Leases

12 Months Ended

Dec. 31, 2020

The Company leases certain manufacturing facilities, distribution centers, sales and administrative offices, equipment, and vehicles, which are accounted for as operating leases. Remaining lease terms are up to 12 years, with certain leases containing renewal options and termination options.

On January 1, 2019, the Company adopted ASC 842, Leases (“ASC 842”), which resulted in the recognition of ROU assets and lease liabilities on the Consolidated Balance Sheets for operating leases with terms greater than one year. Prior to the adoption

of ASC 842, the Company accounted for its lease arrangements under ASC Topic 840, Leases (“ASC 840”), with no ROU assets or lease liabilities being reflected on the Consolidated Balance Sheets. The Company adopted ASC 842 under a modified retrospective approach. Thus, results for reporting periods beginning after January 1, 2019 are prepared under ASC 842, whereas results prior to that have not been adjusted and continue to be reported in accordance with our historic accounting under ASC 840.

The following table presents activities associated with our operating leases (in millions):


	December 31,
	2020		2019
Fixed lease expenses	$	35	$	37
Variable lease expenses	34		29
Total lease expenses	$	69	$	66

Cash paid for leases	$	69	$	67

ROU assets obtained in exchange for lease obligations	$	55	$	42
Reductions of ROU assets and lease liabilities	(3)		(16)
Net non-cash increases to ROU assets and lease liabilities	$	52	$	26

Variable lease expenses incurred were not included in the measurement of the Company’s ROU assets and lease liabilities. These expenses consisted primarily of distribution center service costs that were based on product distribution volumes, as well as non-fixed common area maintenance, real estate taxes, and other operating costs associated with various facility leases. Expenses related to short term leases were not significant.

Cash payments for operating leases are included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.

ROU assets obtained in exchange for lease obligations primarily include new lease arrangements entered into by the Company. ROU assets obtained in exchange for lease obligations also include contract modifications that extend lease terms and/or provide us additional rights, changes in assessments that render it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period, as well as lease arrangements obtained through acquisitions.

Reductions of the Company’s ROU assets and lease liabilities generally relate to modifications to lease agreements that result in a reduction to future minimum lease payments, as well as changes in assessments that render it no longer reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the period. The Company’s reduction of ROU assets and lease liabilities during 2019 primarily related to a modification to a distribution center lease agreement that resulted in a reduction to fixed future minimum lease payments.

The weighted average remaining term of the Company’s operating leases was approximately 6 years as of December 31, 2020 and 2019. The weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 5% and 6% as of December 31, 2020 and 2019, respectively.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2020 were as follows (in millions):


2021	$	38
2022	33
2023	29
2024	23
2025	19
Thereafter	44
Total future minimum lease payments	$	186
Less: Interest	(27)
Present value of lease liabilities	$	159

Reported as of December 31, 2020:
Current portion of lease liabilities	$	30
Long-term lease liabilities	129
Present value of lease liabilities	$	159

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Rent expense under the Company’s operating leases during the year ended December 31, 2018, prior to the Company’s adoption of ASC 842, was $33 million.

Revenues earned from lease arrangements under which the Company is a lessor were not significant.