Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.4
Leases
 9 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases Leases
For discussion regarding the lease abandonment and impairment charges recognized during the quarter, refer to Note 4 Restructuring and other income/(charges).
Description of Leases
The significant majority of our lease obligations are for real property. We lease numerous facilities relating to our operations, primarily for office, manufacturing and warehouse facilities, as well as both long-term and short-term employee housing. Leases for real property have terms ranging from month-to-month to ten years. We also lease various types of
equipment, including vehicles, office equipment (such as copiers and postage machines), heavy warehouse equipment (such as fork lifts), heavy construction equipment (such as cranes), medium and light construction equipment used for customer project needs (such as pipe threading machines) and mobile offices and other general equipment that is normally associated with an office environment. Equipment leases generally have terms ranging from six months to five years.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us.

    We lease temporary power products under our TPS product brand line to our customers on a short-term basis. Lease contracts associated with such rental of the temporary power products have historically been month-to-month contracts without purchase options. No lease contracts in which the Company was the lessor have had an initial term in excess of one year. As such, lease revenues for temporary power products recognized under ASC Topic 842 in the interim period did not materially differ from leases that would have been recorded under ASC Topic 840.
Variable Lease Payments
A majority of our lease agreements include fixed rental payments. A small number of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on an index or rate such as CPI are included in the lease payments based on the commencement date index or rate. Estimated changes to the index or rate during the lease term are not considered in the determination of the lease payments.
Options to Extend or Terminate Leases
Most of our real property leases include early termination options and/or one or more options to renew, with renewal terms that can extend the lease term for an additional one to five years or longer. The exercise of lease termination and renewal options is at our sole discretion. If it is reasonably certain that we will exercise such renewal options, the periods covered by such renewal options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount Rate
The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. A large concentration of the Company's operating lease liabilities are attributed to our North American operations. Many of our Europe, Middle East and Africa (“EMEA”) operations and Asia-Pacific operations borrow funds from the debt facilities maintained by our U.S. operating subsidiary and establish intercompany balances to account for these loans. This practice is due to the more preferential rates available to our U.S. operating subsidiary and/or the ease with which funds can be drawn from the debt facilities already established within the United States. With this in mind, the Company has utilized its U.S. credit facility rate as the worldwide incremental borrowing rate. The Company used incremental borrowing rates as of April 1, 2020 for operating leases that commenced prior to April 1, 2020 to establish the lease liabilities. For operating leases that commenced during the nine months ended December 31, 2020, rates applicable at or close to the time of the inception of the lease were used to establish the new lease's ROU liabilities.
Lease Term and Discount Rate December 31, 2020 March 31, 2020
Weighted average remaining lease term:
Operating 6.1 6.2
Finance 3.2 3.4
Weighted average discount rate:
Operating 4.81  % 4.82  %
Finance 6.57  % 6.98  %

    Supplemental balance sheet information related to leases was as follows:
Assets Classification December 31, 2020 March 31, 2020
Operating Operating lease right-of-use assets $ 13,527  $ 16,637 
Finance Property, plant and equipment 478  695 
Total right-of-use assets $ 14,005  $ 17,332 
Liabilities
Current
Operating Lease liabilities $ 2,433  $ 3,352 
Finance Lease liabilities 50  201 
Non-current
Operating Non-current lease liabilities 13,985  15,060 
Finance Non-current lease liabilities 507  511 
Total lease liabilities $ 16,975  $ 19,124 
    
Supplemental statement of operations information related to leases was as follows:
Lease expense Classification  Three Months Ended December 31, 2020  Three Months Ended December 31, 2019 Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
Operating lease expense Marketing, general and administrative and engineering $ 1,070  $ 860  $ 3,455  $ 2,627 
Finance lease expense:
Amortization of ROU assets Marketing, general and administrative and engineering 66  63  211  189 
Interest expense on finance lease liabilities Interest expense 9  12  31  38 
Short-term lease expense Marketing, general and administrative and engineering 9  225  60  940 
Net lease expense $ 1,154  $ 1,160  $ 3,757  $ 3,794 

Supplemental statement of cash flows information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
Operating cash used for operating leases $ 2,747  $ 2,083 
Operating cash flows used for finance leases 31  43 
Financing cash flows used for finance leases 218  189 

Future lease payments under non-cancellable operating leases as of December 31, 2020 were as follows:
Future Lease Payments Operating Leases Finance Leases
Twelve months ending December 31,
2021 $ 4,375  $ 212 
2022 3,507  162 
2023 2,499  142 
2024 2,020  84 
2025 1,697  — 
Thereafter 4,958  — 
Total lease payments $ 19,056  $ 600 
Less imputed interest (2,638) (43)
Total lease liability $ 16,418  $ 557 
Leases Leases
For discussion regarding the lease abandonment and impairment charges recognized during the quarter, refer to Note 4 Restructuring and other income/(charges).
Description of Leases
The significant majority of our lease obligations are for real property. We lease numerous facilities relating to our operations, primarily for office, manufacturing and warehouse facilities, as well as both long-term and short-term employee housing. Leases for real property have terms ranging from month-to-month to ten years. We also lease various types of
equipment, including vehicles, office equipment (such as copiers and postage machines), heavy warehouse equipment (such as fork lifts), heavy construction equipment (such as cranes), medium and light construction equipment used for customer project needs (such as pipe threading machines) and mobile offices and other general equipment that is normally associated with an office environment. Equipment leases generally have terms ranging from six months to five years.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have not yet commenced but that create significant rights and obligations for us.

