LEASES

9 Months Ended

Sep. 30, 2019

NOTE 14: LEASES

We account for leases in accordance with ASC Topic 842, Leases, which we adopted on January 1, 2019, using the modified retrospective transition approach at the beginning of the adoption period through a cumulative-effect adjustment to retained earnings. This adoption resulted in the recognition of right-of-use assets ("ROU assets") of $165 million and lease liabilities of $172 million, with the difference of $7 million recorded to "Retained earnings", on our Consolidated Balance Sheet on January 1, 2019.

The majority of our operating leases are related to our office and warehouse space, and the majority of our financing leases are related to vehicles and forklifts. Our leases have remaining lease terms of approximately 1 year to 25 years. Options to renew, extend or terminate a lease are reflected in our lease terms when we believe it is reasonably certain we will exercise that option. When our leases do not provide an implicit or an explicit interest rate, we use our incremental borrowing rate in determining the present value of lease payments.

Lease Expense

	QUARTER ENDED		YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2019		SEPTEMBER 2019
Operating lease costs	$	5	$	15
Financing lease costs⁽¹⁾		4		12
Total lease costs	$	9	$	27

Supplemental Cash Flow Information

	YEAR-TO-DATE ENDED
DOLLAR AMOUNTS IN MILLIONS	SEPTEMBER 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	15
Financing cash flows for financing leases⁽¹⁾	$	11
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	5
Financing leases	$	5

(1)	Interest expense related to financing leases was immaterial during third quarter 2019 and year-to-date 2019.

Supplemental Balance Sheet Information Related to Leases

DOLLAR AMOUNTS IN MILLIONS		SEPTEMBER 30, 2019
LEASES	BALANCE SHEET CLASSIFICATION
Assets
Operating lease right-of-use assets	Other assets	$	123
Financing lease right-of-use assets	Property and equipment, less accumulated depreciation		31
Total leased assets		$	154
Liabilities
Current:
Operating lease liabilities	Accrued liabilities	$	20
Financing lease liabilities	Accrued liabilities		14
Noncurrent:
Operating lease liabilities	Other liabilities		106
Financing lease liabilities	Other liabilities		22
Total lease liabilities		$	162

Weighted Average Remaining Lease Term as of September 30, 2019

Operating leases		11 years
Financing leases		3 years

Weighted Average Discount Rate as of September 30, 2019

Operating leases			4.2	%
Financing leases			3.1	%

Maturities of Lease Liabilities as of September 30, 2019

DOLLAR AMOUNTS IN MILLIONS	OPERATING LEASES			FINANCING LEASES
2019	$	5		$	4
2020		20			13
2021		18			9
2022		17			7
2023		16			4
Thereafter		81			—
Total lease payments		157			37
Less: interest		(31	)		(1	)
Total present value of lease liabilities	$	126		$	36

Operating Lease Commitments as of December 31, 2018

DOLLAR AMOUNTS IN MILLIONS
2019	$	35
2020		29
2021		26
2022		24
2023		18
Thereafter		78