8. Leases

The Company determines if an arrangement is a lease at inception of the agreement. Operating leases are included in operating lease assets, and current and non-current operating lease liabilities in the Company’s Condensed Consolidated Balance Sheets. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease asset also includes in its calculation any prepaid lease payments made and excludes any lease incentives received from the arrangement. The Company’s lease terms may include options to extend or terminate the lease, and the impact of these options are included in the lease liability and lease asset calculations when the exercise of the option is at the Company’s sole discretion and it is reasonably certain that the Company will exercise that option. The Company will not separate lease and non-lease components for its leases when it is impractical to separate the two, such as leases with variable payment arrangements. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company has operating leases for certain rail cars, office space, warehouses, and machinery & equipment. The commencement date used for the calculation of the lease obligation is the latter of the commencement date of the new standard (January 1, 2019) or the lease start date. Certain of the leases have options to extend the life of the lease, which are included in the liability calculation when the option is at the sole discretion of the Company and it is reasonably certain that the Company will exercise the option. The Company has certain leases that have variable payments based solely on output or usage of the leased asset. These variable operating lease assets are excluded from the Company’s balance sheet presentation and expensed as incurred. Leases with an initial term of 12 months or less are not material. The Company currently has no finance leases.

Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense were as follows:


Lease Cost	Three Months Ended March 31,
(in millions)	2019
Operating lease cost	$	13
Variable operating lease cost		6
Lease cost	$	19

The following is a reconciliation of future undiscounted cash flows to the operating lease liabilities and the related operating lease assets as presented on our Condensed Consolidated Balance Sheet as of March 31, 2019.


Operating Leases		As of
(in millions)		March 31, 2019
2019 (Excluding the three months ended March 31, 2019)	$	41
2020		43
2021		32
2022		23
2023		18
Thereafter		33
Total future lease payments		190
Less imputed interest		35
Present value of future lease payments		155
Less current lease liabilities		42
Non-current operating lease liabilities	$	113
Operating lease assets	$	146

Additional information related to the Company’s operating leases was as follows:

(a)


Other Information	Three Months Ended March 31,
($ in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	161
Weighted average remaining lease term:
Operating leases		5.5 years
Weighted average discount rate:
Operating leases		5.7%

As the Company has not restated prior-year information for its adoption of ASC Topic 842, the following presents its future minimum lease payments for operating leases under ASC Topic 840 on December 31, 2018:


Operating Leases	As of
(in millions)	December 31, 2018
2019	$	53
2020		44
2021		40
2022		27
2023		22
Thereafter		27
Total future lease payments	$	213