Leases

6 Months Ended

Mar. 28, 2020

Leases [Abstract]

Leases

Leases

The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space. These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options, some of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component for leases of retail, corporate, and data center facilities.

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $363 million and $732 million for the three- and six-month periods ended March 28, 2020, respectively. Lease costs associated with variable payments on the Company’s leases were $1.9 billion and $4.8 billion for the three- and six-month periods ended March 28, 2020, respectively.

For the three- and six-month periods ended March 28, 2020, the Company made $353 million and $702 million of fixed cash payments related to operating leases, respectively. Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $1.2 billion and $9.3 billion for the three- and six-month periods ended March 28, 2020, respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of March 28, 2020 (in millions):

Lease-Related Assets and Liabilities	Financial Statement Line Items	March 28, 2020
Right-of-use assets:
Operating leases	Other non-current assets	$	8,097
Finance leases	Property, plant and equipment, net	631
Total right-of-use assets		$	8,728
Lease liabilities:
Operating leases	Other current liabilities	$	1,185
	Other non-current liabilities	7,421
Finance leases	Other current liabilities	19
	Other non-current liabilities	629
Total lease liabilities		$	9,254

Lease liability maturities as of March 28, 2020, are as follows (in millions):

	Operating Leases			Finance Leases			Total
2020 (remaining six months)	$	559		$	14		$	573
2021	1,428			40			1,468
2022	1,298			38			1,336
2023	1,091			49			1,140
2024	951			26			977
Thereafter	4,269			920			5,189
Total undiscounted liabilities	9,596			1,087			10,683
Less: Imputed interest	(990		)	(439		)	(1,429		)
Total lease liabilities	$	8,606		$	648		$	9,254

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of March 28, 2020 were 10.7 years and 2.2%, respectively. The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

As of March 28, 2020, the Company had $1.8 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2020 and 2022, with lease terms ranging from less than 1 year to 21 years.

Leases

Note 12 – Leases

The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space. These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options, some of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component for leases of retail, corporate, and data center facilities.

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $363 million and $732 million for the three- and six-month periods ended March 28, 2020, respectively. Lease costs associated with variable payments on the Company’s leases were $1.9 billion and $4.8 billion for the three- and six-month periods ended March 28, 2020, respectively.

For the three- and six-month periods ended March 28, 2020, the Company made $353 million and $702 million of fixed cash payments related to operating leases, respectively. Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $1.2 billion and $9.3 billion for the three- and six-month periods ended March 28, 2020, respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of March 28, 2020 (in millions):

Lease-Related Assets and Liabilities	Financial Statement Line Items	March 28, 2020
Right-of-use assets:
Operating leases	Other non-current assets	$	8,097
Finance leases	Property, plant and equipment, net	631
Total right-of-use assets		$	8,728
Lease liabilities:
Operating leases	Other current liabilities	$	1,185
	Other non-current liabilities	7,421
Finance leases	Other current liabilities	19
	Other non-current liabilities	629
Total lease liabilities		$	9,254

Lease liability maturities as of March 28, 2020, are as follows (in millions):

	Operating Leases			Finance Leases			Total
2020 (remaining six months)	$	559		$	14		$	573
2021	1,428			40			1,468
2022	1,298			38			1,336
2023	1,091			49			1,140
2024	951			26			977
Thereafter	4,269			920			5,189
Total undiscounted liabilities	9,596			1,087			10,683
Less: Imputed interest	(990		)	(439		)	(1,429		)
Total lease liabilities	$	8,606		$	648		$	9,254

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of March 28, 2020 were 10.7 years and 2.2%, respectively. The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

As of March 28, 2020, the Company had $1.8 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2020 and 2022, with lease terms ranging from less than 1 year to 21 years.