Leases

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

Leases, Operating

LEASESWe 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. Some 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:

Year Ended December 31	2021		2020		2019
Finance lease cost:
Amortization of right-of-use assets	$	96	$	94	$	86
Interest on lease liabilities	20		25		24
Operating lease cost	323		326		332
Short-term lease cost	71		62		75
Variable lease cost	18		12		14
Sublease income	(18)		(16)		(13)
Total lease costs, net	$	510	$	503	$	518

Additional information related to leases was as follows:

Year Ended December 31	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	322	$	323	$	325
Operating cash flows from finance leases	21		25		24
Financing cash flows from finance leases	66		64		57
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	249		205		365
Finance leases	27		45		50

Additional quantitative lease information was as follows:

December 31	2021		2020
Weighted-average remaining lease term:
Operating leases	11.5 years		10.5 years
Finance leases	13.7 years		10.1 years
Weighted-average discount rate:
Operating leases	3	%	3	%
Finance leases	5	%	7	%

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 Consolidated Balance Sheet on December 31, 2021:

Year Ended December 31	Operating Leases		Finance Leases
2022	$	289	$	92
2023	227		45
2024	184		27
2025	121		25
2026	96		24
Thereafter	728		202
Total future lease payments	1,645		415
Less imputed interest	302		78
Present value of future lease payments	1,343		337
Less current portion of lease liabilities	258		79
Long-term lease liabilities	$	1,085	$	258
ROU assets	$	1,257	$	319

On December 31, 2020, operating and finance lease liabilities and the related ROU assets were as follows:

	Operating Leases		Finance Leases
Current portion of lease liabilities	$	262	$	68
Long-term lease liabilities	1,149		255
ROU assets	1,328		333

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 December 31, 2021, we had additional future payments on leases that had not yet commenced of $54. These leases will commence in 2022 and 2023, and have lease terms of 1 to 20 years.

Leases, Financing

LEASESWe 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. Some 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:

Year Ended December 31	2021		2020		2019
Finance lease cost:
Amortization of right-of-use assets	$	96	$	94	$	86
Interest on lease liabilities	20		25		24
Operating lease cost	323		326		332
Short-term lease cost	71		62		75
Variable lease cost	18		12		14
Sublease income	(18)		(16)		(13)
Total lease costs, net	$	510	$	503	$	518

Additional information related to leases was as follows:

Year Ended December 31	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	322	$	323	$	325
Operating cash flows from finance leases	21		25		24
Financing cash flows from finance leases	66		64		57
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	249		205		365
Finance leases	27		45		50

Additional quantitative lease information was as follows:

December 31	2021		2020
Weighted-average remaining lease term:
Operating leases	11.5 years		10.5 years
Finance leases	13.7 years		10.1 years
Weighted-average discount rate:
Operating leases	3	%	3	%
Finance leases	5	%	7	%

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 Consolidated Balance Sheet on December 31, 2021:

Year Ended December 31	Operating Leases		Finance Leases
2022	$	289	$	92
2023	227		45
2024	184		27
2025	121		25
2026	96		24
Thereafter	728		202
Total future lease payments	1,645		415
Less imputed interest	302		78
Present value of future lease payments	1,343		337
Less current portion of lease liabilities	258		79
Long-term lease liabilities	$	1,085	$	258
ROU assets	$	1,257	$	319

On December 31, 2020, operating and finance lease liabilities and the related ROU assets were as follows:

	Operating Leases		Finance Leases
Current portion of lease liabilities	$	262	$	68
Long-term lease liabilities	1,149		255
ROU assets	1,328		333

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 December 31, 2021, we had additional future payments on leases that had not yet commenced of $54. These leases will commence in 2022 and 2023, and have lease terms of 1 to 20 years.