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LEASES AND COMMITMENTS

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

LEASES AND COMMITMENTS

LEASES AND COMMITMENTS

The Company’s lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses, and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. The Company determines whether a contract is or contains a lease at contract inception. The majority of the Company’s lease arrangements are comprised of fixed payments, and a limited number of these arrangements include a variable payment component based on certain index fluctuations. As of December 31, 2023, a significant portion of the Company’s leases were classified as operating leases.

Generally, the Company’s operating leases have renewal options that extend the lease terms, and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception.

All leases with an initial term of 12 months or less without an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Consolidated Balance Sheets, and lease expense is recognized on a straight-line basis over the lease term.

The following table presents the lease assets and lease liabilities as of December 31, 2023 and 2022:

						December 31,
(in millions)						2023						2022
Assets			Balance Sheet Location
Operating leases			Other non-current assets			$	143					$	106
Finance leases			Property, plant and equipment, net			25						8
Total lease assets						$	168					$	114
Liabilities
Current
Operating leases			Other current liabilities			$	37					$	22
Finance leases			Notes payable and other short-term debt			3						2
Non-current
Operating leases			Other non-current liabilities			112						85
Finance leases			Long-term debt			23						9
Total lease liabilities						$	175					$	118

The following table presents lease obligations arising from obtaining leased assets for the years ended December 31, 2023 and 2022:

			December 31,
(in millions)			2023						2022
Operating leases			$	63					$	14
Finance leases			17						—
Total lease obligations			$	80					$	14

The following table presents the maturity of lease liabilities as of December 31, 2023:

(in millions)			Operating leases						Finance leases
2024			$	37					$	3
2025			30						5
2026			23						4
2027			19						4
2028			14						5
After 2028			69						12
Total (undiscounted) lease payments			$	192					$	33
Less: Imputed interest			43						7
Present value of lease liabilities			$	149					$	26

In the years ended December 31, 2023, 2022 and 2021, the Company recorded operating lease expense of $33 million, $32 million and $28 million, respectively.

In the years ended December 31, 2023, 2022 and 2021, the operating cash flows for operating leases were $33 million, $30 million and $28 million, respectively.

In the years ended December 31, 2023, 2022 and 2021, the Company recorded short-term lease costs of $29 million, $21 million and $17 million, respectively.

Finance lease costs and related cash flows were immaterial for the periods presented.

ASC Topic 842, “Leases”, requires that the rate implicit in the lease be used if readily determinable. Generally, implicit rates are not readily determinable in the Company’s agreements, so the incremental borrowing rate is used instead for such lease arrangements. The incremental borrowing rates are determined using rates specific to the term of the lease, economic environments where lease activity is concentrated, value of lease portfolio, and assuming full collateralization of the loans. The following table presents the terms and discount rates:

			December 31,
			2023						2022
Weighted average remaining lease term (years)
Operating leases			8						6
Finance leases			8						5
Weighted average discount rate
Operating leases			5.4		%				3.1		%
Finance leases			6.2		%				2.5		%

LEASES AND COMMITMENTS

LEASES AND COMMITMENTS

The Company’s lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses, and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. The Company determines whether a contract is or contains a lease at contract inception. The majority of the Company’s lease arrangements are comprised of fixed payments, and a limited number of these arrangements include a variable payment component based on certain index fluctuations. As of December 31, 2023, a significant portion of the Company’s leases were classified as operating leases.

Generally, the Company’s operating leases have renewal options that extend the lease terms, and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception.

All leases with an initial term of 12 months or less without an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Consolidated Balance Sheets, and lease expense is recognized on a straight-line basis over the lease term.

The following table presents the lease assets and lease liabilities as of December 31, 2023 and 2022:

						December 31,
(in millions)						2023						2022
Assets			Balance Sheet Location
Operating leases			Other non-current assets			$	143					$	106
Finance leases			Property, plant and equipment, net			25						8
Total lease assets						$	168					$	114
Liabilities
Current
Operating leases			Other current liabilities			$	37					$	22
Finance leases			Notes payable and other short-term debt			3						2
Non-current
Operating leases			Other non-current liabilities			112						85
Finance leases			Long-term debt			23						9
Total lease liabilities						$	175					$	118

The following table presents lease obligations arising from obtaining leased assets for the years ended December 31, 2023 and 2022:

			December 31,
(in millions)			2023						2022
Operating leases			$	63					$	14
Finance leases			17						—
Total lease obligations			$	80					$	14

The following table presents the maturity of lease liabilities as of December 31, 2023:

(in millions)			Operating leases						Finance leases
2024			$	37					$	3
2025			30						5
2026			23						4
2027			19						4
2028			14						5
After 2028			69						12
Total (undiscounted) lease payments			$	192					$	33
Less: Imputed interest			43						7
Present value of lease liabilities			$	149					$	26

In the years ended December 31, 2023, 2022 and 2021, the Company recorded operating lease expense of $33 million, $32 million and $28 million, respectively.

In the years ended December 31, 2023, 2022 and 2021, the operating cash flows for operating leases were $33 million, $30 million and $28 million, respectively.

In the years ended December 31, 2023, 2022 and 2021, the Company recorded short-term lease costs of $29 million, $21 million and $17 million, respectively.

Finance lease costs and related cash flows were immaterial for the periods presented.

ASC Topic 842, “Leases”, requires that the rate implicit in the lease be used if readily determinable. Generally, implicit rates are not readily determinable in the Company’s agreements, so the incremental borrowing rate is used instead for such lease arrangements. The incremental borrowing rates are determined using rates specific to the term of the lease, economic environments where lease activity is concentrated, value of lease portfolio, and assuming full collateralization of the loans. The following table presents the terms and discount rates:

			December 31,
			2023						2022
Weighted average remaining lease term (years)
Operating leases			8						6
Finance leases			8						5
Weighted average discount rate
Operating leases			5.4		%				3.1		%
Finance leases			6.2		%				2.5		%

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- Definition

The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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- Definition

The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 842
-SubTopic 20
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//842-20/tableOfContent

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