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Leases

9 Months Ended

Sep. 29, 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			Nine Months Ended
	September 29, 2019			September 29, 2019
Finance lease cost:
Amortization of right-of-use assets	$	21		$	64
Interest on lease liabilities	7			19
Operating lease cost	86			250
Short-term lease cost	22			54
Variable lease cost	3			5
Sublease income	(3		)	(11		)
Total lease costs, net	$	136		$	381

Additional information related to leases was as follows:



Nine Months Ended	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	247
Operating cash flows from finance leases	19
Financing cash flows from finance leases	42
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	292
Finance leases	5

Additional quantitative lease information was as follows:



	September 29, 2019
Weighted-average remaining lease term:
Operating leases	11.0 years
Finance leases	5.2 years
Weighted-average discount rate:
Operating leases	3	%
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 September 29, 2019:



Year Ended December 31	Operating Leases		Finance Leases
2019 (excluding the nine months ended September 29, 2019)	$	81	$	22
2020	281		81
2021	237		75
2022	191		75
2023	147		29
Thereafter	900		67
Total future lease payments	1,837		349
Less imputed interest	366		68
Present value of future lease payments	1,471		281
Less current portion of lease liabilities	241		66
Long-term lease liabilities	$	1,230	$	215
ROU assets	$	1,400	$	325

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 September 29, 2019, we had additional future payments on leases that had not yet commenced of $144. 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