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Leases

12 Months Ended

Dec. 31, 2019

8. Leases

Our operating lease activities primarily consist of leases for real estate, landfills and operating equipment. Our financing lease activities primarily consist of leases for operating equipment, railcars and landfill assets. Leases with an initial term of 12 months or less, which are not expected to be renewed beyond one year, are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms generally ranging from one to 10 years. The exercise of lease renewal options is at our sole discretion. We include the renewal term in the calculation of the right-of-use asset and related lease liability when

such renewals are reasonably certain of being exercised. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments based on usage and other lease agreements include rental payments adjusted periodically for inflation; these payments are treated as variable lease payments. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

When the implicit interest rate is not readily available for our leases, we discount future cash flows of the remaining lease payments using the current interest rate that would be paid to borrow on collateralized debt over a similar term, or incremental borrowing rate, at the commencement date.

Supplemental balance sheet information for our leases is as follows (in millions):


Leases	Classification	December 31, 2019
Assets
Long-term:
Operating	Other assets	$	424
Financing	Property and equipment, net of accumulated depreciation and amortization		374
Total lease assets		$	798

Liabilities
Current:
Operating	Accrued liabilities	$	79
Financing	Current portion of long-term debt		36
Long-term:
Operating	Other liabilities		366
Financing	Long-term debt, less current portion		323
Total lease liabilities		$	804

Operating lease expense was $132 million, $129 million and $134 million during 2019, 2018 and 2017, respectively, and is included in operating and selling, general and administrative expenses in our Consolidated Statement of Operations. Financing lease expense for 2019 was $48 million and is included in depreciation and amortization expense and interest expense, net in our Consolidated Statement of Operations.

Minimum contractual obligations for our leases (undiscounted) as of December 31, 2019 are as follows (in millions):


		Operating		Financing
2020	$	63	$	47
2021		58		45
2022		57		45
2023		51		44
2024		40		41
Thereafter		359		256
Total lease payments	$	628	$	478
Less: interest		(183)		(119)
Discounted lease liabilities	$	445	$	359

As of December 31, 2019, we entered into leases, primarily for real estate, that have not yet commenced with future lease payments of $26 million that are not reflected in the table above. These leases will commence through 2020 with non-cancelable lease terms up to 15 years.

Cash paid during 2019 for our operating and financing leases was $87 million and $40 million, respectively. During 2019, right-of-use assets obtained in exchange for lease obligations for our operating and financing leases were $149 million and $134 million, respectively.

As of December 31, 2019, the weighted average remaining lease terms of our operating and financing leases were approximately 16 years and 14 years, respectively. The weighted average discount rates used to determine the lease liabilities as of December 31, 2019 for our operating and financing leases were approximately 3.50% and 4.10%, respectively.