Leases

12 Months Ended

Dec. 31, 2020

Note M: Leases

The Company has leases, primarily for equipment, railcars, fleet vehicles, office space, land and information technology equipment and software. The Company’s leases have remaining lease terms of one year to 99 years, some of which may include options to extend the leases for up to 30 years, and some of which may include options to terminate the leases within one year.

Certain of the Company’s lease agreements include payments based upon variable rates, including, but not limited to, hours used, tonnage processed and factors related to indices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease cost are as follows:

years ended December 31 (in millions)	2020		2019
Operating lease cost	$	79.0	$	80.9
Finance lease cost:
Amortization of right-of-use assets		3.6		3.4
Interest on lease liabilities		0.6		0.5
Variable lease cost		16.9		21.1
Short-term lease cost		31.3		33.0
Total lease cost	$	131.4	$	138.9

The Company has royalty agreements that are prescriptively excluded from the scope of ASC 842 and generally require royalty payments based on tons produced, tons sold or total sales dollars and also contain minimum payments. Royalty expense was $60.8 million and $58.2 million for the years ended December 31, 2020 and 2019, respectively. Royalty expense was $52.5 million for the year ended December 31, 2018.

The balance sheet classifications of operating and finance leases are as follows:

December 31 (in millions)	2020			2019
Operating Leases:
Operating lease right-of-use assets	$	453.0		$	481.9

Current operating lease liabilities	$	48.6		$	52.7
Noncurrent operating lease liabilities		410.4			433.9
Total operating lease liabilities	$	459.0		$	486.6

Finance Leases:
Property, plant and equipment	$	37.8		$	18.3
Accumulated depreciation		(6.9	)		(3.1	)
Property, plant and equipment, net	$	30.9		$	15.2

Other current liabilities	$	3.3		$	2.8
Other noncurrent liabilities		21.2			5.9
Total finance lease liabilities	$	24.5		$	8.7

The incremental borrowing rate ranged from 0.7% to 6.0% and 2.1% to 5.5%, for the years ended December 31, 2020 and 2019, respectively. Weighted-average remaining lease terms and discount rates are as follows:

December 31	2020		2019
Weighted-average remaining lease terms (years):
Operating leases		13.9		14.5
Finance leases		14.3		9.0

Weighted-average discount rates:
Operating leases	4.2%		4.3%
Finance leases	3.3%		5.2%

Future lease payments as of December 31, 2020 are as follows:

	Operating			Finance
(in millions)	Leases			Leases
2021	$	66.4		$	4.0
2022		60.3			2.9
2023		55.4			2.7
2024		45.3			2.3
2025		42.1			1.5
Thereafter		357.0			17.9
Total lease payments		626.5			31.3
Less: imputed interest		(167.5	)		(6.8	)
Present value of lease payments		459.0			24.5
Less: current lease obligations		(48.6	)		(3.3	)
Total long-term lease obligations	$	410.4		$	21.2

The undiscounted fixed-payment commitments of leases entered into but not yet commenced as of December 31, 2020 was $151.3 million. These commitments include a lease for the Company’s corporate headquarters in Raleigh, North Carolina, and assumes the Company will exercise the renewal options in the agreement.

Total lease expense for operating leases was $122.5 million for the year ended December 31, 2018. The Company also had capital lease obligations for machinery and equipment of $3.2 million.