6.LEASES AND LEASE-FINANCED TRANSACTIONS

The Company leases certain store real estate, warehouses, distribution centers, office space and equipment. While the Company’s current strategy emphasizes ownership of store real estate, the Company operates in leased facilities in approximately half of its store locations. Lease terms generally range from 10 to 20 years with options to renew for varying terms at the Company’s sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities or insurance and maintenance. Rent expense for leases with escalation clauses or other lease concessions are accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain properties or portions thereof are subleased to others for periods generally ranging from one to 20 years.

The following table provides supplemental balance sheet classification information related to leases:


		May 25,		February 2,
	Classification	2019		2019
Assets
Operating	Operating lease assets	$	6,819	$	—
Finance	Property, plant and equipment, net (1)		641		721

Total leased assets		$	7,460	$	721

Liabilities
Current
Operating	Current portion of operating lease liabilities	$	682	$	—
Finance	Current portion of long-term debt including obligations under finance leases		48		54

Noncurrent
Operating	Noncurrent operating lease liabilities		6,420		—
Finance	Long-term debt including obligations under finance leases		760		824

Total lease liabilities		$	7,910	$	878

(1)

Finance lease assets are recorded net of accumulated amortization of $287 and $345 as of May 25, 2019 and February 2, 2019.

The following table provides the components of lease cost:


		First Quarter Ended
Lease Cost	Classification	May 25, 2019
Operating lease cost (1)	Rent Expense	$	311
Sublease income	Rent Expense		(37)
Finance lease cost
Amortization of leased assets	Depreciation and Amortization		15
Interest on lease liabilities	Interest Expense		14

Net lease cost		$	303

(1)

Includes short-term leases and variable lease costs, which are immaterial.

Maturities of operating and finance lease liabilities are listed below. Amounts in the table include options to extend lease terms that are reasonably certain of being exercised.


	Operating		Finance
	Leases		Leases		Total
Remainder of 2019	$	700	$	63	$	763
2020		888		84		972
2021		824		84		908
2022		706		80		786
2023		635		79		714
Thereafter		6,645		787		7,432

Total lease payments		10,398		1,177	$	11,575

Less amount representing interest		3,296		369

Present value of lease liabilities (1)	$	7,102	$	808

(1)

Includes the current portion of $682 for operating leases and $48 for finance leases.

Total future minimum rentals under non-cancellable subleases at May 25, 2019 were $274.

The following table provides the weighted-average lease term and discount rate for operating and finance leases:



	May 25, 2019
Weighted-average remaining lease term (years)
Operating leases	16.3
Finance leases	15.0
Weighted-average discount rate
Operating leases	4.4	%
Finance leases	4.4	%

The following table provides supplemental cash flow information related to leases:


	First Quarter Ended
	May 25, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	239
Operating cash flows from finance leases	$	14
Financing cash flows from finance leases	$	9
Leased assets obtained in exchange for new operating lease liabilities	$	257
Leased assets obtained in exchange for new finance lease liabilities	$	33
Net gain recognized from sale and leaseback transactions (1)	$	51

(1)

During the first quarter of 2019, the Company entered into sale leaseback transactions related to eight properties, which resulted in total proceeds of $102.

The Company adopted new lease accounting guidance in the first quarter of 2019 as discussed in Note 1 and Note 5, and as required, the following disclosure is provided for periods prior to adoption. Minimum annual rentals and payments under capital leases and lease-financed transactions for the five years subsequent to February 2, 2019 and in the aggregate are listed below. Amounts in the table below only include payments through the noncancelable lease term.


					Lease-
	Capital		Operating		Financed
	Leases		Leases		Transactions
2019	$	103	$	948	$	5
2020		89		880		6
2021		86		773		5
2022		82		649		5
2023		81		556		5
Thereafter		766		3,197		17

Total		1,207	$	7,003	$	43

Less estimated executory costs included in capital leases		—

Net minimum lease payments under capital leases		1,207
Less amount representing interest		372

Present value of net minimum lease payments under capital leases	$	835