Leases

9 Months Ended

Jul. 31, 2020

Leases [Abstract]

Leases

LEASES

We primarily lease office space, parking facilities, warehouses, vehicles, and equipment. We determine if an arrangement is a lease at inception and begin recording lease activity at the commencement date, which is generally the date in which we take possession of or control the physical use of the asset. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit rate in a lease is readily determinable. Our incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. This incremental borrowing rate is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities. Our incremental borrowing rate as of November 1, 2019 was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842, as described in Note 2, “Basis of Presentation and Significant Accounting Policies.”

Our lease terms range from 1 to 30 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term. We typically include options to extend the lease in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end of its term, we would owe the lessor the remaining lease payments under the term of such lease. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We may rent or sublease to third parties certain real estate assets that we no longer use.

Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances. Prior to November 1, 2019, we recognized lease expense related to operating leases on a straight-line basis over the terms of the leases and, accordingly, recorded the difference between cash rent payments and recognition of rent expense as a deferred rent liability or prepaid rent. Landlord-funded leasehold improvements were also recorded as deferred rent liabilities and were amortized as a reduction of rent expense over the noncancelable term of the related operating lease. The ROU assets recognized upon adoption of Topic 842 include cumulative prepaid or accrued rent on the adoption date, unamortized lease incentives, and unamortized initial direct costs initially recognized prior to adoption of Topic 842. Following adoption of Topic 842, ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.

Certain of our lease agreements include variable rent payments, consisting primarily of rental payments adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities. Certain of our parking arrangements also contain variable rent payments that are a percentage of parking services revenue based on contractual levels. Variable rent lease components are not included in the lease liability.

Service concession arrangements within the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, are excluded from the scope of Topic 842. Lease costs associated with these arrangements are recorded as a reduction of revenues. See Note 3, “Revenues,” for further discussion.

The components of lease assets and liabilities and their classification on our unaudited Consolidated Balance Sheets as of July 31, 2020 were as follows:

		Balance at
(in millions)	Classification	July 31, 2020
Lease assets
Operating leases	Right-of-use assets	$	156.6
Finance leases	Property, plant and equipment, net(1)	6.8
Total lease assets		$	163.4
Lease liabilities
Current liabilities
Operating leases	Current portion of lease liabilities	$	37.2
Finance leases	Other accrued liabilities	4.1
Noncurrent liabilities
Operating leases	Long-term lease liabilities	141.1
Finance leases	Other noncurrent liabilities	1.8
Total lease liabilities		$	184.2

⁽¹⁾ Finance lease assets are recorded net of accumulated amortization of $13.9 million as of July 31, 2020.

Total lease costs for the three and nine months ended July 31, 2020 were $22.3 million and $75.9 million, respectively, including operating leases of $21.0 million and $72.2 million, respectively, and finance leases of $1.3 million, and $3.7 million, respectively. The components of lease costs and classification within the unaudited Consolidated Statements of Comprehensive Income (Loss) were as follows:

	Three Months Ended		Nine Months Ended
(in millions)	July 31, 2020		July 31, 2020
Operating lease costs:
Operating expenses(1)(2)	$	14.8	$	52.9
Selling, general and administrative expenses(3)	6.2		19.3
Finance lease costs:
Operating expenses(4)	1.2		3.3
Interest expense(5)	0.1		0.4
Total lease costs	$	22.3	$	75.9

⁽¹⁾ Related to certain parking arrangements.

⁽²⁾ Includes short-term lease costs and variable lease costs.

⁽³⁾ Includes short-term lease costs.

⁽⁴⁾ Represents amortization of leased assets.

⁽⁵⁾ Interest on lease liabilities.

The following table presents information on short-term and variable lease costs:

	Three Months Ended		Nine Months Ended
(in millions)	July 31, 2020		July 31, 2020
Short-term lease costs	$	9.5	$	35.9
Variable lease costs	—		3.0
Total short-term and variable lease costs	$	9.5	$	38.9

Sublease income generated during the three and nine months ended July 31, 2020 was immaterial. We continue to monitor the impact of the Pandemic on our subleases; however, we do not expect a significant impact.

