Leases

12 Months Ended

Dec. 31, 2019

The Company leases certain manufacturing facilities, distribution centers, sales and administrative offices, equipment, and vehicles, which are accounted for as operating leases. Remaining lease terms are up to 13 years, with certain leases containing renewal options.

The following table presents activities associated with our operating leases during the year ended December 31, 2019 (in millions):



Fixed lease expenses	$	37
Variable lease expenses	29
Total lease expenses	$	66

Cash paid for leases	$	67

ROU assets obtained in exchange for lease obligations	$	42
Reduction of ROU assets and lease liabilities	(16		)
Net non-cash increases to ROU assets and lease liabilities	$	26

The variable lease expenses incurred during the year were not included in the measurement of the Company’s ROU assets and lease liabilities. Variable lease expenses consisted primarily of distribution center service costs that were based on product distribution volumes, as well as non-fixed common area maintenance, real estate taxes, and other operating costs associated with various facility leases. Expenses incurred during the year related to short term leases were not significant.

Cash payments for operating leases are included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.

ROU assets obtained in exchange for lease obligations includes new lease arrangements entered into by the Company during the year, as well as lease arrangements obtained through acquisitions. Additionally, ROU assets obtained in exchange for lease obligations include contract modifications that occurred during the year, as well as changes in assessments made during the year rendering it reasonably certain that lease renewal options will be exercised based on facts and circumstances that arose during the year.

Reductions in the Company’s ROU assets and lease liabilities were primarily related to a modification to one of the Company’s distribution center lease agreements during the fourth quarter of 2019, resulting in a reduction to fixed future lease payments. That amendment is not, however, expected to significantly affect total future lease costs, inclusive of variable lease payments.

As of December 31, 2019, the weighted average remaining term of the Company’s operating leases was approximately 6 years, and the weighted average discount rate used to measure the ROU assets and lease liabilities was approximately 6%.

Future minimum lease payments under non-cancellable operating leases as of December 31, 2019 were as follows (in millions):



2020	$	36
2021	30
2022	24
2023	20
2024	15
Thereafter	27
Total future minimum lease payments	$	152
Less: Interest	(23		)
Present value of lease liabilities	$	129

Reported as of December 31, 2019:
Current portion of lease liabilities	$	29
Long-term lease liabilities	100
Present value of lease liabilities	$	129

The current portion of lease liabilities is included within Accrued liabilities on the Consolidated Balance Sheets.

Rent expense under the Company’s operating leases during the years ended December 31, 2018 and 2017, prior to the Company’s adoption of ASC 842, was $33 million and $34 million, respectively. The Company’s total future minimum lease obligations under non-cancellable operating leases as of December 31, 2018 was comparable to those as of December 31, 2019.

Revenues earned from lease arrangements under which the Company is a lessor were not significant.