LEASE COMMITMENTS

12 Months Ended

Dec. 30, 2022

Leases [Abstract]

LEASE COMMITMENTS

NOTE 18: LEASE COMMITMENTS

Our operating and finance leases at December 30, 2022 and December 31, 2021 primarily consisted of real estate leases for office space, warehouses, manufacturing, research and development facilities, tower space and land and equipment leases.

The components of lease costs are as follows:

	Fiscal Year Ended
(In millions)	December 30, 2022		December 31, 2021		January 1, 2021
Operating lease cost	$	151	$	172	$	176
Short-term and equipment lease cost	21		20		7
Variable lease cost	25		20		25
Other, net(1)	6		3		1
Total lease cost	$	203	$	215	$	209

______________

(1) Consists of finance amortization and interest costs as well as sublease income.

Lease Impairment — Fiscal 2021

As discussed in more detail in Note 10: Intangible Assets in these Notes, during the quarter ended July 2, 2021, we tested the CTS reporting unit for potential impairment of the long-lived assets, including identifiable assets and property, plant and equipment, and recorded a $145 million non-cash charge for the impairment of CTS long-lived assets, including $19 million for impairment of ROU assets, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2021.

Lease Impairment — Fiscal 2020

During fiscal 2020, as discussed in more detail in Note 9: Goodwill in these Notes, in conjunction with, and in advance of, the tests of goodwill related to our Commercial Aviation Solutions reporting unit, we recorded a $257 million non-cash impairment charge for long lived assets, including $31 million for impairment of ROU assets. Additionally, in connection with COVID restructuring actions, we recognized $5 million of non-cash impairment

charges for ROU assets associated with consolidated facilities. These impairments are included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2020.

Sale and Leaseback Transaction — Fiscal 2020

On November 24, 2020, we completed a sale and leaseback transaction of a parcel of land and manufacturing facility located in Los Angeles, California for $92 million (net cash proceeds of $66 million after $2 million of closing costs and $24 million for a residual value guarantee payment). The lease had a maximum term of sixteen months (including two options to extend the lease by one month). Due to its short term nature relative to the property’s remaining economic life, the lease is accounted for as an operating lease. We recognized a pre-tax gain on this sale and leaseback transaction of $22 million, which is included in the “Engineering, selling and administrative expenses” line item in our Consolidated Statement of Operations for fiscal 2020.

Supplemental operating and finance lease balance sheet information at December 30, 2022 and December 31, 2021 is as follows:

(In millions)	December 30, 2022		December 31, 2021
Operating Leases
Operating lease ROU assets	$	756	$	769
Other accrued items	121		109
Operating lease liabilities	741		768
Total operating lease liabilities	$	862	$	877
Finance Leases
Property, plant and equipment	$	170	$	163
Accumulated amortization	(15)		(9)
Property, plant and equipment, net	$	155	$	154
Current portion of long-term debt	$	5	$	4
Long-term debt	165		157
Total finance lease liabilities	$	170	$	161

Other supplemental lease information for fiscal 2022 and 2021 is as follows:

	Fiscal Year Ended
(In millions, except lease term and discount rate)	December 30, 2022			December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Net cash provided by operating activities - operating lease payments	$	148		$	154
Net cash provided by operating activities - finance lease interest payments	5			5
Net cash used in financing activities - finance lease obligation payments	4			3
Assets obtained in exchange for new lease obligations
ROU assets obtained with operating leases	$	123		$	260
Property, plant and equipment obtained with finance leases	20			120
Weighted average remaining lease term (in years)
Operating leases	9.3			9.8
Finance leases	21.3			23.8
Weighted average discount rate
Operating leases	3.5		%	3.7		%
Finance leases	3.4		%	3.1		%

Maturities under non-cancelable operating and finance leases at December 30, 2022 were as follows:

(In millions)	Operating Leases		Finance Leases
2023	$	145	$	11
2024	143		11
2025	118		11
2026	89		11
2027	82		10
Thereafter	420		187
Total future lease payments required(1)	997		241
Less: imputed interest	135		71
Total	$	862	$	170

_______________

(1)On December 30, 2022, we had additional future payments on leases of $12 million that had not yet commenced. These leases will commence in 2023, and have lease terms of 7 years to 15 years.

These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent concessions, leasehold improvement incentives or unusual provisions or conditions. We do not consider any individual lease material to our operations.

