Lessee Arrangements

9 Months Ended

Sep. 30, 2019

The Company determines at contract inception whether the contract represents or contains a lease and conveys the right to control the use of an identified asset over a period of time in exchange for consideration. For leases with terms greater than 12 months, the Company recognizes right-of-use assets and lease obligations at the lease commencement date based on a present value of lease payments over the lease term. Lease payments included in the measurement of right-of-use assets and lease obligations consist of: (i) fixed payments, including periodic rent increases and excluding any lease incentives paid or payable to the Company by a lessor, and (ii) certain variable payments that depend on an index or a market rate measured on the commencement date. The Company estimates its incremental borrowing rate based on the remaining lease term and remaining lease payments, as well as other information available at lease commencement since a readily determinable implicit rate is not provided in the Company's leases. The Company has elected to utilize a portfolio approach as it pertains to the application of the appropriate discount rates to its portfolios of leases. The weighted average discount rate for operating leases was 5.20% as of September 30, 2019. Right-of-use assets for operating leases are initially measured on the lease commencement date and include any initial direct costs incurred, as well as lease obligation amounts, net of any lease incentives received from a lessor. Lease expense for operating leases is recognized on a straight-line basis over the lease term which includes: (i) a non-cancelable term during which the Company has a right to use an underlying asset, (ii) renewal options that extend the lease, are in the control of the lessor and are reasonably certain to be exercised, and (iii) options to terminate the lease before the end of its non-cancelable term that are not reasonably certain to be exercised. Variable payments that are excluded from the measurement of right-of-use assets and lease obligations consist primarily of non-lease related services, the Company's proportionate share of operating expenses for the leased facilities and certain payments related to excess mileage and usage charges for the leased vehicles and equipment. Such variable payments are recognized as lease expense in the results of operations when the obligation is incurred. The Company does not record right-of-use assets and lease obligations for leases with an initial term of 12 months or less and recognizes lease expense on a straight-line basis over the lease term. Finance leases are included in "Property and equipment, net", "Debt payable within one year" and "Debt payable after one year" in the accompanying unaudited Consolidated Balance Sheets and are not material at September 30, 2019 and December 31, 2018.

The Company leases manufacturing and office facilities, as well as certain vehicles and equipment under operating leases. Certain manufacturing facilities are leased under land and building lease arrangements where lease terms as of September 30, 2019 consist of a remaining non-cancelable lease term of up to 7.9 years and renewal options that are reasonably certain to be exercised for an additional term of up to 31.8 years. The weighted average remaining lease term for operating leases was 15.0 years as of September 30, 2019.

The following table summarizes components of lease expense for the three and nine months ended September 30, 2019:



(In millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease expense	$	2.9	$	9.3
Variable lease expense	1.0		3.5
Short-term lease expense	0.7		1.6
Total lease expense	$	4.6	$	14.4

The following table summarizes lease liability maturities as of September 30, 2019:



(In millions)	Amount
Remainder of 2019	$	2.9
2020	9.0
2021	5.5
2022	3.2
2023	2.2
Thereafter	26.1
Total undiscounted lease payments	48.9
Less: imputed interest	(14.6		)
Present value of lease payments	34.3
Less: operating lease obligations payable within one year	(8.6		)
Long-term operating lease obligations	$	25.7

The following table summarizes supplemental cash flow information related to leases during the nine months ended September 30, 2019:



(In millions)	Amount
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.4
Operating lease right of use assets obtained in exchange for new lease obligations:
Upon adoption of Topic 842	$	40.8
During the nine months ended September 30, 2019	3.7
Total	$	53.9

As of December 31, 2018, future minimum noncancelable payments for operating leases are as follows:



(In millions)
Year ending December 31,	Amount
2019	$	12.1
2020	8.3
2021	4.6
2022	2.6
2023	1.9
Thereafter	28.1
Total	$	57.6

Lessee Arrangements

The following table summarizes components of lease expense for the three and nine months ended September 30, 2019:



(In millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease expense	$	2.9	$	9.3
Variable lease expense	1.0		3.5
Short-term lease expense	0.7		1.6
Total lease expense	$	4.6	$	14.4

The following table summarizes lease liability maturities as of September 30, 2019:



(In millions)	Amount
Remainder of 2019	$	2.9
2020	9.0
2021	5.5
2022	3.2
2023	2.2
Thereafter	26.1
Total undiscounted lease payments	48.9
Less: imputed interest	(14.6		)
Present value of lease payments	34.3
Less: operating lease obligations payable within one year	(8.6		)
Long-term operating lease obligations	$	25.7

The following table summarizes supplemental cash flow information related to leases during the nine months ended September 30, 2019:



(In millions)	Amount
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.4
Operating lease right of use assets obtained in exchange for new lease obligations:
Upon adoption of Topic 842	$	40.8
During the nine months ended September 30, 2019	3.7
Total	$	53.9

As of December 31, 2018, future minimum noncancelable payments for operating leases are as follows:



(In millions)
Year ending December 31,	Amount
2019	$	12.1
2020	8.3
2021	4.6
2022	2.6
2023	1.9
Thereafter	28.1
Total	$	57.6