Leases (Notes)

12 Months Ended

Dec. 31, 2020

Leases of Lessee Disclosure [Text Block]

11. LEASES

Our lease portfolio consists primarily of real estate, mobile equipment at our manufacturing facilities, rail cars to transport our products, and a fleet of vehicles. We determine if an arrangement is a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

As most of our leases do not provide an implicit rate, we used our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease term for all of our leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not to terminate) the lease that we are reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor.

As of December 31, 2020, our weighted average discount rates were five percent and four percent for operating and finance leases, respectively. As of December 31, 2020, our weighted average remaining lease terms were 12 and 2 years for operating and finance leases, respectively.

Our operating and finance leases are included in our Consolidated Balance Sheet and Consolidated Statement of Income as follows:


	Classification	December 31,
Consolidated Balance Sheet		2020		2019
Assets:
Operating lease assets	Operating lease assets	$	40	$	44
Finance lease assets	Property, plant, and equipment, net	—		1
Total lease assets		$	40	$	45
Liabilities:
Current
Operating	Accounts payable and accrued liabilities	$	8	$	8
Finance	Current portion of long-term debt	—		—
Non-current
Operating	Non-current operating lease liabilities	32		36
Finance	Long-term debt, excluding current portion	—		1
Total lease liabilities		$	40	$	45


	Classification	December 31,
Consolidated Statement of Income		2020		2019
Lease Cost:
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	12	$	10
Finance lease cost
Amortization of leased assets	Cost of sales	—		—
Interest on lease liabilities	Interest expense	—		—
Total lease cost		$	12	$	10

For the year ended December 31, 2020, we incurred short-term lease and variable lease costs of $2 million, and we made cash payments of $9 million in operating leases. For the year ended December 31, 2019, we incurred short-term lease and variable lease costs of $31 million, and we made cash payments of $9 million in operating leases.

We obtained right to use (ROU) assets in exchange for new operating lease liabilities of $4 million and $47 million for the years ended December 31, 2020, and 2019, respectively. We did not enter into any financing leases during 2020. We obtained ROU assets in exchange for new finance lease liabilities of $1 million for the year ended December 31, 2019.

The following table sets forth the minimum lease payments that are expected to be made in each of the years indicated.


	Operating Leases		Finance Leases		Total
2021	$	9	$	—	$	9
2022	7		—		7
2023	4		—		4
2024	3		—		3
2025	2		—		2
2026 and thereafter	27		—		27
Total lease payments	52		—		52
Less: Interest	(12)		—		(12)
Present value of lease liabilities	$	40	$	—	$	40