Leases

12 Months Ended

Dec. 31, 2023

NOTE F – LEASES

We have operating and finance leases for real estate including corporate offices, land, warehouse space, and vehicles and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that we are reasonably certain to exercise (short-term leases). We recognize lease expense on a straight-line basis over the lease term for short-term leases that we do not record on our balance sheet. If there is a change in our assessment of the lease term and, as a result, the remaining lease term extends more than 12 months from the end of the previously determined lease term, or we subsequently become reasonably certain that we will exercise an option to purchase the underlying asset, the lease no longer meets the definition of a short-term lease and is accounted for as either an operating or finance lease and recognized on the balance sheet. In accordance with FASB ASC Topic 842, we account for the lease components and the non-lease components as a single lease component, with the exception of our warehouse leases. Our leases have remaining lease terms of less than 1 year to approximately 53 years, some of which may include options to extend the leases for up to 10 years. If we are reasonably certain we will exercise an option to extend the lease, the time period covered by the extension option is included in the lease term.

We determine whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

Our operating lease right-of-use assets are presented within Other long-term assets and corresponding liabilities are presented within Other current liabilities and Other long-term liabilities on our consolidated balance sheets. Refer to Note E – Contractual Obligations and Commitments for information regarding our finance leases. As of December 31, 2023, we have entered into two leases for additional office, warehouse and lab space which have not yet commenced. These facilities are currently under construction. We do not control the building during construction and are thus not deemed to be the owner during construction. Total estimated undiscounted future lease payments are approximately $500 million, which includes a buyout option exercisable once construction is complete which we are reasonably certain to exercise with respect to one of the leases. These leases will commence at the end of 2024 and second half of 2025 with noncancellable lease terms ranging from 20 to 25 years.

The following table presents supplemental balance sheet information related to our operating leases:


	As of December 31,
(in millions)	2023		2022
Assets
Operating lease right-of-use assets in Other long-term assets	$	439	$	386
Liabilities
Operating lease liabilities in Other current liabilities	76		61
Operating lease liabilities in Other long-term liabilities	390		347

The following table presents the weighted average remaining lease term and discount rate information related to our operating leases:


	As of December 31,
	2023	2022
Weighted average remaining lease term	9 years	10 years
Weighted average discount rate	4.5%	3.3%

Our operating lease cost under FASB ASC Topic 842 was $96 million in 2023, $91 million in 2022 and $90 million in 2021.

The following table presents supplemental cash flow information related to our operating leases:


	Year Ended December 31,
(in millions)	2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows from operating leases	$	93	$	91

Right-of-use assets obtained in exchange for operating lease obligations were $123 million and $43 million for the years ended December 31, 2023 and 2022, respectively.

The following table presents the maturities of our operating lease liabilities as of December 31, 2023 (in millions):


Fiscal year	Operating Leases (1)
2024	$	89
2025	78
2026	65
2027	49
2028	41
Thereafter	217
Total future minimum operating lease payments	539
Less: imputed interest	(74)
Present value of operating lease liabilities	$	466

(1) Excludes expected lease payments for lease terms that have not yet commenced.