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Leases
 6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases 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 stated in the lease agreement. Operating lease expense is recognized on a straight-line basis over the lease term.
The components of lease expense included in Income before Income Taxes are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In millions)
2019
 
2019
Operating Lease Expense
$
74

 
$
148

Finance Lease Expense:
 
 
 
Amortization of ROU Assets
3

 
5

Interest on Lease Liabilities
5

 
10

Short Term Lease Expense
2

 
3

Variable Lease Expense
1

 
3

Sublease Income
(4
)
 
(8
)
Total Lease Expense
$
81

 
$
161


Supplemental cash flow information related to leases is as follows:
 
Six Months Ended
 
June 30,
(In millions)
2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
 
Operating Cash Flows for Operating Leases
$
134

Operating Cash Flows for Finance Leases
10

Financing Cash Flows for Finance Leases
3

ROU Assets Obtained in Exchange for Lease Obligations
 
Operating Leases
90

Finance Leases
32


Supplemental balance sheet information related to leases is as follows:
 
June 30,
(In millions, except lease term and discount rate)
2019
Operating Leases
 
Operating Lease ROU Assets
$
854

 
 
Operating Lease Liabilities due Within One Year
$
200

Operating Lease Liabilities
664

Total Operating Lease Liabilities
$
864

 


Finance Leases
 
Property, Plant and Equipment, at cost
$
259

Accumulated Depreciation
(45
)
Property, Plant and Equipment, net
$
214

 
 
Long Term Debt and Finance Leases due Within One Year
$
6

Long Term Debt and Finance Leases
242

Total Finance Lease Liabilities
$
248

 
 
Weighted Average Remaining Lease Term
 
Operating Leases
6.9 years

Finance Leases
32.2 years

 
 
Weighted Average Discount Rate
 
Operating Leases
6.72
%
Finance Leases
8.48
%

Future maturities of our lease liabilities, excluding subleases, as of June 30, 2019 are as follows:
(In millions)
Operating Leases
 
Finance Leases
2019 (excluding the six months ended June 30)
$
128

 
$
12

2020
222

 
24

2021
174

 
35

2022
123

 
21

2023
96

 
20

Thereafter
369

 
713

Total Lease Payments
1,112

 
825

Less: Imputed Interest
248

 
577

Total
$
864

 
$
248


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 June 30, 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 June 30, 2019. These operating leases will commence between 2019 and 2022 with lease terms of 1 year to 15 years.
Leases 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 stated in the lease agreement. Operating lease expense is recognized on a straight-line basis over the lease term.
The components of lease expense included in Income before Income Taxes are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(In millions)
2019
 
2019
Operating Lease Expense
$
74

 
$
148

Finance Lease Expense:
 
 
 
Amortization of ROU Assets
3

 
5

Interest on Lease Liabilities
5

 
10

Short Term Lease Expense
2

 
3

Variable Lease Expense
1

 
3

Sublease Income
(4
)
 
(8
)
Total Lease Expense
$
81

 
$
161


Supplemental cash flow information related to leases is as follows:
 
Six Months Ended
 
June 30,
(In millions)
2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
 
Operating Cash Flows for Operating Leases
$
134

Operating Cash Flows for Finance Leases
10

Financing Cash Flows for Finance Leases
3

ROU Assets Obtained in Exchange for Lease Obligations
 
Operating Leases
90

Finance Leases
32


Supplemental balance sheet information related to leases is as follows:
 
June 30,
(In millions, except lease term and discount rate)
2019
Operating Leases
 
Operating Lease ROU Assets
$
854

 
 
Operating Lease Liabilities due Within One Year
$
200

Operating Lease Liabilities
664

Total Operating Lease Liabilities
$
864

 


Finance Leases
 
Property, Plant and Equipment, at cost
$
259

Accumulated Depreciation
(45
)
Property, Plant and Equipment, net
$
214

 
 
Long Term Debt and Finance Leases due Within One Year
$
6

Long Term Debt and Finance Leases
242

Total Finance Lease Liabilities
$
248

 
 
Weighted Average Remaining Lease Term
 
Operating Leases
6.9 years

Finance Leases
32.2 years

 
 
Weighted Average Discount Rate
 
Operating Leases
6.72
%
Finance Leases
8.48
%

Future maturities of our lease liabilities, excluding subleases, as of June 30, 2019 are as follows:
(In millions)
Operating Leases
 
Finance Leases
2019 (excluding the six months ended June 30)
$
128

 
$
12

2020
222

 
24

2021
174

 
35

2022
123

 
21

2023
96

 
20

Thereafter
369

 
713

Total Lease Payments
1,112

 
825

Less: Imputed Interest
248

 
577

Total
$
864

 
$
248


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 June 30, 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 June 30, 2019. These operating leases will commence between 2019 and 2022 with lease terms of 1 year to 15 years.