LEASES (Notes)

3 Months Ended

Dec. 28, 2019

The Company leases certain manufacturing facilities, offices, land, equipment and vehicles. Such leases, some of which are noncancelable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and payments within certain lease agreements are adjusted periodically for changes in an index or rate.

The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on the lease term and the currency in which lease payments are made. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.

The components of lease expense for the thirteen weeks ended December 28, 2019 are as follows (in millions):



	Classification	December 28, 2019
Operating lease cost	Cost of Sales or Selling and Administrative Expenses	$	7
Finance lease cost
Amortization of leased assets	Cost of Sales	1
Interest on lease liabilities	Interest Expense - Net	1
Total lease cost		$	9

Supplemental cash flow information related to leases for the thirteen week period ended December 28, 2019 is as follows (in millions):



	December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	7
Operating cash outflows from finance leases	1

Lease assets obtained in exchange for new lease obligations:
Operating leases	$	10

Supplemental balance sheet information related to leases is as follows (in millions):



	Classification	December 28, 2019
Operating Leases
Operating lease right-of-use assets	Other Assets	$	102

Current operating lease liabilities	Accrued Liabilities	21
Long-term operating lease liabilities	Other Non-current Liabilities	87
Total operating lease liabilities		$	108

Finance Leases
Finance lease right-of-use assets, net	Property, Plant and Equipment—Net	$	70

Current finance lease liabilities	Accrued Liabilities	1
Long-term finance lease liabilities	Other Non-current Liabilities	51
Total finance lease liabilities		$	52

As of December 28, 2019, the Company has the following remaining lease term and weighted average discount rates (in millions):



Weighted-average remaining lease term
Operating leases	6.5 years
Finance leases	18.1 years

Weighted-average discount rate
Operating leases	6.2%
Finance leases	7.9%

Maturities of lease liabilities at December 28, 2019 are as follows (in millions):



	Operating Leases		Finance Leases
2020	$	20	$	4
2021	24		5
2022	20		5
2023	16		5
2024	14		6
Thereafter	38		76
Total future minimum lease payments	132		101
Less: imputed interest	24		49
Present value of lease liabilities reported	$	108	$	52

A summary of minimum rental commitments at December 28, 2019 under noncancelable operating leases, which expire at various dates and in most cases contain renewal options, for each of the next five years and thereafter in the aggregate, is as follows (in millions):



	Operating Leases
2020	$	20
2021	25
2022	21
2023	17
2024	14
Thereafter	39
Total lease commitments	$	136