Notes to Financial Statements

NOTE 13  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:

 

(In millions)

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

2017

 

 

 

2018

 

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease cost

 

$

413

 

 

$

399

 

 

$

823

 

 

$

787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

84

 

 

$

57

 

 

$

162

 

 

$

105

 

Interest on lease liabilities

 

 

59

 

 

 

44

 

 

 

114

 

 

 

74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total finance lease cost

 

$

143

 

 

$

101

 

 

$

276

 

 

$

179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information related to leases was as follows:

 

(In millions)

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

 

2017

 

 

 

2018

 

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

407

 

 

$

375

 

 

$

804

 

 

$

744

 

Operating cash flows from finance leases

 

 

59

 

 

 

45

 

 

 

114

 

 

 

75

 

Financing cash flows from finance leases

 

 

54

 

 

 

31

 

 

 

101

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

472

 

 

 

308

 

 

 

968

 

 

 

699

 

Finance leases

 

 

645

 

 

 

650

 

 

 

1,064

 

 

 

1,378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental balance sheet information related to leases was as follows:

 

(In millions, except lease term and discount rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,
2018

 

 

June 30,
2018

 

 

 

 

Operating Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

6,806

 

 

$

6,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

1,421

 

 

$

1,399

 

Operating lease liabilities

 

 

5,683

 

 

 

5,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating lease liabilities

 

$

7,104

 

 

$

6,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance Leases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, at cost

 

$

5,554

 

 

$

4,543

 

Accumulated depreciation

 

 

(566

)

 

 

(404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

$

4,988

 

 

$

4,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

245

 

 

$

176

 

Other long-term liabilities

 

 

4,965

 

 

 

4,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total finance lease liabilities

 

$

5,210

 

 

$

4,301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Remaining Lease Term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

7 years

 

 

 

7 years

 

Finance leases

 

 

13 years

 

 

 

13 years

 

 

 

 

 

 

 

 

 

 

Weighted Average Discount Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

2.9%

 

 

 

2.7%

 

Finance leases

 

 

4.9%

 

 

 

5.2%

 

 

 

 

 

 

 

 

 

 

 

Maturities of lease liabilities were as follows:

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ending June 30,

 

Operating

Leases

 

 

Finance

Leases

 

 

 

 

2019 (excluding the six months ended December 31, 2018)

 

$

799

 

 

$

241

 

2020

 

 

1,503

 

 

 

479

 

2021

 

 

1,244

 

 

 

487

 

2022

 

 

1,048

 

 

 

495

 

2023

 

 

861

 

 

 

498

 

Thereafter

 

 

2,439

 

 

 

4,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total lease payments

 

 

7,894

 

 

 

7,134

 

Less imputed interest

 

 

(790

)

 

 

(1,924

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

7,104

 

 

$

5,210

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018, we have additional operating and finance leases, primarily for datacenters, that have not yet commenced of $2.7 billion and $6.4 billion, respectively. These operating and finance leases will commence between fiscal year 2019 and fiscal year 2022 with lease terms of 1 year to 16 years.