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Leases | 6 Months Ended
--- | ---
Jun. 30, 2020
Leases [Abstract] |
Leases | Leases Lessor Sealed Air has contractual obligations as a lessor with respect to free on loan equipment and leased equipment, both sales-type and operating. The consideration in a contract that contains both lease and non-lease components is allocated based on the standalone selling price. Our contractual obligations for operating leases can include termination and renewal options. Our contractual obligations for sales-type leases tend to have fixed terms and can include purchase options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise. All lease payments are primarily fixed in nature and therefore captured in the lease receivable. Our lease receivable balance at June 30, 2020 was:
(in millions) |  | Short-Term (12 months or less) |  | Long-Term |  | Total
Total lease receivable (Sales-type and Operating) |  | $ | 4.8 |  |  | $ | 11.2 |  |  | $ | 16.0 |
Lessee Sealed Air has contractual obligations as a lessee with respect to warehouses, offices, manufacturing facilities, IT equipment, automobiles, and material production equipment. Under the leasing standard, ASC 842, leases that are more than one year in duration are capitalized and recorded on the balance sheet. Some of our leases, namely for automobiles and real estate, offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation. In determining the discount rate to use in calculating the present value of lease payments, we estimate the rate of interest we would pay on a collateralized loan with the same payment terms as the lease by utilizing our bond yields traded in the secondary market to determine the estimated cost of funds for the particular tenor. We update our assumptions and discount rates on a quarterly basis. We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842. This means, for those leases that qualify, we will not recognize right of use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets. We have also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes. Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred. Generally, variable lease payments are based on usage and common area maintenance. These payments will be included as variable lease expense when recognized. The following table details our lease obligations included in our Condensed Consolidated Balance Sheets.
(in millions) |  | June 30, 2020 |  | December 31, 2019
Other non-current assets: |  |  |  |
Finance leases - ROU assets |  | $ | 58.9 |  |  | $ | 54.8 |
Finance leases - Accumulated depreciation |  | (19.9) |  |  | (15.0) |
Operating lease right-of-use-assets: |  |  |  |
Operating leases - ROU assets |  | 120.6 |  |  | 118.8 |
Operating leases - Accumulated depreciation |  | (38.9) |  |  | (28.7) |
Total lease assets |  | $ | 120.7 |  |  | $ | 129.9 |
Current portion of long-term debt: |  |  |  |
Finance leases |  | $ | (10.5) |  |  | (10.4) |
Current portion of operating lease liabilities: |  |  |  |
Operating leases |  | (24.9) |  |  | (26.2) |
Long-term debt, less current portion: |  |  |  |
Finance leases |  | (27.4) |  |  | (28.7) |
Long-term operating lease liabilities, less current portion: |  |  |  |
Operating leases |  | (58.7) |  |  | (65.7) |
Total lease liabilities |  | $ | (121.5) |  |  | $ | (131.0) |
At June 30, 2020, estimated future minimum annual rental commitments under non-cancelable real and personal property leases were as follows:
(in millions) |  | Operating leases |  | Finance leases
Remainder of 2020 |  | $ | 15.0 |  |  | $ | 6.6 |
2021 |  | 25.2 |  |  | 11.9 |
2022 |  | 18.1 |  |  | 7.3 |
2023 |  | 12.5 |  |  | 3.7 |
2024 |  | 8.1 |  |  | 2.1 |
Thereafter |  | 16.3 |  |  | 13.5 |
Total lease payments |  | 95.2 |  |  | 45.1 |
Less: Interest |  | (11.6) |  |  | (7.2) |
Present value of lease liabilities |  | $ | 83.6 |  |  | $ | 37.9 |
The following lease cost is included in our Condensed Consolidated Statements of Operations:
| Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |
(in millions) | 2020 |  | 2019 |  | 2020 |  | 2019
Lease cost(1) |  |  |  |  |  |  |
Finance leases |  |  |  |  |  |  |
Amortization of ROU assets | $ | 2.8 |  |  | $ | 2.0 |  |  | $ | 5.5 |  |  | $ | 4.1 |
Interest on lease liabilities | 0.4 |  |  | 0.5 |  |  | 0.9 |  |  | 1.0 |
Operating leases | 7.8 |  |  | 7.9 |  |  | 15.9 |  |  | 16.3 |
Short-term lease cost | 0.8 |  |  | 1.0 |  |  | 1.7 |  |  | 1.9 |
Variable lease cost | 1.2 |  |  | 2.1 |  |  | 2.8 |  |  | 3.1 |
Total lease cost | $ | 13.0 |  |  | $ | 13.5 |  |  | $ | 26.8 |  |  | $ | 26.4 |
(1) With the exception of Interest on lease liabilities, we record lease costs to Cost of sales or Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations, depending on the use of the leased asset. Interest on lease liabilities is recorded to Interest expense, net on the Condensed Consolidated Statement of Operations.
