Leases

6 Months Ended

Jun. 30, 2019

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. The Company's 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 the Company's 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 following table presents the operating lease assets and lease liabilities as of June 30, 2019:



(in millions)		June 30, 2019
Assets
Operating lease assets	Other non-current assets	$	95
Total operating lease assets		$	95

Liabilities
Current
Operating lease liabilities	Accounts payable and accrued expenses	$	22
Noncurrent
Operating lease liabilities	Other non-current liabilities	71
Total operating lease liabilities		$	93

In the three and six months ended June 30, 2019, the Company recorded operating lease cost of $6 million and $13 million, respectively, reflected in Selling, general and administrative expenses in the Condensed 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 six months ended June 30, 2019. Variable costs for the six months ended June 30, 2019 are immaterial, and the Company does not have sublease income or gains/losses on sale leaseback transactions.

The following table presents the maturity of lease liabilities as of June 30, 2019:



(in millions)	Operating Leases
2019 (excluding the six months ended June 30, 2019)	$	11
2020	20
2021	15
2022	12
2023	9
After 2023	39
Total (undiscounted) lease payments	$	106
Less: Imputed interest	13
Present value of lease liabilities	$	93

Total rent expense was $11 million and $21 million for the three and six months ended June 30, 2018. Future minimum operating lease payments at December 31, 2018 were as follows:



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

The following table presents the lease terms and discount rates as of June 30, 2019:



Weighted-average remaining lease term (years)
Operating leases	8
Finance leases	3
Weighted-average discount rate
Operating leases	2.8	%
Finance leases	3.3	%

The operating cash flows for operating leases were $12 million for the six months ended June 30, 2019.

As of June 30, 2019, the operating and finance leases that the Company signed but have not yet commenced are immaterial.