The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the reconciliation to the present value of the lease liabilities as recorded on our unaudited Consolidated Balance Sheets as of July 31, 2020 are as follows:

(in millions)	Operating Lease Liabilities		Finance Lease Liabilities		Total
Remainder of fiscal 2020	$	11.3	$	1.0	$	12.3
Fiscal 2021	42.4		3.3		45.7
Fiscal 2022	35.0		1.7		36.7
Fiscal 2023	29.5		0.9		30.4
Fiscal 2024	24.0		—		24.0
Thereafter	61.4		—		61.4
Total lease payments	203.7		6.9		210.5
Less: imputed interest	25.4		1.0		26.3
Present value of lease liabilities	$	178.3	$	5.9	$	184.2

Future sublease rental income was excluded for the periods shown above as the amounts are immaterial.

We have entered into operating lease arrangements as of July 31, 2020 that are effective for future periods. The total amount of ROU assets and lease liabilities related to these arrangements is immaterial.

The following table includes the weighted-average remaining lease terms, in years, and the weighted-average discount rate used to calculate the present value of operating lease liabilities:

	As of
	July 31, 2020
Weighted-average remaining lease term (years)
Operating leases	6.1
Finance leases	2.2
Weighted-average discount rate
Operating leases	4.11	%
Finance leases	4.50	%

The following table includes supplemental cash and non-cash information related to operating leases:

	Nine Months Ended
(in millions)	July 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	34.5
Operating cash flows from finance leases	0.4
Financing cash flows from finance leases	2.7
Lease assets obtained in exchange for new operating lease liabilities(1)	15.4

⁽¹⁾ Excludes the amount initially capitalized in conjunction with the adoption of Topic 842.

As previously disclosed in our Annual Report, the amounts of minimum future commitments under non-cancelable operating and capital leases as of October 31, 2019 in accordance with Topic 840 were as follows:

(in millions)	Operating and Other(1)		Capital		Total
Fiscal 2020	$	42.8	$	3.1	$	45.9
Fiscal 2021	35.5		2.5		38.0
Fiscal 2022	30.3		1.3		31.6
Fiscal 2023	25.6		0.6		26.2
Fiscal 2024	20.5		—		20.5
Thereafter	51.8		—		51.8
Total(2)	$	206.5	$	7.5	$	214.0

⁽¹⁾ Includes total estimated sublease rental income of $15.8 million.

(2) Total undiscounted future minimum payments.

Leases

LEASES

We primarily lease office space, parking facilities, warehouses, vehicles, and equipment. We determine if an arrangement is a lease at inception and begin recording lease activity at the commencement date, which is generally the date in which we take possession of or control the physical use of the asset. ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis. We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit rate in a lease is readily determinable. Our incremental borrowing rate is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. This incremental borrowing rate is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities. Our incremental borrowing rate as of November 1, 2019 was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842, as described in Note 2, “Basis of Presentation and Significant Accounting Policies.”

Our lease terms range from 1 to 30 years. Some leases include one or more options to renew, with renewal terms that can extend the lease term. We typically include options to extend the lease in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end of its term, we would owe the lessor the remaining lease payments under the term of such lease. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We may rent or sublease to third parties certain real estate assets that we no longer use.

Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances. Prior to November 1, 2019, we recognized lease expense related to operating leases on a straight-line basis over the terms of the leases and, accordingly, recorded the difference between cash rent payments and recognition of rent expense as a deferred rent liability or prepaid rent. Landlord-funded leasehold improvements were also recorded as deferred rent liabilities and were amortized as a reduction of rent expense over the noncancelable term of the related operating lease. The ROU assets recognized upon adoption of Topic 842 include cumulative prepaid or accrued rent on the adoption date, unamortized lease incentives, and unamortized initial direct costs initially recognized prior to adoption of Topic 842. Following adoption of Topic 842, ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.

Certain of our lease agreements include variable rent payments, consisting primarily of rental payments adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as maintenance and utilities. Certain of our parking arrangements also contain variable rent payments that are a percentage of parking services revenue based on contractual levels. Variable rent lease components are not included in the lease liability.

Service concession arrangements within the scope of ASU No. 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services, are excluded from the scope of Topic 842. Lease costs associated with these arrangements are recorded as a reduction of revenues. See Note 3, “Revenues,” for further discussion.

