Leases

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

5. Leases

Meredith's lessee portfolio is primarily comprised of real estate leases for the use of office space, land, and station facilities. The portfolio also contains leases for equipment, vehicles, and antenna and transmitter sites. Meredith determines whether an arrangement contains a lease at inception.

Lease assets and liabilities are recognized upon commencement of the lease based on the present value of the future minimum lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise that option. The remaining terms of the leases are three months to 22 years.

The Company generally utilizes its incremental borrowing rate based on information available at the commencement of the lease in determining the present value of future payments since the implicit rate for most of the Company's leases is not readily determinable.

Variable lease expense includes rental increases that are not fixed, such as those based on a consumer price index, and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities.

Lease agreements entered into that have not yet commenced were not significant at December 31, 2019.

Operating Leases

The total lease cost for operating leases included within the selling, general, and administrative line on the Condensed Consolidated Statements of Earnings was as follows:

Periods ended December 31, 2019	Three Months			Six Months
(In millions)
Operating lease cost	$	16.7		$	33.5
Variable lease cost	0.5			1.1
Short term lease cost	0.1			0.2
Sublease income	(1.6		)	(3.5		)
Total lease cost	$	15.7		$	31.3

The table below presents supplemental information related to operating leases:

Six months ended December 31, 2019
(In millions except for lease term and discount rate)
Operating cash flows for operating leases	$	33.2
Noncash lease liabilities arising from obtaining operating lease assets	2.9
Weighted average remaining lease term (in years)	11.4
Weighted average discount rate	5.3		%

Meredith purchased the underlying assets of a lease arrangement for $3.3 million during the second quarter of fiscal 2020, resulting in the derecognition of operating lease assets of $2.6 million and lease liabilities of $2.5 million.

Maturities of operating lease liabilities as of December 31, 2019, were as follows:

Years ending June 30,
(In millions)
2020	$	30.9
2021	61.4
2022	60.3
2023	60.1
2024	61.5
Thereafter	426.8
Total lease payments	701.0
Less: Interest	(181.9		)
Present value of lease liabilities	$	519.1

Future minimum lease payments under operating leases as of June 30, 2019, were as follows:

	Payments Due In
Years ending June 30,	2020		2021		2022		2023		2024		Thereafter		Total
(In millions)
Operating leases	$	61.3	$	57.5	$	54.9	$	52.4	$	52.8	$	397.7	$	676.6

Future minimum operating lease payments have been reduced by estimated future minimum sublease income of $7.7 million in fiscal 2020, $8.7 million in fiscal 2021, $9.3 million in fiscal 2022, $9.1 million in fiscal 2023, $9.5 million in fiscal 2024, and $24.2 million thereafter.

Finance Leases

Meredith holds finance leases related to a broadcast tower and certain equipment with remaining terms ranging between four and seven years. Finance lease assets of $3.6 million were recorded in property, plant, and equipment, and current finance lease liabilities of $0.7 million and long-term finance lease liabilities of $3.3 million were recorded in accrued expenses and other liabilities and other noncurrent liabilities, respectively, on the Condensed Consolidated Balance Sheets at December 31, 2019.

For the three and six months ended December 31, 2019, $0.1 million and $0.2 million of interest expense and $0.2 million and $0.4 million of amortization were recorded in the interest expense, net and the depreciation and amortization lines, respectively, on the Condensed Consolidated Statements of Earnings. Operating cash flows of

$0.2 million and financing cash flows of $0.7 million were also incurred during the six months ended December 31, 2019. As of December 31, 2019, the finance leases have a weighted average remaining term of 5.5 years and weighted average interest rate of 6.7 percent.

Lessor Activities

The Company has several agreements to lease space to third parties on its owned broadcast towers. These leases all meet the operating lease criteria. The associated rental revenue on these leases is recorded in the other revenue line on the Condensed Consolidated Statements of Earnings, which was $0.3 million and $0.5 million for the three and six months ended December 31, 2019, respectively.

