Lease Accounting

6 Months Ended

Jun. 30, 2019

Arrangements wherein we are the lessee:

We have operating and finance leases for land, warehouses, offices, vehicles, and equipment with remaining lease terms ranging from 1 to 34 years. Many of our leases include one or more options to extend the lease term from 1 to 10 years that may be exercised at our sole discretion. Additionally, many of our leases for vehicles and equipment include options to purchase the underlying asset at or before expiration of the lease agreement. Rental payments are generally fixed over the term of the lease agreement with the exception of certain equipment leases for which the rental payment may vary based on usage of the asset. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of June 30, 2019, the rights and obligations with respect to leases which have been signed but have not yet commenced are not material to our financial position or results of operations.

The components of lease expense were as follows:



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	(In thousands)
Components of lease expense:
Operating lease cost ^(a)	$	7,855		$	15,930
Financing lease cost:
Depreciation	3,009			5,265
Interest on lease liabilities	763			1,413
Sublease income ^(b)	(134		)	(256		)
Net lease expense	$	11,493		$	22,352

^(a)Includes short-term lease and variable lease costs, which are immaterial.

^(b) Sublease income relates to two warehouses in the U.S. and New Zealand.

Other information related to leases is as follows:



	Six Months Ended June 30, 2019
	(In thousands)

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(13,423	)
Operating cash flows from finance leases	(1,413		)
Financing cash flows from finance leases	(5,838		)
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	8,117
Finance leases	20,215
Weighted-average remaining lease term (years)
Operating leases	6.4
Finance leases	4.8
Weighted-average discount rate
Operating leases	4.1		%
Finance leases	5.7		%

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:



Years ending December 31,	Operating Lease Payments			Finance Lease Payments			Total Lease Payments
	(In thousands)
2019 (excluding 6 months ended June 30, 2019)	$	11,185		$	8,293		$	19,478
2020	19,219			16,000			35,219
2021	13,351			14,723			28,074
2022	8,218			9,518			17,736
2023	7,982			6,485			14,467
Thereafter	19,706			9,183			28,889
Total future minimum lease payments	79,661			64,202			143,863
Less: Interest	(11,040		)	(8,859		)	(19,899		)
Total future minimum lease payments less interest	$	68,621		$	55,343		$	123,964

Reported as of June 30, 2019
Accounts payable and accrued expenses	$	193		$	51		$	244
Operating lease obligations	68,428			—			68,428
Finance lease obligations	—			55,292			55,292
Total lease obligations	$	68,621		$	55,343		$	123,964

Arrangements wherein we are the lessor:

We receive lease income as the lessor for certain buildings and warehouses or space within a warehouse. The remaining term on existing leases ranges from 1 to 10 years. Lease income is generally fixed over the duration of the contract and each lease contract contains clauses permitting extension or termination. Lease incentives and options for purchase of the leased asset by the lessee are generally not included.

The Company is party to operating leases only and currently does not have sales-type or direct financing leases. Lease income is included within "Rent, storage, and warehouse services" in the Condensed Consolidated Statements of Operations as denoted in Note 23 "Revenues from Contracts with Customers".

Property, plant and equipment underlying operating leases is included in "Land" and "Buildings and improvements" on the Condensed Consolidated Balance Sheets. The gross value and net value of these assets was $369.3 million and $323.4 million, for Land and Buildings and improvements as of June 30, 2019. Depreciation expense for such assets was $4.7 million and $9.5 million for the three and six months ended June 30, 2019, respectively.

Future minimum lease payments as of June 30, 2019 were as follows (in thousands):



	Operating Leases
Year ending December 31,	Operating Leases
2019 (excluding 6 months ended June 30, 2019)	$	9,324
2020	14,267
2021	10,820
2022	9,529
2023	7,927
Thereafter	23,470
Total	$	75,337

Lease Accounting

Arrangements wherein we are the lessee:

As of June 30, 2019, the rights and obligations with respect to leases which have been signed but have not yet commenced are not material to our financial position or results of operations.

The components of lease expense were as follows:



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	(In thousands)
Components of lease expense:
Operating lease cost ^(a)	$	7,855		$	15,930
Financing lease cost:
Depreciation	3,009			5,265
Interest on lease liabilities	763			1,413
Sublease income ^(b)	(134		)	(256		)
Net lease expense	$	11,493		$	22,352

^(a)Includes short-term lease and variable lease costs, which are immaterial.

