Leases

12 Months Ended

Dec. 31, 2022

The Company leases certain land, buildings, machinery, equipment, vehicles and office and computer equipment under finance and operating leases. The Company accounts for these leases pursuant to ASU 2016-02, “Leases”. Under the standard, lessees are required to record an asset (a right-of-use “ROU” asset or finance lease asset) and a lease liability. ROU assets represent the Company’s right to use an underlying asset during the lease term while lease liabilities represent the Company’s obligation to make lease payments during the lease term. The standard allows for two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term whereas finance leases result in an accelerated expense. ASU 2016-02 also contains guidance regarding the identification of embedded leases in service and supply contracts, as well as the identification of lease and nonlease components of an arrangement. All leases greater than 12 months result in the recognition of an ROU asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The present value of the lease payments is calculated using the applicable weighted-average discount rate. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated using the currency denomination of the lease, the contractual lease term and the Company’s applicable borrowing rate.

The Company does not recognize an ROU asset or lease liability with respect to operating leases with an initial term of 12 months or less and recognizes expense on such leases on a straight-line basis over the lease term. The Company accounts for lease components separately from nonlease components other than for real estate and office equipment. The Company evaluated its supplier agreements for the existence of leases and determined these leases comprised an insignificant portion of its supplier agreements. As such, these leases were not material to the Company’s Consolidated Balance Sheets. The Company has certain leases that contain one or more options to terminate or renew that can extend the lease term up to 14 years. Options that the company is reasonably certain to exercise are included in the lease term. The depreciable life of ROU assets and leasehold improvements are limited by the expected lease term. The Company has certain lease agreements that include variable rental payments that are adjusted periodically for inflation based on the index rate as defined by the applicable government authority. Generally, the Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

Total lease assets and liabilities at December 31, 2022 and 2021 were as follows (in millions):


Lease Assets	Classification	As of December 31, 2022		As of December 31, 2021
Operating ROU assets	Right-of-use lease assets	$	163.9	$	154.1
Finance lease assets	Property, plant and equipment, net(1)	6.7		10.6
Total lease assets		$	170.6	$	164.7

Lease Liabilities	Classification	As of December 31, 2022		As of December 31, 2021
Current:
Operating	Accrued expenses	$	42.2	$	42.3
Finance	Other current liabilities	0.7		3.8

Noncurrent:
Operating	Operating lease liabilities	125.4		115.5
Finance	Other noncurrent liabilities	5.4		6.0
Total lease liabilities		$	173.7	$	167.6

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(1) Finance lease assets are recorded net of accumulated depreciation of $5.1 million and $7.8 million as of December 31, 2022 and 2021, respectively.

Total lease costs for 2022 and 2021 are set forth below (in millions):


	Classification	Year Ended December 31, 2022		Year Ended December 31, 2021
Operating lease cost	Selling, general and administrative expenses	$	51.2	$	59.0
Variable lease cost	Selling, general and administrative expenses	1.7		1.0
Short-term lease cost	Selling, general and administrative expenses	17.5		18.7
Finance lease cost:
Amortization of lease assets	Depreciation expense(1)	1.0		2.4
Interest on lease liabilities	Interest expense, net	0.2		0.3
Total lease cost		$	71.6	$	81.4

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(1) Depreciation expense was included in both cost of goods sold and selling, general and administrative expenses.

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2022 were as follows (in millions):


	December 31, 2022
		Operating Leases		Finance Leases


2023		$	47.8	$	0.8
2024		36.6		0.6
2025		27.0		0.4
2026		19.1		0.2
2027		13.4		0.2
Thereafter		51.2		6.0
Total lease payments		195.1		8.2
Less: imputed interest(1)		(27.5)		(2.1)

Present value of lease liabilities		$	167.6	$	6.1

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(1) Calculated using the implicit interest rate for each lease or the Company’s incremental borrowing rate, when implicit rate is not available

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2021 were as follows (in millions):


	December 31, 2021
		Operating Leases		Finance Leases
2022		$	45.7	$	4.0
2023		36.2		0.9
2024		24.5		0.6
2025		17.3		0.4
2026		12.3		0.2
Thereafter		39.1		6.3
Total lease payments		175.1		12.4
Less: imputed interest(1)		(17.3)		(2.5)

