Leases

12 Months Ended

Dec. 31, 2019

Note 5. Leases

We have operating and finance leases for manufacturing and distribution facilities, vehicles, equipment and office space. Our leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases for up to 6 years. We assume the majority of our termination options will not be exercised when determining the lease term of our leases. We do not include significant restrictions or covenants in our lease agreements, and residual value guarantees are generally not included within our operating leases, with the exception of some fleet leases. Some of our leasing arrangements require variable payments that are dependent on usage or output or may vary for other reasons, such as product costs, insurance and tax payments. These variable payment leases are not included in our recorded lease assets and liabilities and are expensed as incurred. Certain leases are tied to a variable index or rate and are included in our lease assets and liabilities based on the indices or rates as of lease commencement.

The components of lease costs were as follows:



	For the Year Ended December 31, 2019
	(in millions)
Operating lease cost	$	222

Finance lease cost:
Amortization of right-of-use assets	29
Interest on lease liabilities	4

Short-term lease cost	39
Variable lease cost	474

Sublease income	(6		)

Total lease cost	$	762

Rent expenses under prior lease accounting rules (ASC 840) recorded in continuing operations were $260 million in 2018 and $284 million in 2017.

Supplemental cash flow information related to leases was as follows:



	For the Year Ended December 31, 2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(234	)
Operating cash flows from finance leases	(4		)
Financing cash flows from finance leases	(27		)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	95
Finance leases	99

Supplemental balance sheet information related to leases was as follows:



	As of December 31, 2019
	(in millions)
Operating Leases:
Operating lease right-of-use assets, net of amortization	$	568

Other current liabilities	$	178
Long-term operating lease liabilities	403
Total operating lease liabilities	$	581

Finance Leases:
Finance leases, net of amortization (within property, plant & equipment)	$	122

Current portion of long-term debt	$	32
Long-term debt	91
Total finance lease liabilities	$	123

Weighted Average Remaining Lease Term
Operating leases	5.2 years
Finance leases	4.6 years

Weighted Average Discount Rate
Operating leases	3.5		%
Finance leases	3.7		%

In 2020, we expect to record a $45 million operating lease liability for a 15 year lease that has not yet commenced.

Future lease payments under non-cancelable leases under the new lease accounting rules (ASC 842) that went into effect on January 1, 2019 were as follows:



	As of December 31, 2019
	Operating Leases			Finance Leases
	(in millions)
Year Ending December 31:
2020	$	197		$	38
2021	146			34
2022	102			23
2023	68			15
2024	42			9
Thereafter	97			15
Total future undiscounted lease payments	$	652		$	134
Less imputed interest	(71		)	(11		)
Total reported lease liability	$	581		$	123

As of December 31, 2018, minimum rental commitments under non-cancelable operating leases under prior lease accounting rules (ASC 840) were (in millions):



2019		2020		2021		2022		2023		Thereafter		Total
$	208	$	165	$	114	$	79	$	57	$	157	$	780

Leases, Finance