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Leases

12 Months Ended

Jan. 03, 2021

At the beginning of the first quarter of 2019, we adopted ASC 842, Leases, using an optional transition method which allowed us to adopt the new lease standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of earnings invested in the business in the period of adoption. We elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that existed prior to adoption of the new standard. We also elected to combine lease and non-lease components, to keep leases with an initial term of 12 months or less off the consolidated balance sheet and recognize the associated lease payments in the consolidated statements of earnings on a straight-line basis over the lease term.

The Company has operating and financing leases for field offices and various equipment. Our leases have remaining lease terms of one year to 10 years. We determine if an arrangement is a lease at inception.

We recorded $74.1 million of right-of-use (“ROU”) assets within operating lease right-of-use assets, $19.8 million of current lease liabilities within operating lease liabilities, current and $54.3 million of noncurrent lease liabilities within operating lease liabilities, noncurrent in the consolidated balance sheet on the date of adoption. No adjustment to the beginning balance of earnings invested in the business was necessary as a result of adopting this standard.

The components of lease expense were as follows (in millions of dollars):


		December Year to Date		December Year to Date
Description	Statements of Earnings Location	2020		2019
Operating:
Operating lease cost	Selling, general and administrative expenses	$	27.0	$	26.7
Short-term lease cost	Selling, general and administrative expenses	3.6		3.5
Variable lease cost	Selling, general and administrative expenses	6.8		6.7
Financing:
Amortization of ROU assets	Selling, general and administrative expenses	1.3		0.4
Interest on lease liabilities	Other income (expense), net	0.4		0.2
Total lease cost		$	39.1	$	37.5

Supplemental consolidated balance sheet information related to leases was as follows (in millions of dollars):


Description	Balance Sheet Location	As of Year-End 2020		As of Year-End 2019
ROU Assets:
Operating	Operating lease right-of-use assets	$	83.2	$	60.4
Financing	Property and equipment	7.0		4.1
Total lease assets		$	90.2	$	64.5

ROU Liabilities:
Operating - current	Operating lease liabilities, current	$	19.6	$	20.1
Financing - current	Accounts payable and accrued liabilities	1.8		1.3
Operating - noncurrent	Operating lease liabilities, noncurrent	67.5		43.3
Financing - noncurrent	Other long-term liabilities	2.8		2.1
Total lease liabilities		$	91.7	$	66.8

Weighted average remaining lease terms and discount rates were as follows:


	December Year to Date		December Year to Date
	2020		2019
Weighted average remaining lease term (years):
Operating leases	8.1		3.9
Financing leases	3.3		3.6
Weighted average discount rate:
Operating leases	5.1	%	5.7	%
Financing leases	5.4	%	4.9	%

Other information related to leases was as follows (in millions of dollars):


	December Year to Date		December Year to Date
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25.4	$	26.0
Financing cash flows from financing leases	2.0		0.7

ROU assets obtained in exchange for new lease obligations:
Operating leases	$	43.3	$	9.2
Financing leases	3.1		4.1

Maturities of lease liabilities as of year-end 2020 were as follows (in millions of dollars):


	Operating Leases		Financing Leases
2021	$	23.4	$	2.1
2022	17.5		2.0
2023	12.6		0.9
2024	9.5		—
2025	6.9		—
Thereafter	36.2
Total future lease payments	106.1		5.0
Less: Imputed interest	19.0		0.4
Total	$	87.1	$	4.6

Lease expense for fiscal year 2018 amounted to $31.4 million.

During the first quarter of 2020, the Company sold its main headquarters building and entered into a leaseback agreement, which is accounted for as an operating lease (see Sale of Assets footnote). As of first quarter-end 2020, we recognized $37.6 million of ROU assets within operating lease right-of-use assets, $1.2 million of current lease liabilities within operating lease liabilities, current and $36.1 million of noncurrent lease liabilities within operating lease liabilities, noncurrent in the consolidated balance sheet, with a discount rate of 4.8% over a 15-year lease term related to this lease.

Leases