Leases

12 Months Ended

Dec. 31, 2023

We are party to operating leases for the majority of our manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. Certain real estate leases include variable rental payments, which adjust periodically based on inflation. Other variable amounts paid under operating leases, such as taxes and common area maintenance, are charged to selling, general and administrative expenses as incurred. Generally, lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Payments arising from operating lease activity, as well as variable and short-term lease payments not included within the operating lease liability, are included as operating activities of our Consolidated Statements of Cash Flows. Operating lease payments representing costs to ready an asset for its intended use (i.e., leasehold improvements) are represented within investing activities within our Consolidated Statements of Cash Flows.

The operating lease expense follows:


	Years Ended December 31,
(in millions)	2023		2022		2021
Operating lease cost:
Selling, general and administrative expenses	$	57	$	50	$	46
Cost of goods sold	20		19		17
Total operating lease costs	$	77	$	69	$	63

Total operating lease costs include variable lease costs of $22 million, $19 million and $17 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The following table summarizes the carrying amounts of our operating leased assets and liabilities along with key inputs used to discount our lease liabilities:


		December 31,
(in millions, except weighted-average data)	Financial Statement Line Item	2023			2022
Operating lease assets	Other assets	$	192		$	191
Operating lease liabilities - current	Accrued liabilities	$	39		$	37
Operating lease liabilities - non-current	Other liabilities	$	166		$	166
Weighted-average remaining term		6.32 years			6.81 years
Weighted-average incremental borrowing rate		6.12		%	5.78		%

The following table summarizes our future minimum lease payments under our non-cancelable leases as of December 31, 2023:


(in millions)	Commitments
2024	$	46
2025	44
2026	40
2027	34
2028	27
Thereafter	58
Total lease payments	249
Less: Imputed interest	44
Present value of operating lease liabilities	$	205

Supplemental cash flow information related to operating leases follows:


	Years Ended December 31,
(in millions)	2023		2022		2021
Cash paid for operating lease liabilities	$	36	$	33	$	33
Non-cash activities: operating lease assets obtained in exchange for new operating lease liabilities (1)	$	39	$	97	$	46

(1) The year ended December 31, 2022 includes $25 million of operating lease assets acquired from the First Alert acquisition.

As of December 31, 2023, we have additional operating leases that have not yet commenced. Obligations under these leases are not material. Additionally, as a lessor, we lease all or a portion of certain owned properties. Rental income for the years ended December 31, 2023, 2022 and 2021 was not material.