|  | Six Months Ended June 30, |  |
(in millions) |  | 2020 |  | 2019
Other information: |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows - finance leases |  | $ | 2.3 |  |  | $ | 2.0 |
Operating cash flows - operating leases |  | $ | 17.5 |  |  | $ | 17.3 |
Financing cash flows - finance leases |  | $ | 5.9 |  |  | $ | 3.7 |
ROU assets obtained in exchange for new finance lease liabilities |  | $ | 5.1 |  |  | $ | 9.0 |
ROU assets obtained in exchange for new operating lease liabilities |  | $ | 9.0 |  |  | $ | 4.9 |
|  | Six Months Ended June 30, |  |
|  | 2020 |  | 2019
Weighted average information: |  |  |  |
Finance leases |  |  |  |
Remaining lease term (in years) |  | 6.1 |  | 7.3
Discount rate |  | 4.8 | % |  | 5.4 | %
Operating leases |  |  |  |
Remaining lease term (in years) |  | 4.8 |  | 5.0
Discount rate |  | 5.1 | % |  | 5.5 | %
Leases | Leases Lessor Sealed Air has contractual obligations as a lessor with respect to free on loan equipment and leased equipment, both sales-type and operating. The consideration in a contract that contains both lease and non-lease components is allocated based on the standalone selling price. Our contractual obligations for operating leases can include termination and renewal options. Our contractual obligations for sales-type leases tend to have fixed terms and can include purchase options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise. All lease payments are primarily fixed in nature and therefore captured in the lease receivable. Our lease receivable balance at June 30, 2020 was:
(in millions) |  | Short-Term (12 months or less) |  | Long-Term |  | Total
Total lease receivable (Sales-type and Operating) |  | $ | 4.8 |  |  | $ | 11.2 |  |  | $ | 16.0 |
Lessee Sealed Air has contractual obligations as a lessee with respect to warehouses, offices, manufacturing facilities, IT equipment, automobiles, and material production equipment. Under the leasing standard, ASC 842, leases that are more than one year in duration are capitalized and recorded on the balance sheet. Some of our leases, namely for automobiles and real estate, offer an option to extend the term of such leases. We utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, some of our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation. In determining the discount rate to use in calculating the present value of lease payments, we estimate the rate of interest we would pay on a collateralized loan with the same payment terms as the lease by utilizing our bond yields traded in the secondary market to determine the estimated cost of funds for the particular tenor. We update our assumptions and discount rates on a quarterly basis. We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842. This means, for those leases that qualify, we will not recognize right of use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets. We have also elected the practical expedient to not separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes. Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred. Generally, variable lease payments are based on usage and common area maintenance. These payments will be included as variable lease expense when recognized. The following table details our lease obligations included in our Condensed Consolidated Balance Sheets.
