Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

8. Leases

The Company adopted ASC Topic 842 - Leases as of January 1, 2019, using the transition method per ASU No. 2018-11 issued on July 2018 wherein entities were allowed to initially apply the new leases standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840 - Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC Topic 842 resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets ("ROU") and operating lease liabilities of approximately $163 million, as of January 1, 2019. Finance leases were not impacted by the adoption of ASC Topic 842, as finance lease liabilities and the corresponding ROU assets were already recorded in the balance sheet under the previous guidance, ASC Topic 840. The adoption did not materially impact the Company’s Consolidated Statements of Earnings or Cash Flows.

The Company has operating and finance leases for corporate offices, manufacturing plants, research and development facilities, shared services facilities, vehicle fleets and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

The Company determines if an arrangement is a lease at inception of a contract. Operating lease ROU assets are included in other assets and deferred charges and operating lease liabilities are included in other accrued expenses and other liabilities in the Consolidated Balance Sheet. Finance lease ROU assets are included in property and equipment, and the related lease liabilities are included in other accrued expenses and other liabilities in the Consolidated Balance Sheet.

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company's lease term include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. ROU assets also include any advance lease payments made and exclude lease incentives. As most of the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Finance lease agreements generally include an interest rate that is used to determine the present value of future lease payments. Operating fixed lease expense and finance lease depreciation expense are recognized on a straight-line basis over the lease term.

The components of lease costs were as follows:

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating Lease Costs:
Fixed	$	13,557	$	38,520
Variable	1,634		5,274
Short-term	3,998		13,736
Total*	$	19,189	$	57,530
* Finance lease cost and sublease income were immaterial.

Supplemental cash flow information were as follows:

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	13,836	$	39,237
Operating cash flows from finance leases	107		326
Financing cash flows from finance leases	490		1,430
Total	$	14,433	$	40,993
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	9,632		28,566
Finance leases	460		827
Total	$	10,092	$	29,393

Supplemental balance sheet information related to leases were as follows:

	September 30, 2019
Operating Leases:
Right of use assets:
Other assets and deferred charges	$	151,655
Lease liabilities:
Other accrued expenses	$	41,719
Other liabilities	117,595
Total operating lease liabilities	$	159,314
Finance Leases:
Right of use assets:
Property, plant and equipment, net (1)	$	8,678
Lease liabilities:
Other accrued expenses	$	1,601
Other liabilities	7,939
Total financing lease liabilities	$	9,540

⁽¹⁾ Finance lease assets are recorded net of accumulated depreciation of $4,203.

The aggregate future lease payments for operating and finance leases as of September 30, 2019 were as follows:

	Operating		Finance
2019 (excluding the nine months ending September 30, 2019)	$	12,410	$	523
2020	43,000		2,069
2021	33,983		1,962
2022	24,536		1,651
2023	16,018		1,219
Thereafter	46,931		3,925
Total lease payments	176,878		11,349
Less: Interest	(17,564)		(1,809)
Present value of lease liabilities	$	159,314	$	9,540

The aggregate future lease payments for operating and capital leases as of December 31, 2018 were as follows:

	Operating		Capital
2019	$	49,009	$	1,802
2020	38,620		1,748
2021	29,396		1,687
2022	21,767		1,392
2023	13,994		952
Thereafter	42,087		3,802
Total	$	194,873	$	11,383

Average lease terms and discount rates were as follows:

	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases	5.8
Finance leases	6.2
Weighted-average discount rate
Operating leases	3.3%
Finance leases	4.2%