Leases

The majority of the Company's global lease portfolio represents leases of real estate, such as manufacturing facilities, warehouses, and office buildings, while the remainder represents leases of personal property, such as vehicle leases, manufacturing and IT equipment. Most of the leases are operating leases with options to renew, with renewal terms that can extend the lease term from 1 to 5 years. The option to renew is included in the lease term if it is reasonably certain that the Company will exercise that option. Certain leases also include options to terminate or purchase the leased asset. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option that is reasonably certain of exercise. The amount recognized in lease assets and liabilities for lease arrangements that include an option for renewal or early termination that is reasonably certain of being exercised is immaterial. Our lease agreements do not contain any material residual value guarantee or material restrictive covenants. The Company's policy is to account for the lease and non-lease components as a single lease component for all asset classes.

ASC 842 requires that the rate implicit in the lease be used if readily determinable. Generally, implicit rates are not readily determinable in our contracts and the incremental borrowing rate is used for each lease arrangement. The incremental borrowing rates are determined using rates specific to the term of the lease, economic environments where lease activity is concentrated, value of lease portfolio, and assuming full collateralization of the loans.

All leases with an initial term of 12 months or less that do not include an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise ("short-term leases") are not recorded on the consolidated balance sheet and lease expense is recognized on a straight-line basis over the lease term. The short-term lease cost for the three months ended March 31, 2019 is less than $1 million and the total remaining payments for short-term leases as of March 31, 2019 are less than $1 million.

The following table presents the operating lease assets and lease liabilities as of March 31, 2019:



Leases (in millions)	Consolidated Balance Sheet Classification	March 31, 2019
Assets
Operating lease assets	Other non-current assets	$	98
Total operating lease assets		$	98

Liabilities
Current
Operating lease liabilities	Accounts payable and accrued expenses	$	23
Noncurrent
Operating lease liabilities	Other non-current liabilities	74
Total operating lease liabilities		$	97

The Company had less than $1 million of finance lease assets recorded in Property, plant and equipment, net, and less than $1 million of finance lease liabilities recorded in Long-term debt in the consolidated balance sheet at March 31, 2019.

In the three months ended March 31, 2019, the Company recorded operating lease cost of $7 million, reflected in Selling, general and administrative expenses in the consolidated statement of operations. The finance lease cost including amortization of leased assets and interest on lease liabilities was less than $1 million in the three months ended March 31, 2019. Variable costs for the three months ended March 31, 2019 are immaterial, and the Company does not have sublease income or gains/losses on sale leaseback transactions.



Maturity of Lease Liabilities (undiscounted) as of March 31, 2019 (millions of dollars)	Operating Leases
2019 (excluding the three months ended March 31, 2019)	$	18
2020	20
2021	15
2022	12
2023	8
After 2023	37
Total lease payments	$	110
Less: Imputed interest	13
Present value of lease liabilities	$	97

Total finance lease payments for each annual period from 2019 (excluding the three months ended March 31, 2019) to 2023 and years after 2023 are less than $1 million.

Total rent expense was $10 million for the three months ended March 31, 2018. Future minimum operating lease payments at December 31, 2018 were as follows:



(millions of dollars)
2019	$	24
2020	21
2021	15
2022	13
2023	10
After 2023	38
Total minimum lease payments	$	121



Lease Term and Discount Rate	March 31, 2019
Weighted-average remaining lease term (years)
Operating leases	8
Finance leases	2
Weighted-average discount rate
Operating leases	2.7	%
Finance leases	3.1	%



Other Information	Three Months Ended
(In millions)	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	$	6

Cash paid for finance leases included in operating and financing cash flows for three months ended March 31, 2019 is less than $1 million. Non-cash transactions related to lease liabilities arising from obtaining lease assets and modification or reassessment events are immaterial for the three months ended March 31, 2019.

As of March 31, 2019, the operating and finance leases that the Company signed but have not yet commenced are immaterial.