The components of lease assets and liabilities and their classification on our unaudited Consolidated Balance Sheets as of July 31, 2020 were as follows:

		Balance at
(in millions)	Classification	July 31, 2020
Lease assets
Operating leases	Right-of-use assets	$	156.6
Finance leases	Property, plant and equipment, net(1)	6.8
Total lease assets		$	163.4
Lease liabilities
Current liabilities
Operating leases	Current portion of lease liabilities	$	37.2
Finance leases	Other accrued liabilities	4.1
Noncurrent liabilities
Operating leases	Long-term lease liabilities	141.1
Finance leases	Other noncurrent liabilities	1.8
Total lease liabilities		$	184.2

⁽¹⁾ Finance lease assets are recorded net of accumulated amortization of $13.9 million as of July 31, 2020.

Total lease costs for the three and nine months ended July 31, 2020 were $22.3 million and $75.9 million, respectively, including operating leases of $21.0 million and $72.2 million, respectively, and finance leases of $1.3 million, and $3.7 million, respectively. The components of lease costs and classification within the unaudited Consolidated Statements of Comprehensive Income (Loss) were as follows:

	Three Months Ended		Nine Months Ended
(in millions)	July 31, 2020		July 31, 2020
Operating lease costs:
Operating expenses(1)(2)	$	14.8	$	52.9
Selling, general and administrative expenses(3)	6.2		19.3
Finance lease costs:
Operating expenses(4)	1.2		3.3
Interest expense(5)	0.1		0.4
Total lease costs	$	22.3	$	75.9

⁽¹⁾ Related to certain parking arrangements.

⁽²⁾ Includes short-term lease costs and variable lease costs.

⁽³⁾ Includes short-term lease costs.

⁽⁴⁾ Represents amortization of leased assets.

⁽⁵⁾ Interest on lease liabilities.

The following table presents information on short-term and variable lease costs:

	Three Months Ended		Nine Months Ended
(in millions)	July 31, 2020		July 31, 2020
Short-term lease costs	$	9.5	$	35.9
Variable lease costs	—		3.0
Total short-term and variable lease costs	$	9.5	$	38.9

Sublease income generated during the three and nine months ended July 31, 2020 was immaterial. We continue to monitor the impact of the Pandemic on our subleases; however, we do not expect a significant impact.

The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the reconciliation to the present value of the lease liabilities as recorded on our unaudited Consolidated Balance Sheets as of July 31, 2020 are as follows:

(in millions)	Operating Lease Liabilities		Finance Lease Liabilities		Total
Remainder of fiscal 2020	$	11.3	$	1.0	$	12.3
Fiscal 2021	42.4		3.3		45.7
Fiscal 2022	35.0		1.7		36.7
Fiscal 2023	29.5		0.9		30.4
Fiscal 2024	24.0		—		24.0
Thereafter	61.4		—		61.4
Total lease payments	203.7		6.9		210.5
Less: imputed interest	25.4		1.0		26.3
Present value of lease liabilities	$	178.3	$	5.9	$	184.2

Future sublease rental income was excluded for the periods shown above as the amounts are immaterial.

We have entered into operating lease arrangements as of July 31, 2020 that are effective for future periods. The total amount of ROU assets and lease liabilities related to these arrangements is immaterial.

The following table includes the weighted-average remaining lease terms, in years, and the weighted-average discount rate used to calculate the present value of operating lease liabilities:

	As of
	July 31, 2020
Weighted-average remaining lease term (years)
Operating leases	6.1
Finance leases	2.2
Weighted-average discount rate
Operating leases	4.11	%
Finance leases	4.50	%

The following table includes supplemental cash and non-cash information related to operating leases:

	Nine Months Ended
(in millions)	July 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	34.5
Operating cash flows from finance leases	0.4
Financing cash flows from finance leases	2.7
Lease assets obtained in exchange for new operating lease liabilities(1)	15.4

⁽¹⁾ Excludes the amount initially capitalized in conjunction with the adoption of Topic 842.

As previously disclosed in our Annual Report, the amounts of minimum future commitments under non-cancelable operating and capital leases as of October 31, 2019 in accordance with Topic 840 were as follows:

(in millions)	Operating and Other(1)		Capital		Total
Fiscal 2020	$	42.8	$	3.1	$	45.9
Fiscal 2021	35.5		2.5		38.0
Fiscal 2022	30.3		1.3		31.6
Fiscal 2023	25.6		0.6		26.2
Fiscal 2024	20.5		—		20.5
Thereafter	51.8		—		51.8
Total(2)	$	206.5	$	7.5	$	214.0

⁽¹⁾ Includes total estimated sublease rental income of $15.8 million.

(2) Total undiscounted future minimum payments.