Leases

3 Months Ended

Mar. 31, 2019

We determine if an arrangement is a lease at inception. We have operating and finance leases for corporate offices, research and development facilities, vehicles, and equipment. Our leases have remaining lease terms of 1 to 14 years, some of which have options to extend the leases, and some of which include options to terminate the leases. Finance leases are included in property and equipment, short-term borrowings and current maturities of long-term debt, and long-term debt in our consolidated condensed balance sheets. Finance leases are not material to our consolidated condensed statements of operations, consolidated condensed balance sheets, and consolidated condensed statements of cash flows. Beginning January 1, 2019 operating leases are included in operating lease assets, other current liabilities, and noncurrent operating lease liabilities in our consolidated condensed balance sheet.

Operating lease 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. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable. The operating lease assets also include any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option.

Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. Variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the obligation for these payments was incurred. Variable lease expense recognized in the three months ended March 31, 2019 was not material.

We elected not to apply the recognition requirements of Accounting Standards Codification 842, Leases, to short-term leases, which are deemed to be leases with a lease term of 12 months or less. Instead, we recognized lease payments in the consolidated condensed statements of operations on a straight-line basis over the lease term and variable payments in the period in which the obligation for these payments was incurred. We elected this policy for all classes of underlying assets. Short-term lease expense recognized in the three months ended March 31, 2019 was not material.

The impact of operating leases to our consolidated condensed financial statements were as follows:



	Three Months Ended March 31,
	2019
Lease cost
Operating lease cost	$	32.1

Other information
Operating cash flows from operating leases	36.9
Right-of-use assets obtained in exchange for new operating lease liabilities	35.1
Weighted-average remaining lease term - operating leases	8 years
Weighted-average discount rate - operating leases	3.7		%

As of March 31, 2019, the annual minimum lease payments of our operating lease liabilities were as follows:




Year 1	$	129.3
Year 2	111.7
Year 3	80.1
Year 4	69.5
Year 5	55.8
After Year 5	285.0
Total lease payments	731.4
Less imputed interest	(109.5		)
Total	$	621.9

Leases

The impact of operating leases to our consolidated condensed financial statements were as follows:



	Three Months Ended March 31,
	2019
Lease cost
Operating lease cost	$	32.1

Other information
Operating cash flows from operating leases	36.9
Right-of-use assets obtained in exchange for new operating lease liabilities	35.1
Weighted-average remaining lease term - operating leases	8 years
Weighted-average discount rate - operating leases	3.7		%

As of March 31, 2019, the annual minimum lease payments of our operating lease liabilities were as follows:




Year 1	$	129.3
Year 2	111.7
Year 3	80.1
Year 4	69.5
Year 5	55.8
After Year 5	285.0
Total lease payments	731.4
Less imputed interest	(109.5		)
Total	$	621.9