Present value of lease liabilities		$	157.8	$	9.9

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(1) Calculated using the implicit interest rate for each lease or the Company’s incremental borrowing rate, when implicit rate is not available

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate:


	As of December 31, 2022		As of December 31, 2021
Weighted-average remaining lease term:
Operating leases	7 years		7 years
Finance leases	17 years		12 years

Weighted-average discount rate:
Operating leases	4.7	%	3.1	%
Finance leases	2.7	%	2.4	%

The following table summarizes the supplemental cash flow information for 2022 and 2021 (in millions):


	Year Ended December 31, 2022		Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	52.3	$	59.8
Operating cash flows from finance leases	0.2		0.2
Financing cash flows from finance leases	1.0		2.6

Leased assets obtained in exchange for lease obligations:
Operating leases	$	65.5	$	50.6
Finance leases	0.4		0.9

Leases

Total lease assets and liabilities at December 31, 2022 and 2021 were as follows (in millions):


Lease Assets	Classification	As of December 31, 2022		As of December 31, 2021
Operating ROU assets	Right-of-use lease assets	$	163.9	$	154.1
Finance lease assets	Property, plant and equipment, net(1)	6.7		10.6
Total lease assets		$	170.6	$	164.7

Lease Liabilities	Classification	As of December 31, 2022		As of December 31, 2021
Current:
Operating	Accrued expenses	$	42.2	$	42.3
Finance	Other current liabilities	0.7		3.8

Noncurrent:
Operating	Operating lease liabilities	125.4		115.5
Finance	Other noncurrent liabilities	5.4		6.0
Total lease liabilities		$	173.7	$	167.6

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(1) Finance lease assets are recorded net of accumulated depreciation of $5.1 million and $7.8 million as of December 31, 2022 and 2021, respectively.

Total lease costs for 2022 and 2021 are set forth below (in millions):


	Classification	Year Ended December 31, 2022		Year Ended December 31, 2021
Operating lease cost	Selling, general and administrative expenses	$	51.2	$	59.0
Variable lease cost	Selling, general and administrative expenses	1.7		1.0
Short-term lease cost	Selling, general and administrative expenses	17.5		18.7
Finance lease cost:
Amortization of lease assets	Depreciation expense(1)	1.0		2.4
Interest on lease liabilities	Interest expense, net	0.2		0.3
Total lease cost		$	71.6	$	81.4

____________________________________

(1) Depreciation expense was included in both cost of goods sold and selling, general and administrative expenses.

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2022 were as follows (in millions):


	December 31, 2022
		Operating Leases		Finance Leases


2023		$	47.8	$	0.8
2024		36.6		0.6
2025		27.0		0.4
2026		19.1		0.2
2027		13.4		0.2
Thereafter		51.2		6.0
Total lease payments		195.1		8.2
Less: imputed interest(1)		(27.5)		(2.1)

Present value of lease liabilities		$	167.6	$	6.1

____________________________________

(1) Calculated using the implicit interest rate for each lease or the Company’s incremental borrowing rate, when implicit rate is not available

Lease payment amounts for operating and finance leases with remaining terms greater than one year as of December 31, 2021 were as follows (in millions):


	December 31, 2021
		Operating Leases		Finance Leases
2022		$	45.7	$	4.0
2023		36.2		0.9
2024		24.5		0.6
2025		17.3		0.4
2026		12.3		0.2
Thereafter		39.1		6.3
Total lease payments		175.1		12.4
Less: imputed interest(1)		(17.3)		(2.5)

Present value of lease liabilities		$	157.8	$	9.9

____________________________________

(1) Calculated using the implicit interest rate for each lease or the Company’s incremental borrowing rate, when implicit rate is not available

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate:


	As of December 31, 2022		As of December 31, 2021
Weighted-average remaining lease term:
Operating leases	7 years		7 years
Finance leases	17 years		12 years

Weighted-average discount rate:
Operating leases	4.7	%	3.1	%
Finance leases	2.7	%	2.4	%

The following table summarizes the supplemental cash flow information for 2022 and 2021 (in millions):


	Year Ended December 31, 2022		Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	52.3	$	59.8
Operating cash flows from finance leases	0.2		0.2
Financing cash flows from finance leases	1.0		2.6

Leased assets obtained in exchange for lease obligations:
Operating leases	$	65.5	$	50.6
Finance leases	0.4		0.9