Leases

12 Months Ended

Dec. 31, 2020

Leases

Leases

10. LEASES

The Company’s leases have remaining lease terms up to 14 years, some of which include options to extend the lease anywhere from six months to ten years.

Sale Leaseback

During the fourth quarter of 2019, the Company completed the sale and subsequent leaseback of Company owned properties in Palo Alto, California. The Company determined the leaseback of both properties to be operating leases, as the criteria to be classified as financing leases were not met. The Company recorded operating lease assets and liabilities of $63 million, representing the fair value of the minimum lease payments associated with the agreements to lease the assets back over a period of two to ten years. The Company also recorded a deferred financing liability representing the off-market terms of the lease. See Note 12 for additional details. During the third quarter of 2020, the Company recognized a reduction in the gain due to the extension of the lease term on one of the properties.

The Company recorded the current portions of the operating lease liabilities and the deferred financing liability in Current lease liabilities and Current portion of long-term debt, respectively, in the Consolidated Balance Sheet. The non-current portions of the operating lease assets, the operating lease liabilities and the deferred financing liability have been recorded in Non-current operating lease assets, Non-current operating lease liabilities and Long-term debt, respectively, in the Consolidated Balance Sheet. Interest expense on the financial liability has been recorded in Interest expense, net in the Consolidated Statement of Operations.

Finance lease expense, variable lease expense, short-term lease expense and sublease income are not material. The components of operating lease expense are as follows:

			Year ended December 31,
	Classification		2020		2019
Operating lease expense		Selling, general, and administrative expense, Product costs, and Service costs1	$	47	$	27

¹Excluding depreciation and amortization

Operating lease expense for the year ended December 31, 2018 was $26 million.

Supplemental lease balance sheet information consists of the following:

			December 31,		December 31,
	Classification		2020		2019
Assets:
Operating		Non-current operating lease assets	$	163	$	176
Finance		Property, plant, and equipment, net		4		5
Total lease assets			$	167	$	181
Liabilities:
Current
Operating		Current operating lease liabilities	$	41	$	40
Finance		Current portion long-term debt		2		2
Non-current
Operating		Operating lease liabilities		158		173
Finance		Long-term debt		1		1
Total lease liabilities			$	202	$	216

Supplemental lease cash flow information is as follows:

	Year ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	43	$	30
Loss (gain) on sale of assets		1		(136)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		16		72

Other supplemental lease information consists of the following:

	December 31,		December 31,
	2020		2019
Weighted average remaining lease term (in years)
Operating leases		8		9
Finance leases		2		3
Weighted average discount rate
Operating leases		6.5%		6.4%
Finance leases		4.1%		3.5%

Maturities of lease liabilities are as follows:

	2021		2022		2023		2024		2025		Thereafter		Less: imputed interest		Total minimum lease payments
Operating leases	$	43	$	41	$	30	$	26	$	24	$	92	$	(57)	$	199
Finance leases		1		1		1		—		—		—		—		3