LEASES

9 Months Ended

Sep. 30, 2019

The Company leases certain facilities, vehicles and equipment principally under multi-year agreements generally having a lease term of one to twenty years, some of which include termination options and options to extend the lease term from one to five years or on a month-to-month basis. The Company includes options that are reasonably certain to be exercised as part of the lease term. The Company may negotiate termination clauses in anticipation of changes in market conditions but generally, these termination options are not exercised. Certain lease agreements also include variable payments that are dependent on usage or may vary month-to-month such as insurance, taxes and maintenance costs. None of the Company's lease agreements contain material residual value guarantees or material restrictive covenants.

As discussed in Note 2, "SIGNIFICANT ACCOUNTING POLICIES" under the new standard for accounting for leases, which the Company adopted effective January 1, 2019, the Company is required to record a right-of-use asset and corresponding lease liability, equal to the present value of the lease payments at the commencement date of each lease. For all asset classes, in determining future lease payments, the Company has elected to aggregate lease components, such as payments for rent,

taxes and insurance costs with non-lease components such as maintenance costs, and account for these payments as a single lease component. In limited circumstances, when the information necessary to determine the rate implicit in a lease is available, the present value of the lease payments is determined using the rate implicit in that lease. If the information necessary to determine the rate implicit in a lease is not available, the Company uses its incremental borrowing rate at the commencement of the lease, which represents the rate of interest that the Company would incur to borrow on a collateralized basis over a similar term.

All leases must be classified as either an operating lease or finance lease. The classification is determined based on whether substantive control has been transferred to the lessee. The classification governs the pattern of lease expense recognition. For leases classified as operating leases, total lease expense over the term of the lease is equal to the undiscounted payments due in accordance with the lease arrangement. Fixed lease expense is recognized periodically on a straight-line basis over the term of each lease and includes: (i) imputed interest during the period on the lease liability determined using the effective interest rate method plus (ii) amortization of the right-of-use asset for that period. Amortization of the right-of-use asset during the period is calculated as the difference between the straight-line expense and the imputed interest on the lease liability for that period. Variable lease expense is recognized when the achievement of the specific target is considered probable. As of September 30, 2019, the Company's finance leases were not material.

Right-of-use assets and lease liabilities associated with the Company's operating leases are included in the Consolidated Balance Sheet as of September 30, 2019 as follows:



(in millions)
Right-of-use assets included in:
Other non-current assets	$	263
Lease liabilities included in:
Accrued and other current liabilities	$	49
Other non-current liabilities	235
Total lease liabilities	$	284

Sub-lease income is not material. Lease expense includes:



(in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease costs	$	15	$	47
Variable operating lease costs	$	3	$	12
Short-term lease expense	$	1	$	2

Other information related to operating leases for the nine months ended September 30, 2019 is as follows:



(dollars in millions)
Cash paid from operating cash flows for amounts included in the measurement of lease liabilities	$	56
Right-of-use assets obtained in exchange for new operating lease liabilities	$	28
Weighted-average remaining lease term	8.5 years
Weighted-average discount rate	6.2		%

Right-of-use assets obtained in exchange for new operating lease liabilities during the nine months ended September 30, 2019 of $28 million in the table above does not include $282 million of right-of-use assets recognized upon adoption of the new standard for accounting for leases on January 1, 2019. See Note 2, "SIGNIFICANT ACCOUNTING POLICIES" for further detail regarding the impact of adoption.

As of September 30, 2019, future payments under noncancelable operating leases for the remainder of 2019, each of the five succeeding years ending December 31 and thereafter are as follows:



(in millions)
Remainder of 2019	$	16
2020	63
2021	49
2022	39
2023	34
2024	28
Thereafter	146
Total	375
Less: Imputed interest	91
Present value of remaining lease payments	284
Less: Current portion	49
Non-current portion	$	235

Upon adopting the new lease guidance, the Company elected the modified retrospective approach without revising prior periods. Accordingly, the Company is providing the following table of future payments under noncancelable operating leases as of December 31, 2018, for each of the five succeeding years ending December 31 and thereafter as previously disclosed under prior accounting guidance:



(in millions)	2019		2020		2021		2022		2023		Thereafter		Total
Future payments	$	78	$	60	$	44	$	39	$	32	$	166	$	419