Leases

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leases

NOTE 6: LEASES

The Company leases various assets including real estate, trucks, trailers, mobile equipment, processing equipment, and IT equipment.  The Company has noncancelable operating leases expiring at various times through 2036 and finance leases expiring at various times through 2027.  

In June 2021, we completed a sale-leaseback transaction for a group of service center properties located in Delaware, Florida, Kentucky, Minnesota, Missouri, Oklahoma, Pennsylvania, Tennessee, Texas, and Virginia for net proceeds of approximately $104 million. The total annual rent for these properties starts at approximately $6.4 million per year, with the amount increasing by 1.5% annually over the 15-year lease term, including, without limitation, during any renewal term. Each lease includes two renewal options of five years each. Under the terms of the lease agreement, the Company is responsible for all taxes, insurance, and utilities and is required to adequately maintain the properties for the lease term.

The transaction met the requirements for sale-leaseback accounting under ASC 842 and ASC 606. Accordingly, the Company recognized the sale of the properties, which resulted in a gain of approximately $62.5 million recorded in the Condensed Consolidated Statements of Comprehensive Income. The related land and buildings were removed from property, plant, and equipment and operating lease assets and liabilities of $84.4 million were recorded in the Condensed Consolidated Balance Sheets.

The following table summarizes the location and amount of lease assets and lease liabilities reported in our Condensed Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020:

		September 30,		December 31,
Leases	Balance Sheet Location	2021		2020
		(In millions)
Assets
Operating lease assets	Operating lease assets	$	204.7	$	108.3
Finance lease assets	Property, plant, and equipment, net(a)		42.2		45.5
Total lease assets		$	246.9	$	153.8
Liabilities
Current
Operating	Current portion of operating lease liabilities	$	25.4	$	20.7
Finance	Other accrued liabilities		13.2		9.0
Noncurrent
Operating	Noncurrent operating lease liabilities		176.6		93.0
Finance	Other noncurrent liabilities		16.5		14.3
Total lease liabilities		$	231.7	$	137.0

(a) Finance lease assets were recorded net of accumulated amortization of $16.6 million and $21.0 million as of September 30, 2021 and December 31, 2020, respectively.

The following table summarizes the location and amount of lease expense reported in our Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2021 and 2020:

		Three Months Ended September 30,				Nine Months Ended September 30,
Lease Expense	Location of Lease Expense Recognized in Income	2021		2020		2021		2020
		(In millions)
Operating lease expense	Warehousing, delivery, selling, general, and administrative	$	8.8	$	6.1	$	21.6	$	18.0
Finance lease expense
Amortization of lease assets	Warehousing, delivery, selling, general, and administrative		1.3		2.2		4.1		5.6
Interest on lease liabilities	Interest and other expense on debt		0.2		0.3		0.7		1.0
Variable lease expense	Warehousing, delivery, selling, general, and administrative		0.7		0.7		2.1		2.3
Short-term lease expense	Warehousing, delivery, selling, general, and administrative		0.7		0.5		2.0		1.8
Total lease expense		$	11.7	$	9.8	$	30.5	$	28.7

The following table presents maturity analysis of lease liabilities at September 30, 2021:

Maturity of Lease Liabilities	Operating Leases(a)			Finance Leases
	(In millions)
2021	$	8.2		$	3.0
2022		30.7			12.7
2023		26.9			6.1
2024		24.6			5.2
2025		20.8			2.7
After 2025		127.6			1.6
Total lease payments		238.8			31.3
Less: Interest(b)		(36.8	)		(1.6	)
Present value of lease liabilities(c)	$	202.0		$	29.7

(a) There were no operating leases with options to extend lease terms that are reasonably certain of being exercised, and the lease payments excluded an estimated amount of $64.2 million of legally binding lease payments for leases signed but not yet commenced.

(b) Calculated using the discount rate for each lease.

(c) Includes the current portion of $25.4 million for operating leases and $13.2 million for finance leases.

The following table shows the weighted-average remaining lease term and discount rate for operating and finance leases, respectively, at September 30, 2021 and December 31, 2020:

	September 30,			December 31,
Lease Term and Discount Rate	2021			2020
Weighted-average remaining lease term (years)
Operating leases		10.4			7.3
Finance leases		2.9			2.8
Weighted-average discount rate
Operating leases		3.2	%		3.4	%
Finance leases		3.5	%		4.4	%

Information reported in our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 and 2020 is summarized below:

	Nine Months Ended September 30,
Other Information	2021		2020
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	21.5	$	18.9
Operating cash flows from finance leases		0.7		1.0
Financing cash flows from finance leases		7.5		9.9
Assets obtained in exchange for lease obligations
Operating leases		115.4		0.9
Finance leases		13.9		1.4