Leasing

12 Months Ended

Dec. 31, 2020

Leases of Lessor Disclosure [Text Block]

14. LEASING

When an agreement grants us the right to substantially all of the economic benefits associated with an identified asset, and we are able to direct the use of that asset throughout the term of the agreement, we have a lease. We lease certain facilities, manufacturing machinery and equipment, and furniture under finance leases, and we also lease certain commercial office and production facilities, manufacturing machinery and equipment, vehicles and other assets under operating leases. Some of our leases include options to extend or terminate the leases and these options have been included in the relevant lease term to the extent that they are reasonably certain to be exercised.

The lease consideration for some of our facilities and machinery and equipment is variable, as it is based on various indices or usage of the underlying assets, respectively. Variable lease payments based on indices have been included in the related right-of-use assets and lease liabilities on our Consolidated Balance Sheets, while variable lease payments based on usage of the underlying asset have been excluded as they do not represent present rights or obligations.

Lease cost consists of the following:


	Twelve Months Ended
	December 31,
	2020		2019
	(in millions)
Finance lease cost
Amortization of right-of-use assets	$	1.8	$	1.0
Interest on lease liabilities	0.4		0.3
Total finance lease cost	2.2		1.3

Operating lease cost	32.7		28.9
Short-term lease cost	3.0		5.9
Variable lease cost	2.9		7.2

Total lease cost	$	40.8	$	43.3

For the year ended December 31, 2020, $28.4 million and $10.2 million were recorded to Cost of goods sold (COGS) and Selling, general and administrative expenses (SG&A), respectively, related to our operating leases, on our Consolidated Statements of Operations, as compared to $31.9 million and $10.1 million, respectively, for the year ended December 31, 2019 and $28.4 million and $10.0 million, respectively, for the year ended December 31, 2018.

The following table summarizes additional information related to our lease agreements.


	Twelve Months Ended
	December 31,
	2020			2019
	(in millions, except lease term and rate)

Cash paid for amounts included in measurement of lease liabilities
Operating cash flows from finance leases	$	0.3		$	0.3
Operating cash flows from operating leases	35.1			29.0
Financing cash flows from finance leases	3.0			1.0

Weighted-average remaining lease term - finance leases	15.8 years			2.8 years
Weighted-average remaining lease term - operating leases	8.7 years			9.2 years

Weighted-average discount rate - finance leases	4.2		%	5.1		%
Weighted-average discount rate - operating leases	5.7		%	6.1		%

As the rate implicit in the lease is typically unknown, the discount rate used to determine the lease liability for the majority of our leases is the collateralized incremental borrowing rate in the applicable geographic area for a similar term and amount as the lease agreement.

Future undiscounted minimum payments under non-cancelable leases are as follows:


	Finance Leases		Operating Leases
	(in millions)
2021	$	3.9	$	27.9
2022	3.1		23.8
2023	1.6		17.3
2024	1.1		12.8
2025	1.1		10.4
Thereafter	18.4		57.4
Total future undiscounted minimum lease payments	29.2		149.6
Less: Impact of discounting	(7.6)		(32.6)
Total	$	21.6	$	117.0

The right-of-use assets and lease liabilities recorded on our Consolidated Balance Sheets are as follows:


	December 31, 2020				December 31, 2019
	Finance Leases		Operating Leases		Finance Leases		Operating Leases
	(in millions)				(in millions)
Property, plant and equipment, net	$	24.9	$	—	$	7.3	$	—
Operating lease right-of-use assets	—		116.6		—		118.5
Total	$	24.9	$	116.6	$	7.3	$	118.5

Current portion of operating lease liabilities	$	—	$	22.6	$	—	$	21.8
Accrued expenses and other	3.3		—		3.3		—
Long-term portion of operating lease liabilities	—		94.4		—		96.7
Postretirement benefits and other long-term liabilities	18.3		—		4.0		—
Total	$	21.6	$	117.0	$	7.3	$	118.5

ASC 842 Adoption of Practical Expedients

We have elected to adopt, for all classes of underlying assets, a package of practical expedients provided under ASC 842 that allow us to 1) not reassess whether existing or expired contracts contain or contained a lease; 2) not reassess the lease classification (operating or financing) of our existing leases at adoption; and 3) not reassess initial direct costs for existing leases.

ASC 842 also provides a practical expedient that allows companies to exclude balance sheet recognition of right-of-use assets and associated liabilities for lease terms of 12 months or less, which we have elected as part of our adoption of ASC 842 for all classes of underlying assets. We do not include right-of-use assets and operating lease liabilities on our Consolidated Balance Sheet for leases with a term of 12 months or less.

We have also elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts that contain both. These lease agreements are accounted for as a single lease component for all classes of underlying assets.

Leases Not Yet Commenced

As of December 31, 2020, we have entered into additional leases that have not yet commenced of approximately $85.2 million, which primarily reflects a lease of a facility in the United States, which has a term of 15 years, and the lease of our new European headquarters and engineering center in Langen, Germany, which has a term of 20 years. These leases are expected to commence in 2021.