Leases

9 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

LEASES

The Company leases certain manufacturing and office facilities, land, vehicles, and equipment. The terms of these leases vary widely, although most have terms between 3 and 10 years.

In accordance with ASC 842, Leases, the Company recognizes a “right-of-use” asset and related lease liability at the commencement date of each lease based on the present value of the fixed lease payments over the expected lease term. The lease term for this purpose will include any renewal period where the Company determines that it is reasonably certain that it will exercise the option to renew. While certain leases also permit Catalent to terminate the lease in advance of the nominal term upon payment of an associated penalty, the Company generally does not take into account potential early termination dates in its determination of the lease term as it is reasonably certain not to exercise an early-termination option as of the lease commencement date.

The Company uses its incremental borrowing rate, which represents the interest rate the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms, in order to calculate the present value of a lease, since the implicit discount rate for its leases is not readily determinable.

Fixed lease payments are recognized on straight-line basis over the lease term, while variable payments are recognized in the period incurred. As permitted by ASC 842, the Company has elected not to separate those components of a lease agreement not related to the leasing of an asset from those components that are related.

The Company does not record leases with an initial lease term of 12 months or less on its consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term.

Supplemental information concerning the leases recorded in the Company's unaudited consolidated balance sheet as of March 31, 2020 is detailed in the following table:

(Dollars in millions)	Line item in the consolidated balance sheet	Balance at March 31, 2020
Right-of-use assets:
Finance leases	Property, plant, and equipment, net	$	100.6
Operating leases	Other assets	90.7
Current lease liabilities:
Finance leases	Current portion of long-term obligations and other short-term borrowings	12.2
Operating leases	Other accrued liabilities	15.0
Non-current lease liabilities:
Finance leases	Long-term obligations, less current portion	124.9
Operating leases	Other liabilities	73.5

The components of the net lease costs for the three and nine months ended March 31, 2020 reflected in the Company's unaudited consolidated statement of operations were as follows:

(Dollars in millions)	Three months ended March 31, 2020		Nine Months ended March 31, 2020
Finance lease costs:
Amortization of right-of-use assets	$	2.9	$	8.6
Interest on lease liabilities	2.7		9.1
Total	5.6		17.7
Operating lease costs	5.3		14.2
Variable lease costs	1.3		5.0
Total lease costs	$	12.2	$	36.9

The weighted average remaining lease term and weighted average discount rate related to the Company's right-of-use assets and lease liabilities as of March 31, 2020 are as follows:

Weighted average remaining lease term (years):
Finance leases	13.4
Operating leases	8.9
Weighted average discount rate:
Finance leases	8.6	%
Operating leases	4.5	%

Supplemental information concerning the cash-flow impact arising from the Company's leases for the nine months ended March 31, 2020 recorded in the Company's unaudited consolidated statement of cash flows is detailed in the following table (in millions):

	Nine Months ended March 31, 2020
Cash paid for amounts included in lease liabilities:
Financing cash flows used for finance leases	$	44.8
Operating cash flows used for finance leases	9.1
Operating cash flows used for operating leases	9.6
Non-cash transactions:
Right-of-use assets obtained in exchange for new finance lease liabilities	11.9
Right-of-use assets obtained in exchange for new operating lease liabilities	53.2

As of March 31, 2020, the Company expects that its future minimum lease payments will become due and payable as follows:

(Dollars in millions)	Finance Leases		Operating Leases		Total
Remainder of fiscal 2020	$	5.9	$	4.4	$	10.3
2021	21.6		17.5		39.1
2022	19.3		16.6		35.9
2023	18.0		16.1		34.1
2024	17.0		12.1		29.1
Thereafter	142.4		43.5		185.9
Total minimum lease payments	224.2		110.2		334.4
Less: interest	87.1		21.7		108.8
Total lease liabilities	$	137.1	$	88.5	$	225.6