Leases

5. Leases

Meredith's lessee portfolio is primarily comprised of real estate leases for the use of office space, land, and station facilities. The portfolio also contains leases for equipment, vehicles, and antenna and transmitter sites. Meredith determines whether an arrangement contains a lease at inception.

Lease assets and liabilities are recognized upon commencement of the lease based on the present value of the future minimum lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise that option. The remaining terms of the leases are three months to 22 years.

The Company generally utilizes its incremental borrowing rate based on information available at the commencement of the lease in determining the present value of future payments since the implicit rate for most of the Company's leases is not readily determinable.

Variable lease expense includes rental increases that are not fixed, such as those based on a consumer price index, and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities.

Lease agreements entered into that have not yet commenced were not significant at December 31, 2019.

Operating Leases

The total lease cost for operating leases included within the selling, general, and administrative line on the Condensed Consolidated Statements of Earnings was as follows:

Periods ended December 31, 2019	Three Months			Six Months
(In millions)
Operating lease cost	$	16.7		$	33.5
Variable lease cost	0.5			1.1
Short term lease cost	0.1			0.2
Sublease income	(1.6		)	(3.5		)
Total lease cost	$	15.7		$	31.3

The table below presents supplemental information related to operating leases:

Six months ended December 31, 2019
(In millions except for lease term and discount rate)
Operating cash flows for operating leases	$	33.2
Noncash lease liabilities arising from obtaining operating lease assets	2.9
Weighted average remaining lease term (in years)	11.4
Weighted average discount rate	5.3		%

Meredith purchased the underlying assets of a lease arrangement for $3.3 million during the second quarter of fiscal 2020, resulting in the derecognition of operating lease assets of $2.6 million and lease liabilities of $2.5 million.

Maturities of operating lease liabilities as of December 31, 2019, were as follows:

Years ending June 30,
(In millions)
2020	$	30.9
2021	61.4
2022	60.3
2023	60.1
2024	61.5
Thereafter	426.8
Total lease payments	701.0
Less: Interest	(181.9		)
Present value of lease liabilities	$	519.1

Future minimum lease payments under operating leases as of June 30, 2019, were as follows:

	Payments Due In
Years ending June 30,	2020		2021		2022		2023		2024		Thereafter		Total
(In millions)
Operating leases	$	61.3	$	57.5	$	54.9	$	52.4	$	52.8	$	397.7	$	676.6

Future minimum operating lease payments have been reduced by estimated future minimum sublease income of $7.7 million in fiscal 2020, $8.7 million in fiscal 2021, $9.3 million in fiscal 2022, $9.1 million in fiscal 2023, $9.5 million in fiscal 2024, and $24.2 million thereafter.

Finance Leases

Meredith holds finance leases related to a broadcast tower and certain equipment with remaining terms ranging between four and seven years. Finance lease assets of $3.6 million were recorded in property, plant, and equipment, and current finance lease liabilities of $0.7 million and long-term finance lease liabilities of $3.3 million were recorded in accrued expenses and other liabilities and other noncurrent liabilities, respectively, on the Condensed Consolidated Balance Sheets at December 31, 2019.

For the three and six months ended December 31, 2019, $0.1 million and $0.2 million of interest expense and $0.2 million and $0.4 million of amortization were recorded in the interest expense, net and the depreciation and amortization lines, respectively, on the Condensed Consolidated Statements of Earnings. Operating cash flows of

$0.2 million and financing cash flows of $0.7 million were also incurred during the six months ended December 31, 2019. As of December 31, 2019, the finance leases have a weighted average remaining term of 5.5 years and weighted average interest rate of 6.7 percent.

Lessor Activities

The Company has several agreements to lease space to third parties on its owned broadcast towers. These leases all meet the operating lease criteria. The associated rental revenue on these leases is recorded in the other revenue line on the Condensed Consolidated Statements of Earnings, which was $0.3 million and $0.5 million for the three and six months ended December 31, 2019, respectively.

