Note 12 – Leases We have entered into various operating and finance lease agreements for certain of our offices, manufacturing and warehouse facilities, retail and service locations, equipment, vehicles, and solar energy systems, worldwide. We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for use by the lessor. We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease. We have elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. Our leases, where we are the lessee, often include options to extend the lease term for up to 10 years. Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Lease expense for operating leases is recognized on a straight-line basis over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Certain operating leases provide for annual increases to lease payments based on an index or rate. We calculate the present value of future lease payments based on the index or rate at the lease commencement date for new leases. Differences between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset. Interest expense on finance lease liabilities is recognized over the lease term within Interest expense in the consolidated statements of operations. The balances for the operating and finance leases where we are the lessee are presented as follows (in millions) within our consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Operating leases: |
|
|
|
|
|
|
Operating lease right-of-use assets |
|
$ |
2,563 |
|
|
$ |
2,016 |
|
|
|
|
|
|
|
|
Accrued liabilities and other |
|
$ |
485 |
|
|
$ |
368 |
|
Other long-term liabilities |
|
|
2,164 |
|
|
|
1,671 |
|
Total operating lease liabilities |
|
$ |
2,649 |
|
|
$ |
2,039 |
|
|
|
|
|
|
|
|
Finance leases: |
|
|
|
|
|
|
Solar energy systems, net |
|
$ |
25 |
|
|
$ |
27 |
|
Property, plant and equipment, net |
|
|
1,094 |
|
|
|
1,536 |
|
Total finance lease assets |
|
$ |
1,119 |
|
|
$ |
1,563 |
|
|
|
|
|
|
|
|
Current portion of long-term debt and finance leases |
|
$ |
486 |
|
|
$ |
501 |
|
Long-term debt and finance leases, net of current portion |
|
|
568 |
|
|
|
991 |
|
Total finance lease liabilities |
|
$ |
1,054 |
|
|
$ |
1,492 |
|
The components of lease expense are as follows (in millions) within our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Operating lease expense: |
|
|
|
|
|
|
|
|
|
Operating lease expense (1) |
|
$ |
798 |
|
|
$ |
627 |
|
|
$ |
451 |
|
|
|
|
|
|
|
|
|
|
|
Finance lease expense: |
|
|
|
|
|
|
|
|
|
Amortization of leased assets |
|
$ |
493 |
|
|
$ |
415 |
|
|
$ |
348 |
|
Interest on lease liabilities |
|
|
72 |
|
|
|
89 |
|
|
|
100 |
|
Total finance lease expense |
|
$ |
565 |
|
|
$ |
504 |
|
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
|
Total lease expense |
|
$ |
1,363 |
|
|
$ |
1,131 |
|
|
$ |
899 |
|
(1)Includes short-term leases and variable lease costs, which are immaterial. Other information related to leases where we are the lessee is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Weighted-average remaining lease term: |
|
|
|
|
|
|
Operating leases |
|
6.4 years |
|
|
6.5 years |
|
Finance leases |
|
3.1 years |
|
|
4.2 years |
|
|
|
|
|
|
|
|
Weighted-average discount rate: |
|
|
|
|
|
|
Operating leases |
|
|
5.3 |
% |
|
|
5.0 |
% |
Finance leases |
|
|
5.7 |
% |
|
|
5.8 |
% |
Supplemental cash flow information related to leases where we are the lessee is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
Operating cash outflows from operating leases |
|
$ |
754 |
|
|
$ |
616 |
|
|
$ |
456 |
|
Operating cash outflows from finance leases (interest payments) |
|
$ |
75 |
|
|
$ |
89 |
|
|
$ |
100 |
|
Financing cash outflows from finance leases |
|
$ |
502 |
|
|
$ |
439 |
|
|
$ |
338 |
|
Leased assets obtained in exchange for finance lease liabilities |
|
$ |
58 |
|
|
$ |
486 |
|
|
$ |
188 |
|
Leased assets obtained in exchange for operating lease liabilities |
|
$ |
1,059 |
|
|
$ |
818 |
|
|
$ |
553 |
|
