Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.20.2
Leases
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases Leases

The Company records right of use (ROU) assets and lease liabilities for non-cancelable operating leases primarily for real estate and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Expense related to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the three and six months ended June 30, 2020, the Company recognized operating lease expense of $72 million and $134 million, respectively.

The following table sets forth the ROU assets and lease liabilities as of June 30, 2020 ($ in millions):
 
June 30, 2020
Assets
 
ROU assets (recorded within other long-term assets)
$
910

 
 
Liabilities
 
Short-term (recorded within accounts payable and accrued expenses)
$
204

Long-term (recorded within other long-term liabilities)
829

Total lease liabilities
$
1,033



During the three and six months ended June 30, 2020, the Company reduced its lease liabilities by $68 million and $131 million, respectively, for cash paid. In addition, during the three and six months ended June 30, 2020, new operating leases commenced resulting in the recognition of ROU assets of $59 million and lease liabilities of $59 million. As of June 30, 2020, the Company had additional operating leases that have not yet commenced of $362 million, which included three significant leases executed during 2019. These operating leases will commence in 2020 with lease terms of 5 years to 16 years. In connection with the WellCare acquisition, the Company acquired approximately $300 million of ROU assets and $300 million of lease liabilities. The valuation of WellCare’s acquired leases has not been finalized, and as a result, the asset and liability estimates recorded are preliminary and subject to change.

As of June 30, 2020, the weighted average remaining lease term of the Company’s operating leases was 6.9 years. The lease liabilities as of June 30, 2020 reflect a weighted average discount rate of 3.8%. Lease payments over the next five years and thereafter are as follows ($ in millions):
 
June 30, 2020
2020
$
114

2021
233

2022
183

2023
149

2024
125

2025
89

Thereafter
286

Total lease payments
1,179

Less: imputed interest
(146
)
Total lease liabilities
$
1,033