LEASES

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

LEASES

We lease office and retail space, warehouse and distribution facilities, land, vehicles, and equipment. We determine if an agreement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Right-of-use ("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 based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date.

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental borrowing rate is derived from information available at the lease commencement date.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. A limited number of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants.

For real estate, equipment and vehicles that support selling, marketing and general administrative activities the Company accounts for the lease and non-lease components as a single lease component. These asset categories comprise the majority of our leases. The lease and non-lease components of real estate and equipment leases supporting production activities are not accounted for as a single lease component. Consideration for such contracts are allocated to the lease component and non-lease components based upon relative standalone prices either observable or estimated if observable prices are not readily available.

The components of lease expense were as follows:

Lease expense	Classification	2019
Operating lease cost	Cost of sales or SM&A (1)	$	42,580
Finance lease cost:
Amortization of ROU assets	Depreciation and amortization (1)	7,821
Interest on lease liabilities	Interest expense, net	4,467
Net lease cost (2)		$	54,868

(1) Supply chain-related amounts were included in cost of sales.

(2) Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

Information regarding our lease terms and discount rates were as follows:

	2019
Weighted-average remaining lease term (years)
Operating leases	14.3
Finance leases	31.4
Weighted-average discount rate
Operating leases	3.8	%
Finance leases	6.0	%

Supplemental balance sheet information related to leases were as follows:

Leases	Classification	2019
Assets
Operating lease ROU assets	Other assets (non-current)	220,678
Finance lease ROU assets, at cost	Property, plant and equipment, gross	101,142
Accumulated amortization	Accumulated depreciation	(7,225	)
Finance lease ROU assets, net	Property, plant and equipment, net	93,917
Total leased assets		314,595
Liabilities
Current
Operating	Accrued liabilities	29,209
Finance	Current portion of long-term debt	4,079
Non-current
Operating	Other long-term liabilities	184,163
Finance	Long-term debt	75,564
Total lease liabilities		293,015

The maturity of our lease liabilities as of December 31, 2019 were as follows:

	Operating leases	Finance leases	Total
2020	36,803	7,798	44,601
2021	30,205	6,641	36,846
2022	16,480	5,027	21,507
2023	13,846	4,629	18,475
2024	13,062	4,618	17,680
Thereafter	172,752	165,693	338,445
Total lease payments	283,148	194,406	477,554
Less: Imputed interest	69,776	114,763	184,539
Total lease liabilities	213,372	79,643	293,015

As of December 31, 2019, the Company has entered into additional leases as a lessee, primarily for real estate. These leases have not yet commenced and will result in ROU assets and corresponding lease liabilities of approximately $19,000. These leases are expected to commence in 2020, with lease terms between two and five years.

Supplemental cash flow and other information related to leases were as follows:

	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	39,910
Operating cash flows from finance leases	4,467
Financing cash flows from finance leases	4,018
ROU assets obtained in exchange for lease liabilities:
Operating leases	27,890
Finance leases	7,943

Disclosures related to periods prior to adoption of ASU 2016-02, Leases (Topic 842)

Future minimum payments under lease arrangements with a remaining term in excess of one year were as follows as of December 31, 2018:

	Operating leases (1)		Capital leases (2)
2019	$	38,041	$	6,980
2020	24,047		5,272
2021	16,883		3,901
2022	15,424		4,399
2023	13,494		4,577
Thereafter	185,608		169,686

(1) Future minimum rental payments reflect commitments under non-cancelable operating leases primarily for offices, retail stores, warehouse and distribution facilities. Total rent expense for the years ended December 31, 2018 and 2017 was $34,157 and $25,525, respectively, including short-term rentals.

(2)

Future minimum rental payments reflect commitments under non-cancelable capital leases primarily for offices and warehouse facilities, as well as vehicles.