Leases

12 Months Ended

Dec. 31, 2020

Our adoption of ASU 2016-02, Leases (Topic 842), and subsequent ASUs related to Topic 842, requires us to recognize substantially all leases on the balance sheet as a ROU asset and a corresponding lease liability. The new guidance also requires additional disclosures as detailed below. We adopted this standard on the effective date of January 1, 2019 and used this effective date as the date of initial application. Under this application method, we were not required to restate prior period financial information or provide Topic 842 disclosures for prior periods. We elected the ‘package of practical expedients’ which permitted us to not reassess our prior conclusions related to lease identification, lease classification and initial direct costs, as well as the practical expedient to not reassess certain land easements. We did not elect the use of hindsight. We combine ROU asset amortization and the change in the lease liability in the same line item on the Consolidated Statements of Cash Flows.

We have operating leases for manufacturing, office, warehouse and distribution space, paperboard sheeting and chipping facilities, equipment and vehicles. We also have finance leases related to our North Carolina converting and manufacturing facilities, as well as for certain office and other equipment. We determine if a contract is a lease at the inception of the arrangement. We review all options to extend, renew, terminate or purchase the right to use (ROU) assets, and when reasonably certain to exercise, we include the option in the determination of the lease term and lease liability. Our leases have remaining lease terms from less than one to eleven years, and some of our leases include one or more options to renew.

Lease ROU assets and liabilities are recognized at the commencement date of the lease. Lease ROU assets and liabilities are measured based on the present value of lease payments over the lease term and are reduced by any lease incentives received. Our leases have not provided an implicit rate, therefore, we use our incremental borrowing rate, which is based on quoted rates from our lender for the term and underlying collateral at the lease commencement date. The depreciable life of leasehold improvements is limited to the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. We combine ROU asset amortization and the change in the lease liability in the same line item on the Consolidated Statements of Cash Flows.

Short-term leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. As of December 31, 2020 and December 31, 2019, our short-term lease expense was not material. Our variable lease costs, which are considered non-lease components, consist primarily of taxes, insurance and common area maintenance. Lease and non-lease components are treated as a single lease component. For the years ended December 31, 2020 and December 31, 2019, our sublease income was immaterial to the financial statements.

The tables below present financial information associated with our leases.

LEASE EXPENSE


(In millions)	Year Ended December 31, 2020		Year Ended December 31, 2019
Operating lease costs	$	15.9	$	15.0

Finance lease costs:
Amortization of right-of-use assets	1.8		1.7
Interest on lease liabilities	1.8		1.9
Total finance lease costs	3.5		3.6

Variable lease costs	1.6		1.2

Total lease costs	$	21.0	$	19.8

SUPPLEMENTAL CASH FLOW INFORMATION


(In millions)	Year Ended December 31, 2020		Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17.9	$	16.6
Operating cash flows from finance leases	1.8		1.9
Financing cash flows from finance leases	1.6		1.3

Non-cash amounts for lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	4.4	$	2.5
Finance leases	0.3		0.5

SUPPLEMENTAL BALANCE SHEET INFORMATION


(In millions)	Classification	December 31, 2020		December 31, 2019
Lease ROU Assets
Operating lease assets	Operating lease right-of-use assets	$	63.5	73.1
Finance lease assets	Property, plant and equipment, net	26.7		26.5
Accumulated Depreciation		(12.7)		(11.1)
Total lease ROU assets		$	77.5	88.5

Lease Liabilities
Current operating lease liabilities	Other accrued liabilities	$	15.3	13.9
Current finance lease liabilities	Short-term debt	1.7		1.4
Total current lease liabilities		17.0		15.3

Non-current operating lease liabilities	Long-term operating lease liabilities	54.3		65.6
Non-current finance lease liabilities	Long-term debt	19.1		20.6
Total non-current lease liabilities		73.4		86.2

Total operating lease liabilities		69.5		79.5
Total finance lease liabilities		20.8		22.0
Total lease liabilities		$	90.3	101.5

LEASE TERM AND DISCOUNT RATE


	December 31, 2020		December 31, 2019
Weighted average remaining lease term (years)
Operating leases	5.8		6.6
Finance leases	9.8		10.7

Weighted average discount rate
Operating leases	4.9	%	4.9	%
Finance leases	8.4	%	8.3	%

MATURITY OF LEASE LIABILITIES

As of December 31, 2020, our future maturities of lease liabilities were as follows:


(In millions)	Operating		Finance
2021	$	18.2	$	3.4
2022	17.3		3.2
2023	10.4		2.9
2024	7.5		2.8
2025	7.2		2.8
Thereafter	19.5		15.9
Total lease payments	80.2		30.9
Less interest portion	(10.7)		(10.1)
Total	$	69.5	$	20.8