Lessee

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Lessee

Lessee

Operating Leases

We have operating leases for real estate and vehicles in our domestic and international operations and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to twelve years and a variety of renewal and/or termination options.

The components of lease expense are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating lease expense	$	29	$	31	$	85	$	97
Short-term lease expense	5		6		15		16
Variable lease expense(1)	12		12		34		37
Sublease income	(1)		—		(2)		(1)
Total Lease expense	$	45	$	49	$	132	$	149

_____________

(1)Variable lease expense is related to our leased real estate for offices and warehouses and primarily includes labor and operational costs as well as taxes and insurance.

Operating leases right-of-use (ROU) assets, net and operating lease liabilities were reported in the Condensed Consolidated Balance Sheets as follows:

	September 30, 2020		December 31, 2019
Other long-term assets	$	323	$	319
Accrued expenses and other current liabilities	$	86	$	87
Other long-term liabilities	264		260
Total Operating lease liabilities	$	350	$	347

Supplemental information related to operating leases is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019
Cash paid for amounts included in the measurement of lease liabilities - Operating cash flows	$	31	$	31	$	89		$	95
ROU assets obtained in exchange for new lease liabilities (1)	$	17	$	5	$	73		$	28
Weighted-average remaining lease term					5 years			4 years
Weighted-average discount rate					5.06		%	5.63		%

_____________

(1)Includes the impact of new leases as well as remeasurements and modifications to existing leases.

Finance Leases

Xerox has finance leases for equipment and related infrastructure within outsourced warehouse supply arrangements in the U.S. and Europe. The leases have varying maturities up to six years with a maximum expiration date through December 2026. As of September 30, 2020 the remaining lease obligation for all finance leases is $9, based on a weighted-average discount rate of 4.41%. The Right-of-use asset balance associated with these finance leases of $11 is included in Land, buildings and equipment, net in the Condensed Consolidated Balance Sheet.

Lessee

Lessee

Operating Leases

We have operating leases for real estate and vehicles in our domestic and international operations and for certain equipment in our domestic operations. Additionally, we have identified embedded operating leases within certain supply chain contracts for warehouses, primarily within our domestic operations. Our leases have remaining terms of up to twelve years and a variety of renewal and/or termination options.

The components of lease expense are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating lease expense	$	29	$	31	$	85	$	97
Short-term lease expense	5		6		15		16
Variable lease expense(1)	12		12		34		37
Sublease income	(1)		—		(2)		(1)
Total Lease expense	$	45	$	49	$	132	$	149

_____________

(1)Variable lease expense is related to our leased real estate for offices and warehouses and primarily includes labor and operational costs as well as taxes and insurance.

Operating leases right-of-use (ROU) assets, net and operating lease liabilities were reported in the Condensed Consolidated Balance Sheets as follows:

	September 30, 2020		December 31, 2019
Other long-term assets	$	323	$	319
Accrued expenses and other current liabilities	$	86	$	87
Other long-term liabilities	264		260
Total Operating lease liabilities	$	350	$	347

Supplemental information related to operating leases is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020			2019
Cash paid for amounts included in the measurement of lease liabilities - Operating cash flows	$	31	$	31	$	89		$	95
ROU assets obtained in exchange for new lease liabilities (1)	$	17	$	5	$	73		$	28
Weighted-average remaining lease term					5 years			4 years
Weighted-average discount rate					5.06		%	5.63		%

_____________

(1)Includes the impact of new leases as well as remeasurements and modifications to existing leases.

Finance Leases

Xerox has finance leases for equipment and related infrastructure within outsourced warehouse supply arrangements in the U.S. and Europe. The leases have varying maturities up to six years with a maximum expiration date through December 2026. As of September 30, 2020 the remaining lease obligation for all finance leases is $9, based on a weighted-average discount rate of 4.41%. The Right-of-use asset balance associated with these finance leases of $11 is included in Land, buildings and equipment, net in the Condensed Consolidated Balance Sheet.