Leases

9 Months Ended

Jun. 26, 2020

Leases

Leases

9. Leases

We have facility, land, vehicle, and equipment leases that expire at various dates. We determine if a contract qualifies as a lease at inception. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the identified asset and the right to direct the use of the identified asset.

Lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of remaining lease payments over the lease term. Lease ROU assets represent our right to use the underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. We do not recognize ROU assets or lease liabilities that arise from short-term leases. Since our lease contracts do not contain a readily determinable implicit rate, we determine a fully-collateralized incremental borrowing rate that reflects a similar term to the lease and the economic environment of the applicable country or region in which the asset is leased.

We have elected to account for lease and non-lease components in our real estate leases as a single lease component; other leases generally do not contain non-lease components. The non-lease components in our real estate leases include logistics services, warehousing, and other operational costs. Many of these costs are variable, fluctuating based on services provided, such as pallets shipped in and out of a location or square footage of space occupied. These costs, and any other variable rental costs, are excluded from our ROU assets and lease liabilities, and instead are expensed as incurred. Some of

our leases may include options to either renew or early terminate the lease. The exercise of these options is generally at our sole discretion and would only occur if there is an economic, financial, or business reason to do so. Such options are included in the lease term if we determine it is reasonably certain they will be exercised.

The components of lease cost were as follows:

	For the		For the
	Quarter Ended		Nine Months Ended
	June 26,		June 26,
	2020		2020
	(in millions)
Operating lease cost	$	27	$	79
Variable lease cost		12		38
Total lease cost	$	39	$	117

Amounts recognized on the Condensed Consolidated Balance Sheet were as follows:

	June 26,
	2020
	($ in millions)
Operating lease ROU assets:
Other assets	$	451
Operating lease liabilities:
Accrued and other current liabilities	$	115
Other liabilities		346
Total operating lease liabilities	$	461
Weighted-average remaining lease term (in years)		5.7
Weighted-average discount rate		1.8	%

Cash flow information, including significant non-cash transactions, related to leases was as follows:

	For the
	Nine Months Ended
	June 26,
	2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)	$	78
ROU assets obtained in exchange for new operating lease liabilities		17

(1) These payments are included in cash flows from continuing operating activities, primarily in changes in other liabilities.

At June 26, 2020, the maturities of operating lease liabilities were as follows:

	(in millions)
Remainder of fiscal 2020	$	30
Fiscal 2021		114
Fiscal 2022		90
Fiscal 2023		72
Fiscal 2024		57
Thereafter		121
Total lease payments		484
Less: interest		(23)
Present value of lease liabilities	$	461

The following table, which was included in our Annual Report on Form 10-K for the fiscal year ended September 27, 2019 and presented in accordance with the previous lease accounting standard, presents the future minimum lease payments under non-cancelable operating lease obligations as of September 27, 2019:

	(in millions)
Fiscal 2020	$	117
Fiscal 2021		102
Fiscal 2022		81
Fiscal 2023		67
Fiscal 2024		55
Thereafter		118
Total	$	540