LEASES

6 Months Ended

Jun. 30, 2019

The Company leases certain properties and buildings (including branches, warehouses, distribution centers and office space) and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists mainly of operating leases which expire at various dates through 2036. Finance leases and service contracts with lease arrangements are not material and the following disclosures pertain to the Company’s operating leases.

Many of the property and building lease agreements obligate the Company to pay real estate taxes, insurance and certain maintenance costs (hereinafter referred to as non-lease components). Certain of the Company’s lease arrangements contain renewal provisions from 1 to 30 years, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with ROU assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses (SG&A).

Information related to operating leases is as follows (in millions of dollars):



	As of June 30, 2019
ROU Assets
Other assets	$	200

Operating lease liabilities
Accrued expenses	52
Other non-current liabilities	150
Total operating lease liabilities	$	202



	Six Months Ended June 30, 2019
Weighted average remaining lease term	7 years
Weighted average incremental borrowing rate	2.4		%
Cash paid for operating leases	$	32
ROU assets obtained in exchange for operating lease obligations	8

Rent expense included in SG&A for the three and six months ended June 30, 2019, was $16 million and $35 million, respectively.

Maturities of operating lease liabilities were as follows as of June 30, 2019 (in millions of dollars):



Year	Maturity of operating lease liabilities
2019 (excluding six months)	$	30
2020	52
2021	40
2022	31
2023	21
Thereafter	36
Total lease payments	210
Less interest	(8		)
Present value of lease liabilities	$	202

As of June 30, 2019, the Company's future operating lease obligations that have not yet commenced are immaterial.