LEASES (Notes)

3 Months Ended

Jan. 31, 2020

Leases of Lessee Disclosure [Text Block]

LEASES

As a lessee, we have various non- cancelable operating lease agreements for office space, warehouses, distribution centers, research and development facilities, manufacturing and production locations as well as vehicles, personal computers and other equipment. Our real estate leases have remaining lease terms of one to thirty years, which represent the non-cancelable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude options that are not reasonably certain to be exercised from our lease terms, ranging from six months to twenty years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms was well as payments for common area maintenance. We often receive incentives from our landlords, such as rent abatement periods, which effectively reduce the total lease payments owed for these leases. Vehicle, personal computer and other equipment operating leases have terms between three and five years.

Prior to the adoption of the new lease accounting standard, future minimum lease payments as of October 31, 2019 and previously disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under non- cancelable leases with initial terms exceeding twelve months were as follows:



	Operating Leases
	(in millions)
2020	$	52
2021	41
2022	29
2023	21
2024	14
2025 and thereafter	56
Total future minimum lease payments	$	213

The components of lease cost for operating leases were as follows:



	Three Months Ended
	January 31, 2020
	(in millions)

Operating lease cost	$	15
Variable lease cost ^(a)	4
Sublease income	(4		)
Total lease cost	$	15

(a) Variable lease cost includes cancelable leases, non-fixed maintenance costs and non-recoverable transaction taxes.

Supplemental cash flow information related to leases was as follows:



	Three Months Ended
	January 31, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	15
Non-cash right of use assets obtained in exchange for operating lease obligations	$	14

Supplemental balance sheet information related to leases was as follows:



		Three Months Ended
	Financial Statement Line Item	January 31, 2020
		(in millions, except lease term and discount rate)
Assets:
Operating lease:
Right of use asset	Other assets	$	191

Liabilities:
Current
Operating lease liabilities	Other accrued liabilities	$	51
Long-Term
Operating lease liabilities	Other long-term liabilities	$	141

Weighted average remaining lease term in years
Operating leases		8.25 years
Weighted average discount rate
Operating leases		2.1		%

Future minimum rents payable as of January 31, 2020 under non-cancelable leases with initial terms exceeding one year reconcile to lease liabilities included in the condensed consolidated balance sheet as follows:



	Operating Leases
	(in millions)
2020	$	41
2021	45
2022	33
2023	22
2024	14
2025 and thereafter	57
Total undiscounted future minimum lease payments	$	212
Less: amount of lease payments representing interest	(20		)
Present value of future minimum lease payments	$	192
Less: current liabilities	(51		)
Long-term lease liabilities	$	141

As of January 31, 2020, we had no additional significant operating or finance leases that had not yet commenced.

As a lessor, we have contracts for equipment leased to customers in connection with our diagnostics business which include both operating-type lease and sales-type lease arrangements. We account for the non-lease component under the revenue recognition rules and the lease component under the leasing guidance. Equipment lease revenue for operating lease agreements is recognized as visualization kits and reagents are shipped over the life of the lease and the cost of customer leased equipment is recorded within property, plant and equipment, net in the consolidated condensed balance sheet and depreciated over the equipment’s estimated

useful life. For arrangements that have been classified as sales-type leases revenue is recognized when the transfer of control of the underlying leased asset has occurred and the net investment the lease recorded which is calculated at the present value of the remaining lease payments due from the lessee.

Revenue allocated to the lease income for both finance/sales-type lease and operating lease rental arrangements represents less than one percent of total net revenue in the three months ended January 31, 2020.

As of January 31, 2020, the original cost and net book value of operating leased assets was $49 million and $16 million, respectively. As of January 31, 2020, lease receivables related to sales-type leases were $38 million.