Lease Obligations

12 Months Ended

Dec. 31, 2021

18. Lease Obligations

The Company determines if an arrangement is a lease at inception. Operating leases are included in Other assets, Other current liabilities and Other liabilities in the Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate which is based on the information available at the lease commencement date. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the expected lease term.

The Company’s most significant leases are office facilities. For these leases, the Company has elected the practical expedient permitted under ASU 2016-02, “Leases (Topic 842)” (“ASC 842”) to combine lease and non-lease components. As a result, non-lease components are accounted for as an element within a single lease. The Company’s remaining operating leases are primarily comprised of equipment leases. The Company also leases certain IT equipment under finance leases which are reflected on the Company’s Consolidated Balance Sheets as computer equipment within Fixed assets, net.

Certain of the Company’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, common area maintenance, payments based on the usage of the asset, and rental payments adjusted periodically for inflation. These variable payments are not included in the lease liabilities reflected on the Company’s Consolidated Balance Sheets.

The Company does sublease portions of our buildings to third parties. The right of use liability associated with these leases are not offset with expected rental incomes, as we remain primarily obligated for the leases.

The Company’s lease agreements do not contain material residual value guarantees, restrictions, or covenants.

The components of lease expense were as follows (in millions):


	Successor			Predecessor
	Six Months Ended			Six Months Ended			Year Ended
	December 31,			June 30,			December 31,
	2021			2021			2020			2019
Operating lease cost	$	14		$	16		$	40		$	27
Finance lease cost:
Amortization of leased assets		12			13			21			15
Interest of lease liabilities		2			2			4			4
Variable and short-term lease cost		3			3			6			8
Sublease income		(3	)		(4	)		(6	)		(8	)
Total lease cost	$	28		$	30		$	65		$	46

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):


	Successor			Predecessor
	December 31,			December 31,
	2021			2020
Operating Leases
Operating lease right-of-use assets	$	120		$	129

Current operating lease liabilities		44			41
Noncurrent operating lease liabilities		139			155
Total operating lease liabilities	$	183		$	196

Finance Leases
Fixed assets, net	$	62		$	83

Current finance lease liabilities		27			28
Noncurrent finance lease liabilities		34			59
Total finance lease liabilities	$	61		$	87

Weighted Average Remaining Lease Term (in years)
Operating leases		5.8			6.6
Finance leases		2.7			3.5

Weighted Average Discount Rate
Operating leases		4.3	%		5.6	%
Finance leases		4.4	%		4.4	%

Supplemental cash flow and other information related to leases was as follows (in millions):


	Successor		Predecessor
	Six Months Ended		Six Months Ended		Year Ended
	December 31,		June 30,		December 31,
	2021		2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	27	$	22	$	42	$	36
Operating cash flows from finance leases		2		2		4		4
Financing cash flows from finance leases		14		17		24		13

Right-of use assets obtained in exchange for lease obligations
Operating leases	$	2	$	10	$	26	$	58
Finance leases		2		2		62		24

Future lease payments for lease obligations with initial terms in excess of one year as of December 31, 2021 are as follows (in millions):


	Finance Leases			Operating Leases
2022	$	23		$	38
2023		22			34
2024		16			33
2025		4			22
2026		—			17
Thereafter		—			46
Total lease payments		65			190
Less: amount representing interest		(4	)		(27	)
Total lease obligations, net		61			163
Less: current portion of lease obligations, net		(27	)		(37	)
Total long-term portion of lease obligations, net	$	34		$	126

The operating lease future lease payments include sublease rental income of $7 million, $6 million, $5 million and $2 million for 2022, 2023, 2024 and 2025, respectively.