LEASES

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

LEASES

NOTE 12. LEASES

We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Our leases consist of leaseholds on EfW facilities, land, trucks and automobiles, office space and machinery and equipment. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above in Note 1. Organization and Basis of Presentation - Accounting Pronouncements Recently Adopted.

We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

The components of lease expense were as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2019
Finance lease:
Amortization of assets, included in Depreciation and amortization expense	$	1	$	5
Interest on lease liabilities, included in Interest expense	1		3
Operating lease:
Amortization of assets, included in Total operating expense	2		6
Interest on lease liabilities, included in Total operating expense	1		2
Total net lease cost	$	5	$	16

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	September 30, 2019
Operating leases:
Operating lease ROU assets, included in Other assets	$	48
Current operating lease liabilities, included in Accrued expenses and other current liabilities	$	6
Noncurrent operating lease liabilities, included in Other liabilities	47
Total operating lease liabilities	$	53
Finance leases:
Property and equipment, at cost	$	166
Accumulated amortization	(23		)
Property and equipment, net	$	143
Current obligations of finance leases, included in Current portion of long-term debt	$	6
Finance leases, net of current obligations, included in Long-term debt	83
Total finance lease liabilities	$	89

Supplemental cash flow and other information related to leases was as follows (in millions):

	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	7
Financing cash flows related to finance leases	$	4
Weighted average remaining lease term (in years):
Operating leases	11.8
Finance leases	33.4
Weighted average discount rate:
Operating leases	4.65		%
Finance leases	5.06		%

Maturities of lease liabilities were as follows (in millions):

	September 30, 2019
	Operating Leases			Finance Leases
Remainder of 2019	$	2		$	3
2020	8			11
2021	8			11
2022	7			11
2023	7			10
2024 and thereafter	38			111
Total lease payments	70			157
Less: Amounts representing interest	(17		)	(68		)
Total lease obligations	$	53		$	89

As of September 30, 2019, we had no additional significant operating or finance leases that had not yet commenced.

Disclosures related to periods prior to the adoption of ASC 842

Rental expense was $5 million and $17 million for the three and nine months ended September 30, 2018, respectively.

LEASES

We determine if an arrangement contains a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

Our leases consist of leaseholds on EfW facilities, land, trucks and automobiles, office space and machinery and equipment. We utilized a portfolio approach in determining our discount rate. The portfolio approach takes into consideration the range of the term, the range of the lease payments, the category of the underlying asset and our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less are not recorded on the balance sheet, per the election of the practical expedient noted above in Note 1. Organization and Basis of Presentation - Accounting Pronouncements Recently Adopted.

We recognize lease expense for these leases on a straight-line basis over the lease term. We recognize variable lease payments in the period in which the obligation for those payments is incurred. Variable lease payments that depend on an index or a rate are initially measured using the index or rate at the commencement date, otherwise variable lease payments are recognized in the period incurred.

The components of lease expense were as follows (in millions):

	Three Months Ended		Nine Months Ended
	September 30, 2019
Finance lease:
Amortization of assets, included in Depreciation and amortization expense	$	1	$	5
Interest on lease liabilities, included in Interest expense	1		3
Operating lease:
Amortization of assets, included in Total operating expense	2		6
Interest on lease liabilities, included in Total operating expense	1		2
Total net lease cost	$	5	$	16

Supplemental balance sheet information related to leases was as follows (in millions, except lease term and discount rate):

	September 30, 2019
Operating leases:
Operating lease ROU assets, included in Other assets	$	48
Current operating lease liabilities, included in Accrued expenses and other current liabilities	$	6
Noncurrent operating lease liabilities, included in Other liabilities	47
Total operating lease liabilities	$	53
Finance leases:
Property and equipment, at cost	$	166
Accumulated amortization	(23		)
Property and equipment, net	$	143
Current obligations of finance leases, included in Current portion of long-term debt	$	6
Finance leases, net of current obligations, included in Long-term debt	83
Total finance lease liabilities	$	89

Supplemental cash flow and other information related to leases was as follows (in millions):

	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	7
Financing cash flows related to finance leases	$	4
Weighted average remaining lease term (in years):
Operating leases	11.8
Finance leases	33.4
Weighted average discount rate:
Operating leases	4.65		%
Finance leases	5.06		%

Maturities of lease liabilities were as follows (in millions):

	September 30, 2019
	Operating Leases			Finance Leases
Remainder of 2019	$	2		$	3
2020	8			11
2021	8			11
2022	7			11
2023	7			10
2024 and thereafter	38			111
Total lease payments	70			157
Less: Amounts representing interest	(17		)	(68		)
Total lease obligations	$	53		$	89

As of September 30, 2019, we had no additional significant operating or finance leases that had not yet commenced.

Disclosures related to periods prior to the adoption of ASC 842

Rental expense was $5 million and $17 million for the three and nine months ended September 30, 2018, respectively.