Leases

12 Months Ended

Dec. 31, 2019

Note 3. Leases

We have leases for warehouses, office space, land, office equipment, production equipment and automobiles. ROU assets and lease obligations are recognized at the lease commencement date based on the present value of lease payments over

the lease term. We have elected to account for lease and associated non-lease components as a single lease component for all asset classes with the exception of buildings and we do not recognize ROU assets and related lease obligations with lease terms of 12 months or less from the commencement date. Operating lease ROU assets and liabilities are included in operating lease right-of-use assets, current operating lease liabilities, and operating lease liabilities on our consolidated balance sheet. Finance leases ROU assets are included in property, plant and equipment, net, while finance lease liabilities are included in long-term debt. As the implicit rate is not readily determinable in most of our lease arrangements, we use our incremental borrowing rate based on information available at the commencement date in order to determine the net present value of lease payments. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. We have lease agreements that contain lease and non-lease components.

We determine if an arrangement is a lease or contains a lease at inception. Certain leases contain renewal options that can extend the term of the lease for one year or more. Our leases have remaining lease terms of up to 92 years, some of which include options to extend the lease term for up to 20 years. Options are recognized as part of our ROU assets and lease liabilities when it is reasonably certain that we will extend that option. Sublease arrangements and leases with residual value guarantees, sale leaseback terms or material restrictive covenants, are immaterial. Lease payments include fixed and variable lease components. Variable components are derived from usage or market-based indices, such as the consumer price index.

The components of lease expense were as follows:


Lease Cost	Year Ended December 31, 2019
Operating lease cost	$	12
Finance lease cost:
Amortization of right-of-use assets	1
Interest on lease liabilities	1
Short-term lease cost	1

Supplemental balance sheet information related to leases was as follows:


Leases	As of December 31, 2019
Assets
Operating Lease Right-of-Use Assets	$	43

Finance Lease Right-of-Use Assets, at cost	$	14
Accumulated Depreciation	(5)
Finance Lease Right-of-Use Assets, net	$	9

Liabilities
Operating Lease Obligation
Current	$	8
Non-Current	37
Total Operating Lease Liabilities	$	45

Finance Lease Obligation
Current	$	2
Non-Current	8
Total Finance Lease Liabilities	$	10

Cash paid for amounts included in the present value of operating lease liabilities were as follows:


Cash Flow Information	Year Ended December 31, 2019
Operating cash flows from operating leases	$	12
Operating cash flows from finance leases	1
Financing cash flows from finance leases	1


Lease Term and Discount Rate	As of December 31, 2019
Weighted average remaining lease term (years)
Operating leases	14.0
Finance leases	5.9
Weighted average discount rate
Operating leases	7.2	%
Financing leases	5.2	%

Maturities of lease liabilities were as follows:


December 31,	Operating Leases		Finance Leases		Total
2020	$	11	$	2	$	13
2021	9		2		11
2022	7		1		8
2023	5		1		6
2024	4		1		5
After 2024	39		6		45
Total lease payments	$	75	$	13	$	88
Less: Interest	30		3		33
Present value of lease liabilities	$	45	$	10	$	55

Disclosures related to periods prior to adoption of the New Lease Standard

The total expense recorded under operating lease agreements in the consolidated and combined statements of operations was $16 million for the year ended December 31, 2018. Future minimum lease payments under noncancelable operating and capital leases as of December 31, 2018 were as follows:


December 31,	Operating Leases		Capital Leases
2019	$	13	$	1
2020	11		2
2021	9		1
2022	6		1
2023	4		1
Thereafter	40		7
Total	$	83	$	13
Less: Amounts representing interest			3
Present value of minimum lease payments			$	10
Less: Current portion of capital leases			1
Long-term portion of capital leases			$	9

Leases