Leases

5. Leases

Meredith's lessee portfolio is primarily comprised of real estate leases for the use of office space, land, and station facilities. The portfolio also contains leases for equipment, vehicles, and antenna and transmitter sites. Meredith determines whether an arrangement contains a lease at inception.

Lease assets and liabilities are recognized upon commencement of the lease based on the present value of the future minimum lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the Company will exercise that option. The remaining terms of the leases are three months to 22 years.

The Company generally utilizes its incremental borrowing rate based on information available at the commencement of the lease in determining the present value of future payments since the implicit rate for most of the Company's leases is not readily determinable.

Variable lease expense includes rental increases that are not fixed, such as those based on a consumer price index, and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities.

Lease agreements entered into that have not yet commenced were not significant at December 31, 2019.

Operating Leases

The total lease cost for operating leases included within the selling, general, and administrative line on the Condensed Consolidated Statements of Earnings was as follows:

Periods ended December 31, 2019	Three Months			Six Months
(In millions)
Operating lease cost	$	16.7		$	33.5
Variable lease cost	0.5			1.1
Short term lease cost	0.1			0.2
Sublease income	(1.6		)	(3.5		)
Total lease cost	$	15.7		$	31.3

The table below presents supplemental information related to operating leases:

Six months ended December 31, 2019
(In millions except for lease term and discount rate)
Operating cash flows for operating leases	$	33.2
Noncash lease liabilities arising from obtaining operating lease assets	2.9
Weighted average remaining lease term (in years)	11.4
Weighted average discount rate	5.3		%

Meredith purchased the underlying assets of a lease arrangement for $3.3 million during the second quarter of fiscal 2020, resulting in the derecognition of operating lease assets of $2.6 million and lease liabilities of $2.5 million.

Maturities of operating lease liabilities as of December 31, 2019, were as follows:

Years ending June 30,
(In millions)
2020	$	30.9
2021	61.4
2022	60.3
2023	60.1
2024	61.5
Thereafter	426.8
Total lease payments	701.0
Less: Interest	(181.9		)
Present value of lease liabilities	$	519.1

Future minimum lease payments under operating leases as of June 30, 2019, were as follows:

	Payments Due In
Years ending June 30,	2020		2021		2022		2023		2024		Thereafter		Total
(In millions)
Operating leases	$	61.3	$	57.5	$	54.9	$	52.4	$	52.8	$	397.7	$	676.6

Future minimum operating lease payments have been reduced by estimated future minimum sublease income of $7.7 million in fiscal 2020, $8.7 million in fiscal 2021, $9.3 million in fiscal 2022, $9.1 million in fiscal 2023, $9.5 million in fiscal 2024, and $24.2 million thereafter.

Finance Leases

Meredith holds finance leases related to a broadcast tower and certain equipment with remaining terms ranging between four and seven years. Finance lease assets of $3.6 million were recorded in property, plant, and equipment, and current finance lease liabilities of $0.7 million and long-term finance lease liabilities of $3.3 million were recorded in accrued expenses and other liabilities and other noncurrent liabilities, respectively, on the Condensed Consolidated Balance Sheets at December 31, 2019.

For the three and six months ended December 31, 2019, $0.1 million and $0.2 million of interest expense and $0.2 million and $0.4 million of amortization were recorded in the interest expense, net and the depreciation and amortization lines, respectively, on the Condensed Consolidated Statements of Earnings. Operating cash flows of

$0.2 million and financing cash flows of $0.7 million were also incurred during the six months ended December 31, 2019. As of December 31, 2019, the finance leases have a weighted average remaining term of 5.5 years and weighted average interest rate of 6.7 percent.

Lessor Activities

The Company has several agreements to lease space to third parties on its owned broadcast towers. These leases all meet the operating lease criteria. The associated rental revenue on these leases is recorded in the other revenue line on the Condensed Consolidated Statements of Earnings, which was $0.3 million and $0.5 million for the three and six months ended December 31, 2019, respectively.