As of December 31, 2022, the maturities of our operating and finance lease liabilities (excluding short-term leases) are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Finance |
|
|
|
Leases |
|
|
Leases |
|
2023 |
|
$ |
610 |
|
|
$ |
534 |
|
2024 |
|
|
558 |
|
|
|
387 |
|
2025 |
|
|
490 |
|
|
|
122 |
|
2026 |
|
|
383 |
|
|
|
52 |
|
2027 |
|
|
300 |
|
|
|
31 |
|
Thereafter |
|
|
805 |
|
|
|
4 |
|
Total minimum lease payments |
|
|
3,146 |
|
|
|
1,130 |
|
Less: Interest |
|
|
497 |
|
|
|
76 |
|
Present value of lease obligations |
|
|
2,649 |
|
|
|
1,054 |
|
Less: Current portion |
|
|
485 |
|
|
|
486 |
|
Long-term portion of lease obligations |
|
$ |
2,164 |
|
|
$ |
568 |
|
As of December 31, 2022, we have excluded from the table above additional operating leases that have not yet commenced with aggregate rent payments of $901 million. These operating leases will commence between fiscal year 2023 and 2024 with lease terms of 2 years to 15 years. Operating Lease and Sales-type Lease Receivables We are the lessor of certain vehicle and solar energy system arrangements as described in Note 2, Summary of Significant Accounting Policies. As of December 31, 2022, maturities of our operating lease and sales-type lease receivables from customers for each of the next five years and thereafter were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Sales-type |
|
|
|
Leases |
|
|
Leases |
|
2023 |
|
$ |
1,212 |
|
|
$ |
202 |
|
2024 |
|
|
900 |
|
|
|
208 |
|
2025 |
|
|
463 |
|
|
|
192 |
|
2026 |
|
|
215 |
|
|
|
174 |
|
2027 |
|
|
194 |
|
|
|
49 |
|
Thereafter |
|
|
1,697 |
|
|
|
12 |
|
Gross lease receivables |
|
$ |
4,681 |
|
|
$ |
837 |
|
The above table does not include vehicle sales to customers or leasing partners with a resale value guarantee as the cash payments were received upfront. For our solar PPA arrangements, customers are charged solely based on actual power produced by the installed solar energy system at a predefined rate per kilowatt-hour of power produced. The future payments from such arrangements are not included in the above table as they are a function of the power generated by the related solar energy systems in the future. Net Investment in Sales-type Leases Net investment in sales-type leases, which is the sum of the present value of the future contractual lease payments, is presented on the consolidated balance sheets as a component of Prepaid expenses and other current assets for the current portion and as Other non-current assets for the long-term portion. Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Gross lease receivables |
|
$ |
837 |
|
|
$ |
427 |
|
Unearned interest income |
|
|
(95 |
) |
|
|
(50 |
) |
Allowance for expected credit losses |
|
|
(4 |
) |
|
|
(1 |
) |
Net investment in sales-type leases |
|
$ |
738 |
|
|
$ |
376 |
|
|
|
|
|
|
|
|
Reported as: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
164 |
|
|
$ |
73 |
|
Other non-current assets |
|
|
574 |
|
|
|
303 |
|
Net investment in sales-type leases |
|
$ |
738 |
|
|
$ |
376 |
|
Lease Pass-Through Financing Obligation As of December 31, 2022, we have six transactions referred to as “lease pass-through fund arrangements.” Under these arrangements, our wholly owned subsidiaries finance the cost of solar energy systems with investors through arrangements contractually structured as master leases for an initial term ranging between 10 and 25 years. These solar energy systems are subject to lease or PPAs with customers with an initial term not exceeding 25 years. Under a lease pass-through fund arrangement, the investor makes a large upfront payment to the lessor, which is one of our subsidiaries, and in some cases, subsequent periodic payments. As of December 31, 2022, the future minimum master lease payments to be received from investors, for each of the next five years and thereafter, were as follows (in millions):
|
|
|
|
|
2023 |
|
$ |
26 |
|
2024 |
|
|
18 |
|
2025 |
|
|
27 |
|
2026 |
|
|
28 |
|
2027 |
|
|
29 |
|
Thereafter |
|
|
366 |
|
Total |
|
$ |
494 |
|
|