Leases and Commitments

12 Months Ended

Dec. 31, 2019

LEASES AND COMMITMENTS

The Company's lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses, and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. A significant portion of leases are classified as operating leases, and as of December 31, 2019, finance leases were immaterial.

Generally, the Company’s operating leases have renewal options that extend lease terms an additional 1 to 5 years, and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception. The Company’s lease arrangements with renewal periods reasonably assured of being exercised at lease inception are immaterial.

For the year ended December 31, 2019, leased assets obtained in exchange for lease obligations were $4 million.

All leases with an initial term of 12 months or less without 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:



(in millions)		December 31, 2019
Assets	Location
Operating leases	Other non-current assets	$	85
Total operating leases		$	85

Liabilities
Operating leases	Accounts payable and accrued expenses	$	18
Operating leases	Other non-current liabilities	67
Total operating lease liabilities		$	85

The following table presents the maturity of lease liabilities as of December 31, 2019:



(in millions)	Operating leases
2020	$	20
2021	15
2022	13
2023	9
2024	7
After 2024	33
Total (undiscounted) lease payments	$	97
Less: Imputed interest	12
Present value of lease liabilities	$	85

In the year ended December 31, 2019, the Company recorded operating lease costs of $24 million and short-term lease costs of $18 million, primarily in Cost of sales in the Consolidated Statement of

Operations. Under the previous lease accounting standard, total rent expense was $42 million and $40 million in the years ended December 31, 2018 and 2017, respectively. The operating cash flows for operating leases were $24 million for the year ended December 31, 2019.

ASC Topic 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 agreements 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. The following table presents the terms and discount rates:



Operating leases	As of December 31, 2019
Weighted-average remaining lease term (years)	8
Weighted-average discount rate	2.8	%