LEASES

9 Months Ended

Sep. 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 September 30, 2019
ROU Assets
Other assets	$	207

Operating lease liabilities
Accrued expenses	54
Other non-current liabilities	159
Total operating lease liabilities	$	213



	Nine Months Ended September 30, 2019
Weighted average remaining lease term	6 years
Weighted average incremental borrowing rate	2.3		%
Cash paid for operating leases	$	49
ROU assets obtained in exchange for operating lease obligations	15

Rent expense related to operating leases included in SG&A for the three and nine months ended September 30, 2019, was $19 million and $54 million, respectively.

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



Year	Maturity of operating lease liabilities
2019 (remaining 3 months)	$	15
2020	57
2021	48
2022	37
2023	25
Thereafter	42
Total lease payments	224
Less interest	(11		)
Present value of lease liabilities	$	213

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