Leasing

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

LEASING

11. LEASING

Lessee We lease property, vehicles and equipment under operating and financing leases.  For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. Leases with a lease term 12 months or less at lease commencement are not recorded on our Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term in our Condensed Consolidated Statement of Operations. Our leases may include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our incremental borrowing rate is based on a credit-adjusted risk-free rate at commencement date, which best approximates a secured rate over a similar term of lease. Additionally, we do not separate lease and non-lease components for any asset classes, except for those leases embedded in certain service arrangements. Fixed and in-substance fixed payments are included in the recognition of the operating and financing assets and lease liabilities, however, variable lease payments, other than those based on a rate or index, are recognized in the Condensed Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. The Company’s variable lease payments generally relate to payments tied to various indices, non-lease components and payments above a contractual minimum fixed payment.

The following table presents our lease balances as of September 30, 2021 and December 31, 2020:

In millions	Location in the Condensed Consolidated Balance Sheet	September 30, 2021		December 31, 2020
Assets
Operating lease assets	Operating lease assets	$	423	$	344
Finance lease assets	Property, plant and equipment, net	64		55
Accumulated amortization of finance lease assets	Property, plant and equipment, net	(31)		(18)
Total leased assets		$	456	$	381
Liabilities
Current
Operating lease liabilities	Other current liabilities	$	102	$	85
Finance lease liabilities	Other current liabilities	17		15
Noncurrent
Operating lease liabilities	Operating lease liabilities	406		325
Finance lease liabilities	Other liabilities	17		23
Total lease liabilities		$	542	$	448

The following tables present our lease costs for operating and finance leases:

	Three months ended September 30				Nine months ended September 30
In millions	2021		2020		2021		2020
Operating lease cost	$	34	$	31	$	99	$	93
Finance lease cost
Amortization of leased assets	5		4		13		10
Interest on lease liabilities	—		—		1		1
Short-Term lease cost	—		2		2		4
Variable lease cost	10		4		21		20
Total lease cost	$	49	$	41	$	136	$	128

The following tables present the supplemental cash flow information:

	Three months ended September 30				Nine months ended September 30
In millions	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36	$	32	$	110	$	93
Operating cash flows from finance leases	$	—	$	—	$	1	$	1
Financing cash flows from finance leases	$	5	$	3	$	13	$	9
Lease Assets Obtained in Exchange for Lease Obligations
Operating Leases	$	5	$	12	$	135	$	14
Finance Leases	$	—	$	1	$	2	$	16

The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the Condensed Consolidated Balance Sheet as of September 30, 2021:

In millions	Operating Leases		Finance Leases
Remainder of 2021	$	37	$	5
2022	112		17
2023	81		10
2024	65		3
2025	53		—
Thereafter	305		—
Total lease payments	653		35
Less: Amount representing interest	145		1
Present value of lease liabilities	$	508	$	34

The following table presents the weighted average remaining lease term and interest rates:

	September 30, 2021		December 31, 2020
Weighted average lease term:
Operating leases	8.3 years		8.7 years
Finance leases	2.2 years		2.7 years
Weighted average interest rates:
Operating leases	5.67	%	6.45	%
Finance leases	3.96	%	4.59	%

    

Lessor We have various arrangements for certain point-of-sale equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

LEASING

11. LEASING

Lessee We lease property, vehicles and equipment under operating and financing leases.  For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. Leases with a lease term 12 months or less at lease commencement are not recorded on our Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term in our Condensed Consolidated Statement of Operations. Our leases may include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our incremental borrowing rate is based on a credit-adjusted risk-free rate at commencement date, which best approximates a secured rate over a similar term of lease. Additionally, we do not separate lease and non-lease components for any asset classes, except for those leases embedded in certain service arrangements. Fixed and in-substance fixed payments are included in the recognition of the operating and financing assets and lease liabilities, however, variable lease payments, other than those based on a rate or index, are recognized in the Condensed Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. The Company’s variable lease payments generally relate to payments tied to various indices, non-lease components and payments above a contractual minimum fixed payment.

The following table presents our lease balances as of September 30, 2021 and December 31, 2020:

In millions	Location in the Condensed Consolidated Balance Sheet	September 30, 2021		December 31, 2020
Assets
Operating lease assets	Operating lease assets	$	423	$	344
Finance lease assets	Property, plant and equipment, net	64		55
Accumulated amortization of finance lease assets	Property, plant and equipment, net	(31)		(18)
Total leased assets		$	456	$	381
Liabilities
Current
Operating lease liabilities	Other current liabilities	$	102	$	85
Finance lease liabilities	Other current liabilities	17		15
Noncurrent
Operating lease liabilities	Operating lease liabilities	406		325
Finance lease liabilities	Other liabilities	17		23
Total lease liabilities		$	542	$	448

The following tables present our lease costs for operating and finance leases:

	Three months ended September 30				Nine months ended September 30
In millions	2021		2020		2021		2020
Operating lease cost	$	34	$	31	$	99	$	93
Finance lease cost
Amortization of leased assets	5		4		13		10
Interest on lease liabilities	—		—		1		1
Short-Term lease cost	—		2		2		4
Variable lease cost	10		4		21		20
Total lease cost	$	49	$	41	$	136	$	128

The following tables present the supplemental cash flow information:

	Three months ended September 30				Nine months ended September 30
In millions	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	36	$	32	$	110	$	93
Operating cash flows from finance leases	$	—	$	—	$	1	$	1
Financing cash flows from finance leases	$	5	$	3	$	13	$	9
Lease Assets Obtained in Exchange for Lease Obligations
Operating Leases	$	5	$	12	$	135	$	14
Finance Leases	$	—	$	1	$	2	$	16

The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the Condensed Consolidated Balance Sheet as of September 30, 2021:

In millions	Operating Leases		Finance Leases
Remainder of 2021	$	37	$	5
2022	112		17
2023	81		10
2024	65		3
2025	53		—
Thereafter	305		—
Total lease payments	653		35
Less: Amount representing interest	145		1
Present value of lease liabilities	$	508	$	34

The following table presents the weighted average remaining lease term and interest rates:

	September 30, 2021		December 31, 2020
Weighted average lease term:
Operating leases	8.3 years		8.7 years
Finance leases	2.2 years		2.7 years
Weighted average interest rates:
Operating leases	5.67	%	6.45	%
Finance leases	3.96	%	4.59	%

    

Lessor We have various arrangements for certain point-of-sale equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.