LEASES (Notes)

3 Months Ended

Mar. 31, 2020

Leases of Lessee Disclosure [Text Block]

LEASES

For additional information on the Company's leases, see Note 18 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

The components of lease cost for operating and finance leases for the three months ended March 31, 2020 and 2019 were as follows:


Lease Cost	Three Months Ended
In millions	Mar 31, 2020		Mar 31, 2019
Operating lease cost	$	120	$	125
Finance lease cost
Amortization of right-of-use assets - finance	$	13	$	6
Interest on lease liabilities - finance	6		6
Total finance lease cost	$	19	$	12
Short-term lease cost	54		50
Variable lease cost	64		44
Sublease income	(1)		(1)
Total lease cost	$	256	$	230

The following table provides supplemental cash flow information related to leases:


Other Lease Information	Three Months Ended
In millions	Mar 31, 2020		Mar 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	126	$	133
Operating cash flows for finance leases	$	6	$	6
Financing cash flows for finance leases	$	8	$	3

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2020 and December 31, 2019:


Lease Position	Balance Sheet Classification	Mar 31, 2020		Dec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases ¹		$	38	$	2,476
Finance leases		$	34	$	89
Assets
Operating lease assets	Operating lease right-of-use assets	$	1,942	$	2,072
Finance lease assets	Property	526		486
Finance lease amortization	Accumulated depreciation	(179)		(167)
Total lease assets		$	2,289	$	2,391
Liabilities
Current
Operating	Operating lease liabilities - current	$	384	$	421
Finance	Long-term debt due within one year	49		32
Noncurrent
Operating	Operating lease liabilities - noncurrent	1,622		1,739
Finance	Long-Term Debt	369		363
Total lease liabilities		$	2,424	$	2,555

1. Includes $2.3 billion for the period ended December 31, 2019 related to the adoption of Topic 842.


Lease Term and Discount Rate	Mar 31, 2020		Dec 31, 2019
Weighted-average remaining lease term
Operating leases	8.0 years		8.0 years
Finance leases	11.5 years		12.3 years
Weighted-average discount rate
Operating leases	4.10	%	4.09	%
Finance leases	6.04	%	6.28	%

The following table provides the maturities of lease liabilities at March 31, 2020:


Maturities of Lease Liabilities	Mar 31, 2020
	Operating Leases		Finance Leases
In millions
2020	$	338	$	56
2021	409		64
2022	349		57
2023	281		82
2024	218		29
2025 and thereafter	806		310
Total future undiscounted lease payments	$	2,401	$	598
Less imputed interest	395		180
Total present value of lease liabilities	$	2,006	$	418

At March 31, 2020, Dow had additional leases of approximately $65 million, primarily for buildings, a rail yard and equipment, which had not yet commenced. These leases are expected to commence in 2020 and 2021, with lease terms of up to 20 years.

Dow provides guarantees related to certain leased assets, specifying the residual value that will be available to the lessor at lease termination through the sale of the assets to the lessee or third parties. The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for residual value guarantees at March 31, 2020 and December 31, 2019. There was no recorded liability related to these residual value guarantees at March 31, 2020 or December 31, 2019, as payment of such residual value guarantees was not determined to be probable. The lease agreements do not contain any material restrictive covenants.


Lease Guarantees	Mar 31, 2020								Dec 31, 2019
In millions	Final Expiration	Maximum Future Payments		Recorded Liability		Final Expiration	Maximum Future Payments		Recorded Liability
Residual value guarantees	2028	$	788	$	—	2028	$	792	$	—