Leases

12 Months Ended

Dec. 31, 2019

We evaluate whether an arrangement is or contains a lease at contract inception. For all our leases, we determine the classification as either operating or financing. We have office space, warehouse facilities, vehicles, and equipment under non-cancelable operating leases with third parties. The leases have remaining lease terms of one to 20 years. Leases with an initial term of 12 months or less are not recognized on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use the incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. We use the implicit rate when readily determinable.

Rent expense charged to operations under operating leases during the year ended December 31, 2019 was $25 million. Common Area Maintenance and taxes for the year ended December 31, 2019 was $2 million. Short-term lease expense and variable rent expense during the year ended December 31, 2019 was not material. Rent expense, under ASC 840, was $20 million for the year ended December 29, 2018 and $17 million for the year ended December 30, 2017.

The following table presents the lease balances within the consolidated balance sheet and other supplemental information related to our leases as of December 31, 2019:



Operating Leases:
Operating lease right-of-use assets, net	$	84

Accrued expenses, other	$	19
Other liabilities	67
Total operating lease liabilities	$	86

Finance Leases:
Property and equipment, net	$	2

Current maturities of long-term debt and other borrowings	$	1
Long-term debt and other borrowings, net	—
Total finance lease liabilities	$	1

Weighted-average remaining lease term:
Operating leases	6.8 years
Finance leases	2.4 years
Weighted-average discount rate:
Operating leases	3.5		%
Finance leases	8.1		%

Supplemental cash flow information related to leases for the year ended was as follows:



	December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	25
Right-of-use assets obtained in exchange for new operating lease liabilities	$	104
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1

The following table presents the maturity of our lease liabilities as of December 31, 2019:



	Operating Leases			Finance Leases
2020	$	22		$	1
2021	18			—
2022	13			—
2023	9			—
2024	8			—
Thereafter	28			—
Total minimum lease payments	98			1
Less: amount representing interest	(12		)	—
Present value of net minimum lease payments	86			1
Less: current portion of lease obligations	(19		)	(1		)
Long-term lease obligations	$	67		$	—

As of December 31, 2019, we had additional operating leases that have not yet commenced which included the following:



Description	Commencing	Lease Term	Total Future Lease Payments
Compounding pharmacy and offices	January 2020	14 years	$	25
Compounding pharmacy	November 2020	20 years	28
New corporate headquarters	October 2021	20 years	78
Total			$	131

Leases

The following table presents the lease balances within the consolidated balance sheet and other supplemental information related to our leases as of December 31, 2019:



Operating Leases:
Operating lease right-of-use assets, net	$	84

Accrued expenses, other	$	19
Other liabilities	67
Total operating lease liabilities	$	86

Finance Leases:
Property and equipment, net	$	2

Current maturities of long-term debt and other borrowings	$	1
Long-term debt and other borrowings, net	—
Total finance lease liabilities	$	1

Weighted-average remaining lease term:
Operating leases	6.8 years
Finance leases	2.4 years
Weighted-average discount rate:
Operating leases	3.5		%
Finance leases	8.1		%

Supplemental cash flow information related to leases for the year ended was as follows:



	December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	25
Right-of-use assets obtained in exchange for new operating lease liabilities	$	104
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1

The following table presents the maturity of our lease liabilities as of December 31, 2019:



	Operating Leases			Finance Leases
2020	$	22		$	1
2021	18			—
2022	13			—
2023	9			—
2024	8			—
Thereafter	28			—
Total minimum lease payments	98			1
Less: amount representing interest	(12		)	—
Present value of net minimum lease payments	86			1
Less: current portion of lease obligations	(19		)	(1		)
Long-term lease obligations	$	67		$	—

As of December 31, 2019, we had additional operating leases that have not yet commenced which included the following:



Description	Commencing	Lease Term	Total Future Lease Payments
Compounding pharmacy and offices	January 2020	14 years	$	25
Compounding pharmacy	November 2020	20 years	28
New corporate headquarters	October 2021	20 years	78
Total			$	131