Leases

12 Months Ended

Jan. 02, 2021

Leases [Abstract]

Operating leases

The Company leases certain distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment. The Company determines if an arrangement is a lease at inception and recognizes a financing or operating lease liability and right-of-use (“ROU”) asset in the Company’s Consolidated Balance Sheets. ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term as of commencement date. For the Company’s leases that do not provide an implicit borrowing rate, the Company uses its incremental borrowing rate based on the information available as of commencement date in determining the present value of future payments. The lease terms may include options to extend, terminate or buy out the lease. When it is reasonably certain that the Company will exercise these options, the associated payments are included in ROU assets and the estimated lease liabilities. Leases with an initial term of 12 months or less are not recorded in the Company's Consolidated Balance Sheets. The Company recognizes lease expense for leases on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For office and warehouse equipment leases, the Company accounts for the lease and non-lease components as a single lease component. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. The Company adopted ASU No. 2016-02, Leases (Topic 842), on December 30, 2018, using the modified retrospective approach.

The following table presents the location of the ROU assets and lease liabilities in the Company’s Consolidated Balance Sheets:

Leases	Consolidated Balance Sheet Location	January 2, 2021		December 28, 2019
Assets
Operating	Other assets	$	284	$	145
Financing	Property and equipment-net(1)	316		333
Total leased assets		$	600	$	478
Liabilities
Current:
Operating	Accrued expenses and other current liabilities	$	44	$	40
Financing	Current portion of long-term debt	86		95
Noncurrent:
Operating	Other long-term liabilities	263		131
Financing	Long-term debt	237		257
Total lease liabilities		$	630	$	523

(1)Financing lease assets are recorded net of accumulated amortization of $244 million and $269 million as of January 2, 2021 and December 28, 2019.

The following table presents the location of lease costs in fiscal years 2020 and 2019 in the Company's Consolidated Statements of Comprehensive Income:

Lease Cost	Statement of Comprehensive Income Location	2020		2019
Operating lease cost	Distribution, selling and administrative costs	$	52	$	29
Financing lease cost:
Amortization of leased assets	Distribution, selling and administrative costs	79		76
Interest on lease liabilities	Interest expense-net	12		12
Variable lease cost	Distribution, selling and administrative costs	13		6
Net lease cost		$	156	$	123

Future lease payments under lease agreements as of January 2, 2021 were as follows:

Maturity of Lease Liabilities	Operating Leases		Financing Lease Obligation		Total
2021	$	57	$	94	$	151
2022	60		73		133
2023	58		68		126
2024	39		51		90
2025	38		32		70
After 2025	175		28		203
Total lease payments	427		346		773
Less amount representing interest	(120)		(23)		(143)
Present value of lease liabilities	$	307	$	323	$	630

Future minimum lease payments in effect as of December 28, 2019 under noncancelable lease arrangements were as follows:

Future Minimum Lease Payments	Operating Leases		Financing Leases		Total
2020	$	48	$	106	$	154
2021	38		84		122
2022	33		62		95
2023	30		58		88
2024	12		41		53
After 2024	42		29		71
Total lease payments	203		380		583
Less amount representing interest	(32)		(28)		(60)
Present value of minimum lease payments	$	171	$	352	$	523

Other information related to lease agreements for fiscal years 2020 and 2019 was as follows:

Cash Paid For Amounts Included In Measurement of Liabilities	2020		2019
Operating cash flows from operating leases	$	56	$	37
Operating cash flows from financing leases	12		12
Financing cash flows from financing leases	102		90

Lease Term and Discount Rate	January 2, 2021		December 28, 2019
Weighted-average remaining lease term (years):
Operating leases	8.42		6.14
Financing leases	5.31		4.85
Weighted-average discount rate:
Operating leases	6.6	%	4.4	%
Financing leases	3.2	%	3.5	%

Finance leases

The Company leases certain distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment. The Company determines if an arrangement is a lease at inception and recognizes a financing or operating lease liability and right-of-use (“ROU”) asset in the Company’s Consolidated Balance Sheets. ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term as of commencement date. For the Company’s leases that do not provide an implicit borrowing rate, the Company uses its incremental borrowing rate based on the information available as of commencement date in determining the present value of future payments. The lease terms may include options to extend, terminate or buy out the lease. When it is reasonably certain that the Company will exercise these options, the associated payments are included in ROU assets and the estimated lease liabilities. Leases with an initial term of 12 months or less are not recorded in the Company's Consolidated Balance Sheets. The Company recognizes lease expense for leases on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For office and warehouse equipment leases, the Company accounts for the lease and non-lease components as a single lease component. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. The Company adopted ASU No. 2016-02, Leases (Topic 842), on December 30, 2018, using the modified retrospective approach.

The following table presents the location of the ROU assets and lease liabilities in the Company’s Consolidated Balance Sheets:

Leases	Consolidated Balance Sheet Location	January 2, 2021		December 28, 2019
Assets
Operating	Other assets	$	284	$	145
Financing	Property and equipment-net(1)	316		333
Total leased assets		$	600	$	478
Liabilities
Current:
Operating	Accrued expenses and other current liabilities	$	44	$	40
Financing	Current portion of long-term debt	86		95
Noncurrent:
Operating	Other long-term liabilities	263		131
Financing	Long-term debt	237		257
Total lease liabilities		$	630	$	523

(1)Financing lease assets are recorded net of accumulated amortization of $244 million and $269 million as of January 2, 2021 and December 28, 2019.

The following table presents the location of lease costs in fiscal years 2020 and 2019 in the Company's Consolidated Statements of Comprehensive Income:

Lease Cost	Statement of Comprehensive Income Location	2020		2019
Operating lease cost	Distribution, selling and administrative costs	$	52	$	29
Financing lease cost:
Amortization of leased assets	Distribution, selling and administrative costs	79		76
Interest on lease liabilities	Interest expense-net	12		12
Variable lease cost	Distribution, selling and administrative costs	13		6
Net lease cost		$	156	$	123

Future lease payments under lease agreements as of January 2, 2021 were as follows:

Maturity of Lease Liabilities	Operating Leases		Financing Lease Obligation		Total
2021	$	57	$	94	$	151
2022	60		73		133
2023	58		68		126
2024	39		51		90
2025	38		32		70
After 2025	175		28		203
Total lease payments	427		346		773
Less amount representing interest	(120)		(23)		(143)
Present value of lease liabilities	$	307	$	323	$	630

Future minimum lease payments in effect as of December 28, 2019 under noncancelable lease arrangements were as follows:

Future Minimum Lease Payments	Operating Leases		Financing Leases		Total
2020	$	48	$	106	$	154
2021	38		84		122
2022	33		62		95
2023	30		58		88
2024	12		41		53
After 2024	42		29		71
Total lease payments	203		380		583
Less amount representing interest	(32)		(28)		(60)
Present value of minimum lease payments	$	171	$	352	$	523

Other information related to lease agreements for fiscal years 2020 and 2019 was as follows:

Cash Paid For Amounts Included In Measurement of Liabilities	2020		2019
Operating cash flows from operating leases	$	56	$	37
Operating cash flows from financing leases	12		12
Financing cash flows from financing leases	102		90

Lease Term and Discount Rate	January 2, 2021		December 28, 2019
Weighted-average remaining lease term (years):
Operating leases	8.42		6.14
Financing leases	5.31		4.85
Weighted-average discount rate:
Operating leases	6.6	%	4.4	%
Financing leases	3.2	%	3.5	%