Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Leases

We lease certain warehouses, distribution centers, office space, land, vehicles and equipment. We determine if an arrangement is a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Amounts associated with operating leases are included in operating lease assets (“ROU assets”), net, accrued expense and other current liabilities and noncurrent operating lease liability in our consolidated balance sheet. Amounts associated with finance leases are included in property and equipment, net, current maturities of long-term debt and long-term debt in our consolidated balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

If the leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate for operating leases that commenced in the period is determined by using the prior quarter end’s incremental borrowing rates.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine lease and nonlease components.

Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more, and the exercise of lease renewal options under these leases is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease ROU assets and liabilities at December 31, 2019 were as follows:

(amounts in thousands)	Balance Sheet Location	December 31, 2019
Assets:
Operating	Operating lease assets, net	$	202,053
Finance	Property and equipment, net (1)	4,045
Total lease assets		$	206,098
Liabilities:
Current:
Operating	Accrued expense and other current liabilities	$	45,254
Finance	Current maturities of long-term debt	1,280
Noncurrent:
Operating	Operating lease liability	164,026
Finance	Long-term debt	2,820
Total lease liability		$	213,380

(1) Finance lease assets are recorded net of accumulated depreciation of $1.5 million as of December 31, 2019.

During the year ended December 31, 2019, we obtained $28.6 million in right-of-use assets in exchange for operating lease liabilities, primarily relating to manufacturing equipment. In December 2019, we entered into a 10 year operating lease for a replacement corporate airplane with an ROU asset of $11.7 million.

The components of lease expense for the year ended December 31, 2019 were as follows:

(amounts in thousands)
Operating	$	54,535
Short term	11,543
Variable	3,806
Low value	1,738
Finance	90
Total lease costs	$	71,712

	December 31, 2019
Weighted average remaining lease terms (years):
Operating	6.7
Finance	3.7
Weighted average discount rate:
Operating	4.7%
Finance	4.4%

Future minimum lease payment obligations under operating and capital leases are as follows:

	December 31, 2019
(amounts in thousands)	Operating Leases (1)		Finance Leases		Total
2020	$	53,894	$	1,451	$	55,345
2021	43,854		1,143		44,997
2022	35,945		783		36,728
2023	30,014		699		30,713
2024	23,630		428		24,058
Thereafter	59,244		—		59,244
Total lease payments	246,581		4,504		251,085
Less: Interest	37,301		404		37,705
Present value of lease liability	$	209,280	$	4,100	$	213,380

(1) Operating lease payments include $15.4 million related to options to extend lease terms that are reasonably certain of being exercised.

Disclosures related to period prior to adoption of the Standard

Operating lease rent expense was $63.7 million and $50 million during the years ended December 31, 2018 and 2017 respectively.

Future minimum lease payment obligations under operating and capital leases are as follows:

	December 31, 2018
(amounts in thousands)	Operating Leases		Capital Leases (1)		Total
2019	$	49,128	$	862	$	49,990
2020	43,794		826		44,620
2021	30,885		561		31,446
2022	24,020		237		24,257
2023	19,352		225		19,577
Thereafter	33,943		23,968		57,911
Total future minimum lease payment obligations	$	201,122	$	26,679	$	227,801

⁽¹⁾ As of December 31, 2018, capital leases included maturities of approximately $24.5 million related to a build-to-suit lease that transitioned to an operating lease under the new leasing standard.

Leases

Leases

We lease certain warehouses, distribution centers, office space, land, vehicles and equipment. We determine if an arrangement is a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Amounts associated with operating leases are included in operating lease assets (“ROU assets”), net, accrued expense and other current liabilities and noncurrent operating lease liability in our consolidated balance sheet. Amounts associated with finance leases are included in property and equipment, net, current maturities of long-term debt and long-term debt in our consolidated balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

If the leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate for operating leases that commenced in the period is determined by using the prior quarter end’s incremental borrowing rates.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine lease and nonlease components.

Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more, and the exercise of lease renewal options under these leases is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease ROU assets and liabilities at December 31, 2019 were as follows:

(amounts in thousands)	Balance Sheet Location	December 31, 2019
Assets:
Operating	Operating lease assets, net	$	202,053
Finance	Property and equipment, net (1)	4,045
Total lease assets		$	206,098
Liabilities:
Current:
Operating	Accrued expense and other current liabilities	$	45,254
Finance	Current maturities of long-term debt	1,280
Noncurrent:
Operating	Operating lease liability	164,026
Finance	Long-term debt	2,820
Total lease liability		$	213,380

(1) Finance lease assets are recorded net of accumulated depreciation of $1.5 million as of December 31, 2019.

During the year ended December 31, 2019, we obtained $28.6 million in right-of-use assets in exchange for operating lease liabilities, primarily relating to manufacturing equipment. In December 2019, we entered into a 10 year operating lease for a replacement corporate airplane with an ROU asset of $11.7 million.

The components of lease expense for the year ended December 31, 2019 were as follows:

(amounts in thousands)
Operating	$	54,535
Short term	11,543
Variable	3,806
Low value	1,738
Finance	90
Total lease costs	$	71,712

	December 31, 2019
Weighted average remaining lease terms (years):
Operating	6.7
Finance	3.7
Weighted average discount rate:
Operating	4.7%
Finance	4.4%

Future minimum lease payment obligations under operating and capital leases are as follows:

	December 31, 2019
(amounts in thousands)	Operating Leases (1)		Finance Leases		Total
2020	$	53,894	$	1,451	$	55,345
2021	43,854		1,143		44,997
2022	35,945		783		36,728
2023	30,014		699		30,713
2024	23,630		428		24,058
Thereafter	59,244		—		59,244
Total lease payments	246,581		4,504		251,085
Less: Interest	37,301		404		37,705
Present value of lease liability	$	209,280	$	4,100	$	213,380

(1) Operating lease payments include $15.4 million related to options to extend lease terms that are reasonably certain of being exercised.

Disclosures related to period prior to adoption of the Standard

Operating lease rent expense was $63.7 million and $50 million during the years ended December 31, 2018 and 2017 respectively.

Future minimum lease payment obligations under operating and capital leases are as follows:

	December 31, 2018
(amounts in thousands)	Operating Leases		Capital Leases (1)		Total
2019	$	49,128	$	862	$	49,990
2020	43,794		826		44,620
2021	30,885		561		31,446
2022	24,020		237		24,257
2023	19,352		225		19,577
Thereafter	33,943		23,968		57,911
Total future minimum lease payment obligations	$	201,122	$	26,679	$	227,801

⁽¹⁾ As of December 31, 2018, capital leases included maturities of approximately $24.5 million related to a build-to-suit lease that transitioned to an operating lease under the new leasing standard.