NOTE 15 — LEASES
We have operating and finance leases for datacenters, corporate offices, research and development facilities, retail stores, and certain equipment. Our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
The components of lease expense were as follows:
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(In millions) |
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Three Months Ended December 31, |
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Six Months Ended December 31, |
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2017 |
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2016 |
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2017 |
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2016 |
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Operating lease cost |
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$ |
399 |
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$ |
434 |
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$ |
787 |
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$ |
694 |
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Finance lease cost: |
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Amortization of right-of-use assets |
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$ |
57 |
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$ |
23 |
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$ |
105 |
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$ |
38 |
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Interest on lease liabilities |
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44 |
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15 |
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74 |
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27 |
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Total finance lease cost |
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$ |
101 |
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$ |
38 |
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$ |
179 |
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$ |
65 |
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Supplemental cash flow information related to leases was as follows:
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(In millions) |
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Three Months Ended December 31, |
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Six Months Ended December 31, |
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2017 |
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2016 |
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2017 |
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2016 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
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$ |
375 |
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$ |
314 |
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$ |
744 |
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$ |
581 |
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Operating cash flows from finance leases |
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45 |
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15 |
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75 |
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27 |
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Financing cash flows from finance leases |
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31 |
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9 |
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56 |
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15 |
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Right-of-use assets obtained in exchange for lease obligations: |
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Operating leases |
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308 |
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119 |
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|
699 |
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174 |
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Finance leases |
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650 |
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498 |
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1,378 |
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765 |
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Supplemental balance sheet information related to leases was as follows:
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(In millions, except lease term and discount rate) |
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December 31, |
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June 30, |
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Operating Leases |
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Operating lease right-of-use assets |
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$ |
6,749 |
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$ |
6,555 |
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Other current liabilities |
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$ |
1,343 |
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$ |
1,423 |
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Operating lease liabilities |
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5,640 |
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5,372 |
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Total operating lease liabilities |
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$ |
6,983 |
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$ |
6,795 |
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Finance Leases |
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Property and equipment, gross |
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$ |
4,062 |
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$ |
2,658 |
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Accumulated depreciation |
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(266 |
) |
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(161 |
) |
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Property and equipment, net |
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$ |
3,796 |
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$ |
2,497 |
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Other current liabilities |
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$ |
156 |
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$ |
113 |
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Other long-term liabilities |
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3,746 |
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2,425 |
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Total finance lease liabilities |
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$ |
3,902 |
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$ |
2,538 |
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Weighted Average Remaining Lease Term |
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Operating leases |
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7 years |
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7 years |
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Finance leases |
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14 years |
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13 years |
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Weighted Average Discount Rate |
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Operating leases |
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2.5% |
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2.5% |
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Finance leases |
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5.0% |
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4.7% |
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Maturities of lease liabilities were as follows:
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(In millions) |
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Year Ending June 30, |
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Operating Leases |
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Finance Leases |
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2018 (excluding the six months ended December 31, 2017) |
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$ |
750 |
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$ |
167 |
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2019 |
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|
1,413 |
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|
340 |
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2020 |
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1,287 |
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|
347 |
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2021 |
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1,025 |
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|
353 |
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2022 |
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|
839 |
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|
360 |
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Thereafter |
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2,634 |
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3,857 |
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Total lease payments |
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|
7,948 |
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|
5,424 |
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Less imputed interest |
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|
(965 |
) |
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(1,522 |
) |
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Total |
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$ |
6,983 |
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$ |
3,902 |
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As of December 31, 2017, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $237 million and $1.6 billion, respectively. These operating and finance leases will commence between fiscal year 2018 and fiscal year 2019 with lease terms of 1 year to 20 years.