LEASES LEASES

9 Months Ended

Sep. 30, 2019

We determine whether an arrangement is a lease at inception. We have operating leases, primarily for offices and fleet, that expire at various dates over the next nine years. We also have finance leases covering certain office equipment that expire at various dates over the next three years. Our leases do not contain any restrictive covenants.

Our office leases generally contain renewal options for periods ranging from one to five years. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and payments associated with the option years are excluded from lease payments. Our office leases also generally include termination options, which allow for early termination of the lease after the first one to three years. Because we are not reasonably certain to exercise these termination options, the options are not considered in determining the lease term; payments for the full lease term are included in lease payments. Our office leases do not contain any material residual value guarantees.

Our fleet leases include a term of 367 days with monthly renewal options thereafter. Our fleet leases also include terminal rental adjustment clauses (“TRAC”), which provide for a final rental payment adjustment at the end of the lease, typically based on the amount realized from the sale of the vehicle. The TRAC is structured such that it will almost always result in a significant payment by us to the lessor if the renewal option is not exercised. Based on the significance of the TRAC adjustment at the initial lease expiration, we believe that it is reasonably certain that we will exercise the monthly renewal options; therefore, the renewal options are considered in determining the lease term, and payments associated with the renewal options are included in lease payments.

For our fleet and office equipment leases, we use the implicit rate in the lease as the discount rate. For our office leases, the implicit rate is typically not available, so we use our incremental borrowing rate as the discount rate. Our lease agreements include both lease and non-lease components. We have elected the practical expedient that allows us to not separate lease and non-lease components for all of our leases.

Payments due under our operating and finance leases include fixed payments as well as variable payments. For our office leases, variable payments include amounts for our proportionate share of operating expenses, utilities, property taxes, insurance, common area maintenance and other facility-related expenses. For our vehicle and equipment leases, variable payments consist of sales tax.

The components of lease cost for the three and nine-month periods ended September 30, 2019 are as follows (amounts in millions):



	For the Three-Month Period Ended September 30, 2019		For the Nine-Month Period Ended September 30, 2019
Operating lease cost:
Operating lease cost	$	8.8	$	26.0
Impairment of operating lease ROU assets	0.7		1.0
Total operating lease cost	9.5		27.0

Finance lease cost:
Amortization of ROU assets	0.5		1.3
Interest on lease liabilities	—		0.1
Total finance lease cost	0.5		1.4

Variable lease cost	0.7		1.9
Short-term lease cost	0.1		0.2

Total lease cost	$	10.8	$	30.5

Amounts reported in the condensed consolidated balance sheet as of September 30, 2019 for our operating leases are as follows (amounts in millions):



	September 30, 2019
Operating lease ROU assets	$	84.1

Current portion of operating lease liabilities	26.8
Operating lease liabilities, less current portion	56.6
Total operating lease liabilities	$	83.4

Amounts reported in the condensed consolidated balance sheet as of September 30, 2019 for finance leases are included in the table below. The finance lease ROU assets are recorded within property and equipment, net of accumulated depreciation within our condensed consolidated balance sheet. The finance lease liabilities are recorded within current portion of long-term obligations and long-term obligations, less current portion within our condensed consolidated balance sheet.



	September 30, 2019
Finance lease ROU assets	$	5.1
Accumulated amortization	(1.4		)
Finance lease ROU assets, net	3.7

Current installments of obligations under finance leases	1.7
Long-term portion of obligations under finance leases	2.0
Total finance lease liabilities	$	3.7

Supplemental cash flow information and non-cash activity related to our leases are as follows (amounts in millions):



	For the Nine-Month Period Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities and ROU assets:
Operating cash flow from operating leases	$	(26.7	)
Financing cash flow from finance leases	(1.2		)

ROU assets obtained in exchange for lease obligations:
Operating leases	106.9
Finance leases	2.7

Reductions to ROU assets resulting from reductions to lease obligations:
Operating leases	(1.2		)
Finance leases	—

Amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.

Weighted average remaining lease terms and discount rates for our leases as of September 30, 2019 are as follows:



	Years
Weighted average remaining lease term:
Operating leases	4.0
Finance leases	2.3
	Rate
Weighted average discount rate:
Operating leases	4.0	%
Finance leases	5.3	%

Maturities of lease liabilities as of September 30, 2019 are as follows (amounts in millions):



	Operating Leases			Finance Leases
2019 (a)	$	6.3		$	0.5
2020	29.8			1.8
2021	22.1			1.4
2022	13.1			0.2
2023	8.2			—
Thereafter	11.0			—
Total undiscounted lease payments	90.5			3.9
Less: Imputed interest	(7.1		)	(0.2		)
Total lease liabilities	$	83.4		$	3.7

(a) Excludes the nine-month period ended September 30, 2019.