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Leases

6 Months Ended

Jun. 30, 2019

LEASES

We determine at its inception whether an arrangement that provides us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. We have elected not to recognize an ROU asset and lease liability for leases with terms of 12 months or less. Certain of our leases include options to extend the term of the lease for up to 30 years or to terminate the lease within 1 year. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining total future lease payments. As most of our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate on the commencement date to calculate the present value of future payments.

Our leases commonly include payments that are based on the Consumer Price Index (CPI) or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability. Other variable lease payments, such as usage-based amounts, are excluded from the ROU asset and lease liability, and are expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease, such as commissions.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.

Our leases are for office space, manufacturing facilities, and machinery and equipment. Real estate represents over 75% of our lease obligations.

The components of lease costs were as follows:



	Three Months Ended			Six Months Ended
	June 30, 2019			June 30, 2019
Finance lease cost:
Amortization of right-of-use assets	$	22		$	43
Interest on lease liabilities	7			12
Operating lease cost	78			164
Short-term lease cost	19			32
Variable lease cost	1			2
Sublease income	(4		)	(8		)
Total lease costs, net	$	123		$	245

Additional information related to leases was as follows:



Six Months Ended	June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	166
Operating cash flows from finance leases	12
Financing cash flows from finance leases	29
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	95
Finance leases	4

Additional quantitative lease information was as follows:



	June 30, 2019
Weighted-average remaining lease term:
Operating leases	10.8 years
Finance leases	5.4 years
Weighted-average discount rate:
Operating leases	4	%
Finance leases	9	%

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on the unaudited Consolidated Balance Sheet on June 30, 2019:



Year Ended December 31	Operating Leases		Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	155	$	44
2020	259		81
2021	214		75
2022	169		74
2023	126		28
Thereafter	762		66
Total future lease payments	1,685		368
Less imputed interest	333		72
Present value of future lease payments	1,352		296
Less current portion of lease liabilities	240		64
Long-term lease liabilities	$	1,112	$	232
ROU assets	$	1,280	$	338

Lease liabilities are included on the Consolidated Balance Sheet in current and noncurrent other liabilities, while ROU assets are included in noncurrent other assets.

On June 30, 2019, we had additional future payments on leases that had not yet commenced of $218. These leases will commence between 2019 and 2020, and have lease terms of 1 to 20 years.

As we have not restated prior-year information for our adoption of ASC Topic 842, the following presents our future minimum lease payments for operating leases and capital leases under ASC Topic 840 on December 31, 2018:



Year Ended December 31	Operating Leases		Capital Leases
2019	$	297	$	92
2020	234		84
2021	196		78
2022	154		79
2023	110		30
Thereafter	698		70
Total future minimum lease payments	$	1,689	433
Less amount representing interest	*		95
Less amount representing executory costs	*		19
Present value of net minimum lease payments	*		319
Less current maturities of capital lease liabilities	*		64
Noncurrent capital lease liabilities	*		$	255

* Not applicable for operating leases.

Leases, Financing