Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

We determine if an arrangement is a lease at inception. We have leases with terms up to 13 years for corporate offices, research and development facilities, vehicles, and equipment, including some of which have options to extend and/or early-terminate the leases. We determine the lease term by assuming the exercise of any renewal and/or early-termination options that are reasonably assured.

Beginning January 1, 2019, operating lease right-of-use assets have been presented in operating lease assets in our consolidated condensed balance sheet, and the current and long-term portions of operating lease liabilities are included in other current liabilities and noncurrent operating lease liabilities, respectively, in our consolidated condensed balance sheet. Short-term leases, which are deemed at inception to have a lease term of 12 months or less, are not recorded on the consolidated condensed balance sheet.

Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lease expense for operating lease assets, which is recognized on a straight-line basis over the lease term, was $34.0 million and $66.1 million, respectively, for the three and six months ended June 30, 2019. Variable lease payments, which represent non-lease components such as maintenance, insurance and taxes, and which vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the payment obligation is incurred and were not material during the three and six months ended June 30, 2019. Short-term lease expense was not material during the three and six months ended June 30, 2019.

Supplemental balance sheet information related to operating leases as of June 30, 2019 was as follows:

Weighted-average remaining lease term	8 years
Weighted-average discount rate	3.7	%

Supplemental cash flow information related to operating leases for the six months ended June 30, 2019 was as follows:

Operating cash flows from operating leases	$	72.7
Right-of-use assets obtained in exchange for new operating lease liabilities	46.2

The annual minimum lease payments of our operating lease liabilities as of June 30, 2019 were as follows:

Year 1	$	135.0
Year 2	113.9
Year 3	80.2
Year 4	67.6
Year 5	56.3
After Year 5	276.6
Total lease payments	729.6
Less imputed interest	(108.0		)
Total	$	621.6

Finance leases are included in property and equipment, short-term borrowings and current maturities of long-term debt, and long-term debt in our consolidated condensed balance sheets. Finance leases are not material to our consolidated condensed financial statements.

Leases

Leases

We determine if an arrangement is a lease at inception. We have leases with terms up to 13 years for corporate offices, research and development facilities, vehicles, and equipment, including some of which have options to extend and/or early-terminate the leases. We determine the lease term by assuming the exercise of any renewal and/or early-termination options that are reasonably assured.

Beginning January 1, 2019, operating lease right-of-use assets have been presented in operating lease assets in our consolidated condensed balance sheet, and the current and long-term portions of operating lease liabilities are included in other current liabilities and noncurrent operating lease liabilities, respectively, in our consolidated condensed balance sheet. Short-term leases, which are deemed at inception to have a lease term of 12 months or less, are not recorded on the consolidated condensed balance sheet.

Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lease expense for operating lease assets, which is recognized on a straight-line basis over the lease term, was $34.0 million and $66.1 million, respectively, for the three and six months ended June 30, 2019. Variable lease payments, which represent non-lease components such as maintenance, insurance and taxes, and which vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time, are expensed in the period in which the payment obligation is incurred and were not material during the three and six months ended June 30, 2019. Short-term lease expense was not material during the three and six months ended June 30, 2019.

Supplemental balance sheet information related to operating leases as of June 30, 2019 was as follows:

Weighted-average remaining lease term	8 years
Weighted-average discount rate	3.7	%

Supplemental cash flow information related to operating leases for the six months ended June 30, 2019 was as follows:

Operating cash flows from operating leases	$	72.7
Right-of-use assets obtained in exchange for new operating lease liabilities	46.2

The annual minimum lease payments of our operating lease liabilities as of June 30, 2019 were as follows:

Year 1	$	135.0
Year 2	113.9
Year 3	80.2
Year 4	67.6
Year 5	56.3
After Year 5	276.6
Total lease payments	729.6
Less imputed interest	(108.0		)
Total	$	621.6

Finance leases are included in property and equipment, short-term borrowings and current maturities of long-term debt, and long-term debt in our consolidated condensed balance sheets. Finance leases are not material to our consolidated condensed financial statements.