    We lease temporary power products under our TPS product brand line to our customers on a short-term basis. Lease contracts associated with such rental of the temporary power products have historically been month-to-month contracts without purchase options. No lease contracts in which the Company was the lessor have had an initial term in excess of one year. As such, lease revenues for temporary power products recognized under ASC Topic 842 in the interim period did not materially differ from leases that would have been recorded under ASC Topic 840.
Variable Lease Payments
A majority of our lease agreements include fixed rental payments. A small number of our lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on an index or rate such as CPI are included in the lease payments based on the commencement date index or rate. Estimated changes to the index or rate during the lease term are not considered in the determination of the lease payments.
Options to Extend or Terminate Leases
Most of our real property leases include early termination options and/or one or more options to renew, with renewal terms that can extend the lease term for an additional one to five years or longer. The exercise of lease termination and renewal options is at our sole discretion. If it is reasonably certain that we will exercise such renewal options, the periods covered by such renewal options are included in the lease term and are recognized as part of our ROU assets and lease liabilities. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Discount Rate
The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. A large concentration of the Company's operating lease liabilities are attributed to our North American operations. Many of our Europe, Middle East and Africa (“EMEA”) operations and Asia-Pacific operations borrow funds from the debt facilities maintained by our U.S. operating subsidiary and establish intercompany balances to account for these loans. This practice is due to the more preferential rates available to our U.S. operating subsidiary and/or the ease with which funds can be drawn from the debt facilities already established within the United States. With this in mind, the Company has utilized its U.S. credit facility rate as the worldwide incremental borrowing rate. The Company used incremental borrowing rates as of April 1, 2020 for operating leases that commenced prior to April 1, 2020 to establish the lease liabilities. For operating leases that commenced during the nine months ended December 31, 2020, rates applicable at or close to the time of the inception of the lease were used to establish the new lease's ROU liabilities.
Lease Term and Discount Rate December 31, 2020 March 31, 2020
Weighted average remaining lease term:
Operating 6.1 6.2
Finance 3.2 3.4
Weighted average discount rate:
Operating 4.81  % 4.82  %
Finance 6.57  % 6.98  %

    Supplemental balance sheet information related to leases was as follows:
Assets Classification December 31, 2020 March 31, 2020
Operating Operating lease right-of-use assets $ 13,527  $ 16,637 
Finance Property, plant and equipment 478  695 
Total right-of-use assets $ 14,005  $ 17,332 
Liabilities
Current
Operating Lease liabilities $ 2,433  $ 3,352 
Finance Lease liabilities 50  201 
Non-current
Operating Non-current lease liabilities 13,985  15,060 
Finance Non-current lease liabilities 507  511 
Total lease liabilities $ 16,975  $ 19,124 
    
Supplemental statement of operations information related to leases was as follows:
Lease expense Classification  Three Months Ended December 31, 2020  Three Months Ended December 31, 2019 Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
Operating lease expense Marketing, general and administrative and engineering $ 1,070  $ 860  $ 3,455  $ 2,627 
Finance lease expense:
Amortization of ROU assets Marketing, general and administrative and engineering 66  63  211  189 
Interest expense on finance lease liabilities Interest expense 9  12  31  38 
Short-term lease expense Marketing, general and administrative and engineering 9  225  60  940 
Net lease expense $ 1,154  $ 1,160  $ 3,757  $ 3,794 

Supplemental statement of cash flows information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities Nine Months Ended December 31, 2020 Nine Months Ended December 31, 2019
Operating cash used for operating leases $ 2,747  $ 2,083 
Operating cash flows used for finance leases 31  43 
Financing cash flows used for finance leases 218  189 

Future lease payments under non-cancellable operating leases as of December 31, 2020 were as follows:
Future Lease Payments Operating Leases Finance Leases
Twelve months ending December 31,
2021 $ 4,375  $ 212 
2022 3,507  162 
2023 2,499  142 
2024 2,020  84 
2025 1,697  — 
Thereafter 4,958  — 
Total lease payments $ 19,056  $ 600 
Less imputed interest (2,638) (43)
Total lease liability $ 16,418  $ 557