Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3.a.u2
Leases
9 Months Ended
Nov. 02, 2019
Leases [Abstract]  
Lessee, Operating and Financing Leases [Text Block] Leases
The Company leases a portion of the real estate and personal property used in its operations. Most leases require the Company to pay real estate taxes, maintenance, insurance and other similar costs; some also require additional payments based on percentages of sales and some contain purchase options. Certain of the Company’s real estate leases have terms that extend for a significant number of years and provide for rental rates that increase or decrease over time. Lease terms include the noncancellable portion of the underlying leases along with any reasonably certain lease periods associated with available renewal periods, termination options and purchase options.   
Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company's incremental borrowing rates for its population of leases. Related operating ROU assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases. ROU assets are tested for impairment in the same manner as long-lived assets.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense as they are incurred. 
Certain of the Company's leases contain covenants that restrict the ability of the tenant (typically a subsidiary of the Company) to take specified actions (including the payment of dividends or other amounts on account of its capital stock) unless the tenant satisfies certain financial tests.

ROU assets and lease liabilities consist of:
 
 
November 2, 2019
 
Classification
(millions)
Assets
 
 
Finance lease assets (a)
Right of Use Assets
$
11

Operating lease assets (b)
Right of Use Assets
2,585

Total lease assets
 
$
2,596

 
 
 
Liabilities
 
 
Current
 
 
Finance
Accounts payable and accrued liabilities
$
1

Operating (b)
Accounts payable and accrued liabilities
313

 
 
 
Noncurrent
 
 
Finance
Long-Term Lease Liabilities
24

Operating (b)
Long-Term Lease Liabilities
2,795

Total lease liabilities
 
$
3,133

(a) Finance lease assets are recorded net of accumulated amortization of $12 million as of November 2, 2019.
(b) As of November 2, 2019, operating lease assets included $394 million of non-lease components and current and noncurrent lease liabilities included $34 million and $367 million, respectively, of non-lease components.
The components of net lease expense are disclosed below. For the 13 and 39 weeks ended November 2, 2019, expense related to non-lease components was $20 million and $61 million, respectively, and variable lease expense was $3 million and $10 million, respectively.
 
 
13 Weeks Ended
 
39 Weeks Ended
 
 
November 2, 2019
 
November 2, 2019
 
Classification
(millions)
Operating lease expense (c)
Selling, general and administrative expenses
$
106

 
$
319

Sublease income
Selling, general and administrative expenses
(1
)
 
(2
)
Net lease expense
 
$
105

 
$
317

(c) Certain supply chain operating lease expense amounts are included in cost of sales.












As of November 2, 2019, the maturity of lease liabilities is as follows:
 
 
Finance
Leases (d)
 
Operating
Leases (e and f)
 
Total
 
(millions)
Fiscal year
 
 
 
 
 
2019
$
1

 
$
90

 
$
91

2020
3

 
334

 
337

2021
3

 
335

 
338

2022
3

 
313

 
316

2023
3

 
308

 
311

After 2023
31

 
5,384

 
5,415

Total undiscounted lease payments
44

 
6,764

 
6,808

Less amount representing interest
19

 
3,656

 
3,675

Total lease liabilities
$
25

 
$
3,108

 
$
3,133

(d) Finance lease payments include $12 million related to options to extend lease terms that are reasonably certain of being exercised.
(e) Operating lease payments include $3,272 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $965 million of legally binding minimum lease payments for leases signed but not yet commenced.
(f) Operating lease payments include $1,159 million related to non-lease component payments, with $841 million related to options to extend lease terms that are reasonably certain of being exercised.

Additional supplemental information regarding assumptions and cash flows for operating and finance leases is as follows:
 
November 2, 2019
Lease Term and Discount Rate
(millions)
Weighted-average remaining lease term (years)
 
Finance leases
17.9

Operating leases
23.6

Weighted-average discount rate
 
Finance leases
6.64
%
Operating leases
6.70
%

 
39 Weeks Ended
 
November 2, 2019
Other Information
 
Cash paid for amounts included in the measurement of lease liabilities
 
Operating cash flows used from operating leases
$
272

Financing cash flows used from financing leases
2

Leased assets obtained in exchange for new operating lease liabilities
48










As of February 2, 2019, as disclosed in the 2018 10-K, minimum rental commitments for noncancellable leases, including executed leases not yet commenced, were as follows:
 
Capitalized
Leases (g)
 
Operating
Leases
 
Total
 
(millions)
Fiscal year
 
 
 
 
 
2019
$
3

 
$
325

 
$
328

2020
3

 
315

 
318

2021
3

 
309

 
312

2022
3

 
283

 
286

2023
3

 
264

 
267

After 2023
31

 
2,758

 
2,789

Total minimum lease payments
46

 
$
4,254

 
$
4,300

Less amount representing interest
20

 
 
 
 
Present value of net minimum capitalized lease payments
$
26

 
 
 
 
(g) For purposes of the disclosure, capitalized lease is used interchangeably with finance lease.