LEASES

3 Months Ended

May 01, 2020

NOTE 5 — LEASES

The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are typically classified as operating leases. The Company’s lease contracts are generally for office buildings used to conduct its business, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. The Company also leases certain global logistics warehouses, employee vehicles, and equipment. As of May 1, 2020, the remaining terms of the Company’s leases range from less than one month to 26 years.

The Company also enters into leasing transactions in which the Company is the lessor, primarily through customer financing arrangements offered through DFS. DFS originates leases that are primarily classified as either sales-type leases or operating leases. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information on the DFS lease portfolio and related lease disclosures.

In adopting the current lease accounting standard effective February 2, 2019, the Company elected to apply a transition method that does not require the retrospective application to periods prior to the effective date. Financial information associated with the Company’s leases in which the Company is the lessee is contained in this Note. As of May 1, 2020 and January 31, 2020, there were no material finance leases for which the Company was a lessee.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income (Loss) for the periods indicated:



	Three Months Ended
	May 1, 2020		May 3, 2019
	(in millions)
Operating lease costs	$	131	$	117
Variable costs	44		38
Total lease costs	$	175	$	155

During both the three months ended May 1, 2020 and May 3, 2019, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:



	Classification	May 1, 2020			January 31, 2020
		(in millions, except for term and discount rate)
Operating lease right of use (“ROU”) assets	Other non-current assets	$	1,745		$	1,780

Current operating lease liabilities	Accrued and other current liabilities	$	403		$	432
Non-current operating lease liabilities	Other non-current liabilities	1,350			1,360
Total operating lease liabilities		$	1,753		$	1,792

Weighted-average remaining lease term (in years)		8.70			8.57
Weighted-average discount rate		3.84		%	3.81		%

The following table presents supplemental cash flow information related to leases for the periods indicated:



	Three Months Ended
	May 1, 2020		May 3, 2019
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	131	$	122

ROU assets obtained in exchange for new operating lease liabilities	$	120	$	42

The following table presents the future maturity of the Company’s operating lease liabilities under non-cancelable leases and reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:



	May 1, 2020
Fiscal Years	(in millions)
Fiscal 2021 (remaining nine months)	$	337
Fiscal 2022	401
Fiscal 2023	315
Fiscal 2024	217
Fiscal 2025	147
Thereafter	701
Total lease payments	$	2,118
Less: Imputed interest	(365		)
Total	$	1,753
Current operating lease liabilities	$	403
Non-current operating lease liabilities	$	1,350

The amount of future lease commitments after Fiscal 2025 is primarily for the ground lease on VMware, Inc.’s Palo Alto, California headquarter facilities, which expires in Fiscal 2047.

As of May 1, 2020, the Company has additional operating leases that have not yet commenced of $697 million. These operating leases will commence during Fiscal 2021 with lease terms of one year to 16 years.