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COMMITMENTS AND GUARANTEES
 9 Months Ended
Sep. 26, 2020
Commitments and Guarantees [Abstract]  
COMMITMENTS AND GUARANTEES COMMITMENTS AND GUARANTEES
COMMITMENTS — The Company has numerous assets, predominantly real estate, vehicles and equipment, under various lease arrangements. At inception of arrangements with vendors, the Company determines whether the contract is or contains a lease based on each party’s rights and obligations under the arrangement. If the lease arrangement also contains non-lease components, the lease and non-lease elements are separately accounted for in accordance with the appropriate accounting guidance for each item. From time to time, lease arrangements allow for, and the Company executes, the purchase of the underlying leased asset. Lease arrangements may also contain renewal options or early termination options. As part of its lease liability and right-of-use asset calculation, consideration is given to the likelihood of exercising any extension or termination options. The present value of the Company’s lease liability was calculated using a weighted-average incremental borrowing rate of approximately 3.6%. The Company determined its incremental borrowing rate based on interest rates from its debt issuances and taking into consideration adjustments for collateral, lease terms and foreign currency. As a result of acquiring right-of-use assets from new leases entered into during the nine months ended September 26, 2020, the Company's lease liability increased approximately $83.6 million. As of September 26, 2020, the Company recognized a lease liability of approximately $526.4 million and right-of-use asset of approximately $525.8 million. The right-of-use asset is included within Other assets in the Condensed Consolidated Balance Sheets, while the lease liability is included within Accrued expenses and Other liabilities, as appropriate. Leases with expected durations of less than 12 months from inception (i.e. short-term leases) were excluded from the Company’s calculation of its lease liability and right-of-use asset, as permitted by ASC 842, Leases.

The Company is a party to leases for one of its major distribution centers and two of its office buildings in which the periodic rental payments vary based on interest rates (i.e. LIBOR). The leases qualify as operating leases for accounting purposes.

The following is a summary of the Company's total lease cost for the three and nine months ended September 26, 2020 and September 28, 2019:
Third QuarterYear-to-Date
(Millions of Dollars)2020201920202019
Operating lease cost$38.8 $37.7 $113.7 $114.0 
Short-term lease cost6.2 6.8 19.0 20.2 
Variable lease cost1.6 2.1 5.4 6.4 
Sublease income(0.3)(0.6)(0.7)(2.1)
Total lease cost$46.3 $46.0 $137.4 $138.5 
During the three and nine months ended September 26, 2020, the Company paid approximately $37.1 million and $116.1 million, respectively, relating to leases included in the measurement of its lease liability and right-of-use asset. During the three and nine months ended September 28, 2019, the Company paid approximately $36.8 million and $111.6 million, respectively, relating to leases included in the measurement of its lease liability and right-of-use asset. As of September 26, 2020, the weighted-average remaining term for the Company's leases is approximately 7 years.

The following is a summary of the Company's future lease obligations on an undiscounted basis at September 26, 2020:
(Millions of Dollars)Total20202021202220232024Thereafter
Lease obligations$595.5 $37.5 $131.9 $100.4 $73.3 $62.1 $190.3 
GUARANTEES — The Company’s financial guarantees at September 26, 2020 are as follows:
(Millions of Dollars)TermMaximum
Potential
Payment		Carrying
Amount of
Liability
Guarantees on the residual values of leased assets
One to four years
$100.6 $— 
Standby letters of credit
Up to three years
162.3 — 
Commercial customer financing arrangements
Up to six years
64.7 7.4 
Total$327.6 $7.4 
The Company has guaranteed a portion of the residual values of certain leased assets including the previously discussed leases for one of its major distribution centers and two of its office buildings. The lease guarantees are for an amount up to $100.6 million while the fair value of the underlying assets is estimated at $123.9 million. The related assets would be available to satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these guarantees.

The Company has issued $162.3 million in standby letters of credit that guarantee future payments which may be required under certain insurance programs and in relation to certain environmental remediation activities described more fully in Note R, Contingencies.

The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and Canadian Mac Tool distributors and franchisees for their initial purchase of the inventory and trucks necessary to function as a distributor and franchisee. In addition, the Company provides limited and full recourse guarantees to financial institutions that extend credit to certain end retail customers of its U.S. Mac Tool distributors and franchisees. The gross amount guaranteed in these arrangements is $64.7 million and the $7.4 million carrying value of the guarantees issued is recorded in Other liabilities in the Condensed Consolidated Balance Sheets.

The Company provides warranties on certain products across its businesses. The types of product warranties offered generally range from one year to limited lifetime. There are also certain products with no warranty. Further, the Company sometimes incurs discretionary costs to service its products in connection with product performance issues. Historical warranty and service claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available.

The changes in the carrying amount of product warranties for the nine months ended September 26, 2020 and September 28, 2019 are as follows: 
(Millions of Dollars)20202019
Balance beginning of period$100.1 $102.1 
Warranties and guarantees issued94.1 92.7 
Warranty payments and currency(84.5)(97.7)
Balance end of period$109.7 $97.1