Leases

6 Months Ended

Jun. 29, 2019

Note 9.

Leases

As a lessee, the company leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers, and other equipment. These operating leases generally have remaining lease terms between 1 month and 30 years, and some include options to extend (generally for 1 to 10 years) or have options to terminate the arrangement within 1 year. The company’s finance leases are not material.

The company has guaranteed the residual value of three leased operating facilities with initial lease terms ending in 2019, 2020 and 2023. The company has agreed with the lessor to comply with certain financial covenants consistent with its other debt arrangements (Note 8). The aggregate maximum guarantee under these three lease arrangements is $147 million. Operating lease ROU assets and lease liabilities for these lease arrangements are recorded on the consolidated balance sheet as of June 29, 2019, but exclude any amounts for residual value guarantees.

As a lessee, the consolidated statement of income includes pre-tax operating lease costs of $50 million and $98 million and pre-tax variable lease costs of $17 million and $26 million for the three and six months ended June 29, 2019, respectively. Lease costs arising from finance leases, short-term leases, and sublease income are not material.

Cash used in operating activities for payments of amounts included in the measurement of operating lease liabilities was $97 million in the six months ended June 29, 2019. Operating lease ROU assets of $36 million were obtained in exchange for new operating lease liabilities in the six months ended June 29, 2019.

The weighted-average remaining operating lease term was 6.2 years and the weighted average discount rate was 4.0% as of June 29, 2019.

ROU assets of $633 million as of June 29, 2019, are classified in other assets in the consolidated balance sheet. Operating lease liabilities of $157 million and $517 million as of June 29, 2019, are classified in other accrued expenses and other long-term liabilities, respectively, in the consolidated balance sheet.

As of June 29, 2019, future payments of operating lease liabilities are as follows:



(In millions)

Remainder of 2019	$	96
2020	171
2021	128
2022	96
2023	68
2024	49
2025 and Thereafter	159

Total Lease Payments	767
Less: Imputed Interest	93

Total Operating Lease Liability	$	674

As a lessor, operating leases, sales-type leases and direct financing leases are not material.

As previously disclosed in the company's 2018 Annual Report on Form 10-K and under previous lease accounting guidance, the following is a summary of annual future minimum lease and rental commitments under noncancelable operating leases as of December 31, 2018:



(In millions)

2019	$	192
2020	158
2021	118
2022	86
2023	58
2024 and Thereafter	177

	$	789