^(b) Sublease income relates to two warehouses in the U.S. and New Zealand.

Other information related to leases is as follows:



	Six Months Ended June 30, 2019
	(In thousands)

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(13,423	)
Operating cash flows from finance leases	(1,413		)
Financing cash flows from finance leases	(5,838		)
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	8,117
Finance leases	20,215
Weighted-average remaining lease term (years)
Operating leases	6.4
Finance leases	4.8
Weighted-average discount rate
Operating leases	4.1		%
Finance leases	5.7		%

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:



Years ending December 31,	Operating Lease Payments			Finance Lease Payments			Total Lease Payments
	(In thousands)
2019 (excluding 6 months ended June 30, 2019)	$	11,185		$	8,293		$	19,478
2020	19,219			16,000			35,219
2021	13,351			14,723			28,074
2022	8,218			9,518			17,736
2023	7,982			6,485			14,467
Thereafter	19,706			9,183			28,889
Total future minimum lease payments	79,661			64,202			143,863
Less: Interest	(11,040		)	(8,859		)	(19,899		)
Total future minimum lease payments less interest	$	68,621		$	55,343		$	123,964

Reported as of June 30, 2019
Accounts payable and accrued expenses	$	193		$	51		$	244
Operating lease obligations	68,428			—			68,428
Finance lease obligations	—			55,292			55,292
Total lease obligations	$	68,621		$	55,343		$	123,964

Arrangements wherein we are the lessor:

Future minimum lease payments as of June 30, 2019 were as follows (in thousands):



	Operating Leases
Year ending December 31,	Operating Leases
2019 (excluding 6 months ended June 30, 2019)	$	9,324
2020	14,267
2021	10,820
2022	9,529
2023	7,927
Thereafter	23,470
Total	$	75,337

Lease Accounting

Arrangements wherein we are the lessee:

As of June 30, 2019, the rights and obligations with respect to leases which have been signed but have not yet commenced are not material to our financial position or results of operations.

The components of lease expense were as follows:



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	(In thousands)
Components of lease expense:
Operating lease cost ^(a)	$	7,855		$	15,930
Financing lease cost:
Depreciation	3,009			5,265
Interest on lease liabilities	763			1,413
Sublease income ^(b)	(134		)	(256		)
Net lease expense	$	11,493		$	22,352

^(a)Includes short-term lease and variable lease costs, which are immaterial.

^(b) Sublease income relates to two warehouses in the U.S. and New Zealand.

Other information related to leases is as follows:



	Six Months Ended June 30, 2019
	(In thousands)

Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(13,423	)
Operating cash flows from finance leases	(1,413		)
Financing cash flows from finance leases	(5,838		)
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	8,117
Finance leases	20,215
Weighted-average remaining lease term (years)
Operating leases	6.4
Finance leases	4.8
Weighted-average discount rate
Operating leases	4.1		%
Finance leases	5.7		%

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:



Years ending December 31,	Operating Lease Payments			Finance Lease Payments			Total Lease Payments
	(In thousands)
2019 (excluding 6 months ended June 30, 2019)	$	11,185		$	8,293		$	19,478
2020	19,219			16,000			35,219
2021	13,351			14,723			28,074
2022	8,218			9,518			17,736
2023	7,982			6,485			14,467
Thereafter	19,706			9,183			28,889
Total future minimum lease payments	79,661			64,202			143,863
Less: Interest	(11,040		)	(8,859		)	(19,899		)
Total future minimum lease payments less interest	$	68,621		$	55,343		$	123,964

Reported as of June 30, 2019
Accounts payable and accrued expenses	$	193		$	51		$	244
Operating lease obligations	68,428			—			68,428
Finance lease obligations	—			55,292			55,292
Total lease obligations	$	68,621		$	55,343		$	123,964

Arrangements wherein we are the lessor:

Future minimum lease payments as of June 30, 2019 were as follows (in thousands):



	Operating Leases
Year ending December 31,	Operating Leases
2019 (excluding 6 months ended June 30, 2019)	$	9,324
2020	14,267
2021	10,820
2022	9,529
2023	7,927
Thereafter	23,470
Total	$	75,337