Leases

12 Months Ended

Dec. 31, 2022

Note 5. Leases

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract.

The Company has operating leases for certain service centers, office space, warehouses and equipment. Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Operating lease expense is recognized on a straight-line basis over the expected lease term. The Company’s incremental borrowing rate is used in determining the present value of future payments at the commencement date of the lease. Balances related to operating leases are included in operating lease ROU assets, operating lease liabilities and noncurrent operating lease liabilities on the audited Consolidated Balance Sheets.

The Company has finance leases primarily related to certain IT equipment. For finance leases, interest expense on the lease liability is recognized based on the incremental borrowing rate and the ROU assets are amortized on a straight-line basis over the shorter of the lease term or the useful life of the ROU assets. Balances related to finance leases are included in property, plant and equipment, net, accrued liabilities and other noncurrent liabilities on the audited Consolidated Balance Sheets.

The Company's original lease terms generally range from one year to thirty-five years. The remaining terms of the Company’s leases range from less than a year to seven years. All real estate leases are recorded on the audited Consolidated Balance Sheets. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the audited Consolidated Balance Sheets. Lease agreements for some locations provide for rent escalations and renewal options. Lease terms include the option to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Certain real estate leases require payment for taxes, insurance and maintenance which are considered non-lease components. The Company accounts for real estate leases and the related fixed non-lease components together as a single component.

The Company has non-cancelable sublease rental arrangements which did not reduce the future maturities of the operating lease liabilities at December 31, 2022 and 2021. The Company’s future rental commitments for leases with subleases were approximately $13.2 million and $17.3 million for the years ended December 31, 2022 and 2021, respectively. The Company remains secondarily liable under these leases in the event that the sub-lessee defaults under the sublease terms. The Company does not believe that material payments will be required as a result of the secondary liability provisions of the primary lease agreements.

The components of lease expense for the years ended December 31, 2022, 2021 and 2020 were as follows:


	Year Ended December 31,
	2022			2021			2020
Operating lease expense:
Operating lease expense	$	17.8		$	19.2		$	26.6
Sublease income		(4.4	)		(4.3	)		(4.5	)
Net operating lease expense	$	13.4		$	14.9		$	22.1

Finance lease expense:
Amortization of ROU assets	$	1.8		$	0.8		$	—
Interest on lease liabilities		0.2			0.1			—
Total finance lease expense	$	2.0		$	0.9		$	—

The Company’s finance lease liabilities as of December 31, 2022 and 2021 are presented within the Company’s audited Consolidated Balance Sheets as follows:


	December 31,
	2022		2021
Property, plant and equipment, net	$	7.1	$	7.5

Accrued liabilities	$	2.0	$	1.6
Other noncurrent liabilities		5.1		5.9
Total	$	7.1	$	7.5

Other information related to operating and finance leases for the years ended December 31, 2022, 2021 and 2020 and as of December 31, 2022 and 2021 was as follows:


	Year Ended December 31,
	2022		2021		2020
Supplemental cash flow information:
Cash paid related to operating leases	$	20.9	$	23.2	$	25.5
Cash paid related to finance leases		1.8		0.8		—

Non-cash disclosure:
Increase in operating lease liabilities due to new ROU assets	$	—	$	4.2	$	6.0
Increase in operating lease liabilities due to lease modifications and remeasurements		7.1		3.2		6.0
Increase in finance lease liabilities due to new ROU assets		1.4		8.3		—


	December 31,
	2022			2021
Weighted-average remaining lease term:
Operating leases	3.2 years			4.0 years
Finance leases	3.4 years			4.4 years
Weighted-average discount rate:
Operating leases		3.6	%		3.8	%
Finance leases		2.5	%		2.3	%

As of December 31, 2022, future maturities of lease liabilities were as follows:


	Operating Leases			Finance Leases
2023	$	17.6		$	2.2
2024		14.8			2.2
2025		9.5			2.0
2026		3.4			1.0
2027		0.7			—
2028 and thereafter		1.4			—
Total lease payments		47.4			7.4
Less: Interest		(2.7	)		(0.3	)
Present value of lease liabilities	$	44.7		$	7.1

During the years ended December 31, 2022, 2021 and 2020, the Company recorded impairment charges of $0.1 million, $0.5 million and $18.2 million, respectively, on operating lease ROU assets, as further described in Note 6, Restructuring, Impairment and Other Charges, net. The Company also recorded charges of $0.8 million and $2.2 million for acceleration of rent expense associated with abandoned leases during the years ended December 31, 2022 and 2020, respectively. Acceleration of rent expense charges were recorded in either cost of sales or SG&A in the Company’s audited Consolidated Statements of Operations, depending on the nature of the property.