LEASING ARRANGEMENTS

12 Months Ended

Dec. 31, 2023

Note 7 — LEASING ARRANGEMENTS

We lease certain manufacturing facilities, warehouse space, machinery and equipment, vehicles and information technology equipment under operating leases. The majority of our leases are operating leases. Finance leases are immaterial to our consolidated financial statements. Operating lease assets and obligations are reflected within Operating lease assets, net, Current operating lease obligations, and Non-current operating lease obligations, respectively.

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. The components of lease cost from continued operations recognized within our Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 were as follows:



(In millions)	2023		2022		2020

Cost of sales	$	19.7	$	18.8	$	20.1
Selling and administrative expense	11.6		10.1		9.3
Total operating lease cost	$	31.4	$	28.9	$	29.4

We often have options to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at our sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for our operating leases as of December 31, 2023 and 2022 was 5.6 years and 5.7 years, respectively. The non-cash net increase in operating lease liabilities was $18.1 million, $13.8 million and $8.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The discount rate implicit within our leases is generally not determinable and, therefore, the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral.

The weighted average discount rate used to measure our operating lease liabilities as of December 31, 2023 and 2022 were 5.0% and 4.8%, respectively.

Future minimum lease payments under non-cancelable operating leases with initial lease terms longer than one year as of December 31, 2023 are as follows:

Maturity Analysis of Lease Liabilities:



(In millions)	2023
2024	$	20.3
2025	13.8
2026	10.1
2027	8.2
2028	4.8
Thereafter	12.3
Total	$	69.5
Less amount of lease payment representing interest	(9.7)
Total present value of lease payments	$	59.8