Owens Corning

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9. LEASES

The Company leases certain equipment and facilities under both operating and finance leases expiring on various dates through 2050. The nature of these leases generally fall into the following five categories: real estate, material handling equipment, fleet vehicles, office equipment and energy equipment.

For leases with initial terms greater than 12 months, we consider these our right-of-use assets and record the related asset and obligation at the present value of lease payments over the term. For leases with initial terms equal to or less than 12 months, we do not consider them as right-of-use assets and instead consider them short-term lease costs that are recognized on a straight-line basis over the lease term.

Our leases may include escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when reasonably certain. These options to extend or terminate a lease are at our discretion. We have elected to take the practical expedient and not separate lease and non-lease components of contracts. We estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our lease agreements do not contain any material residual value guarantees.

Balance Sheet Classification

The table below presents the lease-related assets and liabilities recorded on the balance sheet (in millions):

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9. LEASES (continued)

Lease Costs

The table below presents lease-related costs (in millions):

Cash paid for operating leases included $76 million, $68 million and $70 million in the years ended December 31, 2023, 2022 and 2021, respectively. Cash paid for finance leases included $33 million for financing activities and $6 million for operating activities for the year ended December 31, 2023. Cash paid for finance leases included $30 million for financing activities and $4 million for operating activities for the year ended December 31, 2022. Cash paid for finance leases included $23 million for financing activities and $4 million for operating activities for the year ended December 31, 2021.

We added $104 million, $119 million and $81 million of operating lease liabilities as a result of obtaining operating lease right-of-use assets in the years ended December 31, 2023, 2022 and 2021 respectively. We added $61 million, $70 million and $51 million of finance lease liabilities as a result of obtaining finance lease right-of-use assets in the years ended December 31, 2023, 2022 and 2021 respectively.

The tables below present supplemental information related to leases:

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9. LEASES (continued)

Maturities of Lease Liabilities

The table below reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of December 31, 2023 (in millions):