts representing interest	(40,189)		(2,212)
Present value of minimum lease payments	66,745		12,451
Less: current maturities of lease obligations	(3,009)		(4,217)
Long-term lease obligations	$	63,736	$	8,234

Supplemental cash flow amounts for the year ended December 31, 2021 and December 31, 2020, respectively, were as follows (in thousands):

Cash Activity: Cash paid in measurement of amounts for lease liabilities	December 31, 2021		December 31, 2020
Operating leases	$	11,089	$	12,527
Finance leases	8,166		5,316
Total	$	19,255	$	17,843
Non-Cash Activity: Right-of-use assets obtained in exchange for lease obligations	December 31, 2021		December 31, 2020
Operating leases	$	7,491	$	6,155
Finance leases	6,572		40,078
Total	$	14,063	$	46,233

Weighted-average remaining lease terms and discount rates for finance and operating leases are as follows as of December 31, 2021 and December 31, 2020, respectively,:

	December 31, 2021	December 31, 2020
Weighted-average remaining lease term - finance leases	15.8 years	17.0 years
Weighted-average remaining lease term - operating leases	5.0 years	4.6 years
Weighted-average discount rate - finance leases	6.43%	6.41%
Weighted-average discount rate - operating leases	7.1%	7.82%