Leases (Notes)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

11.

LEASES

On January 1, 2019, we adopted ASU 2016-02, "Leases (Topic 842)" (ASC 842), which supersedes the lease accounting requirements in ASC Topic 840, "Leases." The new standard requires entities to recognize, separately from each other, an asset for its right to use (ROU) the underlying asset equal to the liability for its finance and operating lease obligations. Further, the Company is required to present the current and non-current portion of the ROU asset and corresponding lease liability separately.

In July 2018, the FASB issued ASU 2018-11, "Leases (Topic 842) Targeted Improvements", which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard. We have elected to adopt this optional transition method.

Our lease portfolio consists primarily of real estate, mobile equipment at our manufacturing facilities, rail cars to transport our products, and a fleet of vehicles. We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

As part of our adoption of ASC 842, we have also elected to apply the following practical expedients as permitted under the new standard:

• Package of practical expedients - We did not reassess whether expiring or existing contracts contain a lease, we

did not reassess the classification of expired or existing leases, and we did not reassess whether lease initial direct costs would qualify for capitalization under the new lease accounting standard.

• Lease and non-lease components as lessee - For leases across all asset classes in which we are a lessee, we did not separate non-lease components from lease components and instead accounted for each separate lease component and the non-lease components associated with that lease component as a single lease component.

• Short-term leases - We have elected not to recognize ROU assets and lease liabilities for short-term leases across all asset classes that have a lease term of 12 months or less. We recognize the lease payments associated with our short-term leases as an expense on a straight-line basis over the lease term.

As most of our leases do not provide an implicit rate, we used our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease term for all of our leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that we are reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

As of December 31, 2019, our weighted-average discount rates were five percent and four percent for operating and finance leases, respectively. As of December 31, 2019, our weighted-average remaining lease terms were 12 and 3 years for operating and finance leases, respectively.

Our operating and finance leases are included in our December 31, 2019, Consolidated Balance Sheet and Consolidated Statement of Income as follows:

	Classification
Consolidated Balance Sheet
Assets:
Operating lease assets	Operating lease assets	$	44
Finance lease assets	Property, plant, and equipment, net	1
Total lease assets		$	45
Liabilities:
Current
Operating	Accounts payable and accrued liabilities	$	8
Finance	Current portion of long-term debt	—
Non-current
Operating	Non-current operating lease liabilities	36
Finance	Long-term debt, excluding current portion	1
Total lease liabilities		$	45

	Classification
Consolidated Statement of Income
Lease Cost:
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	10
Finance lease cost
Amortization of leased assets	Cost of sales	—
Interest on lease liabilities	Interest expense	—
Total lease cost		$	10

For the year ended December 31, 2019, we incurred short-term lease and variable lease costs of $31 million, and we made cash payments of $9 million in operating leases.

We obtained ROU assets in exchange for new operating and finance lease liabilities of $47 million and $1 million, respectively, for the year ended December 31, 2019.

The following table sets forth the minimum lease payments that are expected to be made in each of the years indicated.

Maturity of Lease Liabilities	Operating Leases			Finance Leases		Total
2020	$	11		$	1	$	12
2021	8			—		8
2022	6			—		6
2023	3			—		3
2024	2			—		2
2025 and thereafter	29			—		29
Total lease payments	59			1		60
Less: Interest	(15		)	—		(15		)
Present value of lease liabilities	$	44		$	1	$	45