Leases

3 Months Ended

Mar. 31, 2019

LEASES

We determine if an arrangement is or contains a lease at inception. We enter into leases primarily for our wholesale distribution facilities, manufacturing equipment, administrative offices, retail stores, vehicles and data processing equipment under varying terms and conditions. Our leases have remaining lease terms of less than 1 year to approximately 50 years. Most of our leases include options to extend the lease, with renewal terms ranging from 1 to 50 years or more, and some include options to terminate the lease within 1 year. If it is reasonably certain that an option to extend or terminate a lease will be exercised, that option is considered in the lease term at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize short-term lease expense for these leases on a straight-line basis over the lease term.

Certain of our lease agreements include variable lease payments, generally based on consumer price indices. Variable lease payments that are assigned to an index are determined based on the initial index at commencement, and the variability based on changes in the index is accounted for as it changes. The variable portion of payments is not included in the initial measurement of the right-of-use asset or lease liability due to the uncertainty of the payment amount and are recorded as lease expense in the period incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We have lease agreements with lease and non-lease components, which are accounted for separately.

Operating leases are included in Operating Lease Right-of-Use (“ROU”) Assets, Operating Lease Liabilities due Within One Year and Operating Lease Liabilities on our Consolidated Balance Sheets. Finance leases are included in Property, Plant and Equipment, Long Term Debt and Finance Leases due Within One Year, and Long Term Debt and Finance Leases on our Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Generally, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments, unless there is a rate implicit in the lease agreement. Operating lease cost is recognized on a straight-line basis over the lease term.

The components of lease expense included in Income (Loss) before Income Taxes are as follows:



	Three Months Ended
	March 31,
(In millions)	2019
Operating Lease Cost	$	74
Finance Lease Cost
Amortization of ROU Assets	2
Interest on Lease Liabilities	5
Short Term Lease Cost	1
Variable Lease Cost	2
Sublease Income	(4		)
Total Lease Cost	$	80

Supplemental cash flow information related to leases is as follows:



	Three Months Ended
	March 31,
(In millions)	2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows for Operating Leases	$	71
Operating Cash Flows for Finance Leases	5
Financing Cash Flows for Finance Leases	2
ROU Assets Obtained in Exchange for Lease Obligations
Operating Leases	37
Finance Leases	28

Supplemental balance sheet information related to leases is as follows:



	March 31,
(In millions, except lease term and discount rate)	2019
Operating Leases
Operating Lease ROU Assets	$	862

Operating Lease Liabilities due Within One Year	$	203
Operating Lease Liabilities	667
Total Operating Lease Liabilities	$	870

Finance Leases
Property, Plant and Equipment, at cost	$	263
Accumulated Depreciation	52
Property, Plant and Equipment, net	$	211

Long Term Debt and Finance Leases due Within One Year	$	5
Long Term Debt and Finance Leases	240
Total Finance Lease Liabilities	$	245

Weighted Average Remaining Lease Term
Operating Leases	6.9 years
Finance Leases	32.4 years

Weighted Average Discount Rate
Operating Leases	6.71		%
Finance Leases	8.44		%

Future maturities of our lease liabilities, excluding subleases, as of March 31, 2019 are as follows:



(In millions)	Operating Leases		Finance Leases

2019 (excluding the three months ended March 31)	$	190	$	19
2020	213		23
2021	162		34
2022	113		21
2023	86		20
Thereafter	359		706
Total Lease Payments	1,123		823
Less: Imputed Interest	253		578
Total	$	870	$	245

Future maturities of our lease liabilities as of December 31, 2018 were as follows:



																2024 and
(In millions)	2019			2020			2021			2022			2023			Beyond			Total
Capital Leases
Minimum lease payments	$	8		$	7		$	18		$	3		$	2		$	23		$	61
Imputed interest	(3		)	(3		)	(3		)	(1		)	(1		)	(13		)	(24		)
Present value	$	5		$	4		$	15		$	2		$	1		$	10		$	37
Operating Leases
Minimum lease payments	$	266		$	214		$	161		$	110		$	84		$	391		$	1,226
Minimum sublease rentals	(15		)	(12		)	(8		)	(5		)	(3		)	(6		)	(49		)
	$	251		$	202		$	153		$	105		$	81		$	385		$	1,177
Imputed interest																			(263		)
Present value																			$	914

As of March 31, 2019, we have additional operating leases that have not yet commenced for which the present value of lease payments over the respective lease terms totals $33 million. Accordingly, these leases are not recorded on the Consolidated Balance Sheet at March 31, 2019. These operating leases will commence between 2019 and 2022 with lease terms of 1 year to 15 years.

Leases