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LEASES AND LEASE-FINANCED TRANSACTIONS
12 Months Ended
Feb. 01, 2020
LEASES AND LEASE-FINANCED TRANSACTIONS  
LEASES AND LEASE-FINANCED TRANSACTIONS

10.

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:

    

    

February 1,

    

February 2,

Classification

2020

2019

Assets

Operating

Operating lease assets

$

6,814

$

Finance

Property, plant and equipment, net(1)

690

721

Total leased assets

$

7,504

$

721

Liabilities

Current

Operating

Current portion of operating lease liabilities

$

597

$

Finance

Current portion of long-term debt including obligations under finance leases

39

54

Noncurrent

Operating

Noncurrent operating lease liabilities

6,505

Finance

Long-term debt including obligations under finance leases

781

824

Total lease liabilities

$

7,922

$

878

(1)Finance lease assets are recorded net of accumulated amortization of $276 and $345 as of February 1, 2020 and February 2, 2019.

The following table provides the components of lease cost:

Year-To-Date

Lease Cost

Classification

    

 

February 1, 2020

Operating lease cost(1)

Rent Expense

$

1,000

Sublease and other rental income

Rent Expense

 

(116)

Finance lease cost

 

Amortization of leased assets

Depreciation and Amortization

53

Interest on lease liabilities

Interest Expense

48

Net lease cost

$

985

(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

2020

$

932

$

84

$

1,016

2021

 

884

 

95

 

979

2022

 

772

 

80

 

852

2023

 

758

 

86

 

844

2024

 

637

 

81

 

718

Thereafter

 

6,353

 

757

 

7,110

Total lease payments

10,336

1,183

$

11,519

Less amount representing interest

 

3,234

363

Present value of lease liabilities(1)

$

7,102

$

820

(1)Includes the current portion of $597 for operating leases and $39 for finance leases.

Total future minimum rentals under non-cancellable subleases at February 1, 2020 were $296.

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

February 1, 2020

Weighted-average remaining lease term (years)

Operating leases

16.0

Finance leases

15.3

Weighted-average discount rate

Operating leases

4.3

%

Finance leases

5.4

%

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

Year-To-Date

February 1, 2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

$

942

Operating cash flows from finance leases

48

Financing cash flows from finance leases

45

Leased assets obtained in exchange for new operating lease liabilities

849

Leased assets obtained in exchange for new finance lease liabilities

233

Net gain recognized from sale and leaseback transactions(1)

58

Impairment of operating lease assets(2)

81

Impairment of finance lease assets

40

(1)In 2019, the Company entered into sale leaseback transactions related to nine properties, which resulted in total proceeds of $113.
(2)Impairment of operating lease assets includes $11 related to Lucky’s Market.

The Company adopted new lease accounting guidance in the first quarter of 2019 as discussed in Note 1 and Note 18, 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