Leases

12 Months Ended

Dec. 31, 2023

The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes.

Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year. The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any arrangements related to material residual value guarantees, restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the consolidated statement of earnings.

Supplemental balance sheet information related to leases is as follows:


(dollars in millions)	December 31, 2023		December 31, 2022
Liabilities
Short term: Accrued liabilities	$	11.6	$	9.9
Long term: Operating lease liabilities	27.9		22.4
Total operating lease liabilities	$	39.5	$	32.3
Less: Rent incentives and deferrals	(2.2)		(2.5)
Assets
Operating lease assets	$	37.3	$	29.8


Lease Term and Discount Rate			December 31, 2023
Weighted-average remaining lease term			7.0 years
Weighted-average discount rate			4.41%

The components of lease expense were as follows:


(dollars in millions)
Lease Expense(1)	Classification	Year ended December 31, 2023		Year ended December 31, 2022
Operating lease expense	Cost of products sold	$	5.3	$	4.3
	Selling, general and administrative expenses	16.2		15.8

(1)Includes short-term lease expense of $1.8 million and variable lease expenses of $4.6 million for the year ended December 31, 2023 and short-term lease expense of $2.1 million and variable lease expenses of $3.1 million for the year ended December 31, 2022, respectively.

Maturities of lease liabilities were as follows:


(dollars in millions)	December 31, 2023
2024	$	13.0
2025	9.5
2026	5.4
2027	3.6
2028	2.3
After 2028	12.6
Total lease payments	46.4
Less: Imputed interest	(6.9)
Present value of operating lease liabilities	$	39.5