LEASE COMMITMENTS

NOTE 18: LEASE COMMITMENTS

Our operating and finance leases at December 30, 2022 and December 31, 2021 primarily consisted of real estate leases for office space, warehouses, manufacturing, research and development facilities, tower space and land and equipment leases.

The components of lease costs are as follows:

	Fiscal Year Ended
(In millions)	December 30, 2022		December 31, 2021		January 1, 2021
Operating lease cost	$	151	$	172	$	176
Short-term and equipment lease cost	21		20		7
Variable lease cost	25		20		25
Other, net(1)	6		3		1
Total lease cost	$	203	$	215	$	209

______________

(1) Consists of finance amortization and interest costs as well as sublease income.

Lease Impairment — Fiscal 2021

As discussed in more detail in Note 10: Intangible Assets in these Notes, during the quarter ended July 2, 2021, we tested the CTS reporting unit for potential impairment of the long-lived assets, including identifiable assets and property, plant and equipment, and recorded a $145 million non-cash charge for the impairment of CTS long-lived assets, including $19 million for impairment of ROU assets, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2021.

Lease Impairment — Fiscal 2020

During fiscal 2020, as discussed in more detail in Note 9: Goodwill in these Notes, in conjunction with, and in advance of, the tests of goodwill related to our Commercial Aviation Solutions reporting unit, we recorded a $257 million non-cash impairment charge for long lived assets, including $31 million for impairment of ROU assets. Additionally, in connection with COVID restructuring actions, we recognized $5 million of non-cash impairment

charges for ROU assets associated with consolidated facilities. These impairments are included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2020.

Sale and Leaseback Transaction — Fiscal 2020

On November 24, 2020, we completed a sale and leaseback transaction of a parcel of land and manufacturing facility located in Los Angeles, California for $92 million (net cash proceeds of $66 million after $2 million of closing costs and $24 million for a residual value guarantee payment). The lease had a maximum term of sixteen months (including two options to extend the lease by one month). Due to its short term nature relative to the property’s remaining economic life, the lease is accounted for as an operating lease. We recognized a pre-tax gain on this sale and leaseback transaction of $22 million, which is included in the “Engineering, selling and administrative expenses” line item in our Consolidated Statement of Operations for fiscal 2020.

Supplemental operating and finance lease balance sheet information at December 30, 2022 and December 31, 2021 is as follows:

(In millions)	December 30, 2022		December 31, 2021
Operating Leases
Operating lease ROU assets	$	756	$	769
Other accrued items	121		109
Operating lease liabilities	741		768
Total operating lease liabilities	$	862	$	877
Finance Leases
Property, plant and equipment	$	170	$	163
Accumulated amortization	(15)		(9)
Property, plant and equipment, net	$	155	$	154
Current portion of long-term debt	$	5	$	4
Long-term debt	165		157
Total finance lease liabilities	$	170	$	161

Other supplemental lease information for fiscal 2022 and 2021 is as follows:

	Fiscal Year Ended
(In millions, except lease term and discount rate)	December 30, 2022			December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Net cash provided by operating activities - operating lease payments	$	148		$	154
Net cash provided by operating activities - finance lease interest payments	5			5
Net cash used in financing activities - finance lease obligation payments	4			3
Assets obtained in exchange for new lease obligations
ROU assets obtained with operating leases	$	123		$	260
Property, plant and equipment obtained with finance leases	20			120
Weighted average remaining lease term (in years)
Operating leases	9.3			9.8
Finance leases	21.3			23.8
Weighted average discount rate
Operating leases	3.5		%	3.7		%
Finance leases	3.4		%	3.1		%

Maturities under non-cancelable operating and finance leases at December 30, 2022 were as follows:

(In millions)	Operating Leases		Finance Leases
2023	$	145	$	11
2024	143		11
2025	118		11
2026	89		11
2027	82		10
Thereafter	420		187
Total future lease payments required(1)	997		241
Less: imputed interest	135		71
Total	$	862	$	170

_______________

(1)On December 30, 2022, we had additional future payments on leases of $12 million that had not yet commenced. These leases will commence in 2023, and have lease terms of 7 years to 15 years.

These commitments do not contain any material rent escalations, rent holidays, contingent rent, rent concessions, leasehold improvement incentives or unusual provisions or conditions. We do not consider any individual lease material to our operations.