(in millions) |  | June 30, 2020 |  | December 31, 2019
Other non-current assets: |  |  |  |
Finance leases - ROU assets |  | $ | 58.9 |  |  | $ | 54.8 |
Finance leases - Accumulated depreciation |  | (19.9) |  |  | (15.0) |
Operating lease right-of-use-assets: |  |  |  |
Operating leases - ROU assets |  | 120.6 |  |  | 118.8 |
Operating leases - Accumulated depreciation |  | (38.9) |  |  | (28.7) |
Total lease assets |  | $ | 120.7 |  |  | $ | 129.9 |
Current portion of long-term debt: |  |  |  |
Finance leases |  | $ | (10.5) |  |  | (10.4) |
Current portion of operating lease liabilities: |  |  |  |
Operating leases |  | (24.9) |  |  | (26.2) |
Long-term debt, less current portion: |  |  |  |
Finance leases |  | (27.4) |  |  | (28.7) |
Long-term operating lease liabilities, less current portion: |  |  |  |
Operating leases |  | (58.7) |  |  | (65.7) |
Total lease liabilities |  | $ | (121.5) |  |  | $ | (131.0) |
At June 30, 2020, estimated future minimum annual rental commitments under non-cancelable real and personal property leases were as follows:
(in millions) |  | Operating leases |  | Finance leases
Remainder of 2020 |  | $ | 15.0 |  |  | $ | 6.6 |
2021 |  | 25.2 |  |  | 11.9 |
2022 |  | 18.1 |  |  | 7.3 |
2023 |  | 12.5 |  |  | 3.7 |
2024 |  | 8.1 |  |  | 2.1 |
Thereafter |  | 16.3 |  |  | 13.5 |
Total lease payments |  | 95.2 |  |  | 45.1 |
Less: Interest |  | (11.6) |  |  | (7.2) |
Present value of lease liabilities |  | $ | 83.6 |  |  | $ | 37.9 |
The following lease cost is included in our Condensed Consolidated Statements of Operations:
| Three Months Ended June 30, |  |  |  | Six Months Ended June 30, |  |
(in millions) | 2020 |  | 2019 |  | 2020 |  | 2019
Lease cost(1) |  |  |  |  |  |  |
Finance leases |  |  |  |  |  |  |
Amortization of ROU assets | $ | 2.8 |  |  | $ | 2.0 |  |  | $ | 5.5 |  |  | $ | 4.1 |
Interest on lease liabilities | 0.4 |  |  | 0.5 |  |  | 0.9 |  |  | 1.0 |
Operating leases | 7.8 |  |  | 7.9 |  |  | 15.9 |  |  | 16.3 |
Short-term lease cost | 0.8 |  |  | 1.0 |  |  | 1.7 |  |  | 1.9 |
Variable lease cost | 1.2 |  |  | 2.1 |  |  | 2.8 |  |  | 3.1 |
Total lease cost | $ | 13.0 |  |  | $ | 13.5 |  |  | $ | 26.8 |  |  | $ | 26.4 |
(1) With the exception of Interest on lease liabilities, we record lease costs to Cost of sales or Selling, general and administrative expenses on the Condensed Consolidated Statements of Operations, depending on the use of the leased asset. Interest on lease liabilities is recorded to Interest expense, net on the Condensed Consolidated Statement of Operations.
|  | Six Months Ended June 30, |  |
(in millions) |  | 2020 |  | 2019
Other information: |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows - finance leases |  | $ | 2.3 |  |  | $ | 2.0 |
Operating cash flows - operating leases |  | $ | 17.5 |  |  | $ | 17.3 |
Financing cash flows - finance leases |  | $ | 5.9 |  |  | $ | 3.7 |
ROU assets obtained in exchange for new finance lease liabilities |  | $ | 5.1 |  |  | $ | 9.0 |
ROU assets obtained in exchange for new operating lease liabilities |  | $ | 9.0 |  |  | $ | 4.9 |
|  | Six Months Ended June 30, |  |
|  | 2020 |  | 2019
Weighted average information: |  |  |  |
Finance leases |  |  |  |
Remaining lease term (in years) |  | 6.1 |  | 7.3
Discount rate |  | 4.8 | % |  | 5.4 | %
Operating leases |  |  |  |
Remaining lease term (in years) |  | 4.8 |  | 5.0
Discount rate |  | 5.1 | % |  | 5.5 | %

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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