Leases

6 Months Ended

Mar. 28, 2020

6. Leases

During the first quarter of fiscal 2020, the Company adopted ASU 2016-02, Leases (Topic 842). The Company leases certain manufacturing facilities, warehouses, office space, manufacturing equipment, office equipment, and automobiles.

Under the new standard, we recognize right-of-use assets and lease liabilities for leases with original lease terms greater than one year based on the present value of lease payments over the lease term using our incremental borrowing rate on a collateralized basis. Short-term leases, with original lease terms of less than one year, are not recognized on the balance sheet. We are party to certain leases, namely for manufacturing facilities, which offer renewal options to extend the original lease term. Renewal options are included in the right-of-use asset and lease liability based on our assessment of the probability that the options will be exercised.

We have elected the package of practical expedients which allows the Company to not reassess: (i) whether any expired or existing contracts are or contain leases (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. Additionally, we have elected the practical expedient to not separate lease and non-lease components for all asset classes.

Supplemental lease information is as follows:

Leases	Classification	March 28, 2020
Assets
Operating lease right-of-use assets	Right-of-use assets	$	574
Finance lease right-of-use assets	Property, plant, and equipment		99
Current liabilities
Operating lease liabilities	Other current liabilities	$	112
Finance lease liabilities	Current portion of long-term debt		19
Non-current liabilities
Operating lease liabilities	Operating lease liabilities	$	479
Finance lease liabilities	Long-term debt, less current portion		81

Lease cost	Quarterly Period Ended March 28, 2020		Two Quarterly Periods Ended March 28, 2020
Operating lease cost	$	28	$	57
Finance lease cost:
Amortization of right-of-use assets		4		8
Interest on lease liabilities		1		2
Total finance lease cost		5		10
Short-term lease cost		4		8
Total lease cost	$	37	$	75

Cash paid for amounts included in lease liabilities	Two Quarterly Periods Ended March 28, 2020
Operating cash flows from operating leases	$	57
Operating cash flows from finance leases		1
Financing cash flows from finance leases		17

	March 28, 2020
Weighted-average remaining lease term - operating leases	8 years
Weighted-average remaining lease term - finance leases	4 years
Weighted-average discount rate - operating leases		4.5	%
Weighted-average discount rate - finance leases		3.7	%

Right-of-use assets obtained in exchange for new operating lease liabilities were $5 million and $13 million for the quarterly and two quarterly periods ended March 28, 2020, respectively.

At March 28, 2020, annual lease commitments were as follows:

Fiscal Year	Operating Leases			Finance Leases
Remainder of 2020	$	59		$	19
2021		111			27
2022		97			26
2023		84			13
2024		70			7
Thereafter		303			15
Total lease payments		724			107
Less: Interest		(133	)		(7	)
Present value of lease liabilities	$	591		$	100