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LEASES | 9 Months Ended
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Sep. 28, 2019
Leases [Abstract] |
LEASES | NOTE 8. LEASES The Company leases retail stores and other facilities, vehicles, and equipment under operating lease agreements. Facility leases typically are for a fixed non-cancellable term with one or more renewal options. In addition to rent payments, the Company is required to pay certain variable lease costs such as real estate taxes, insurance and common-area maintenance on most of the facility leases. For leases beginning in 2019, the Company accounts for lease components (e.g., fixed payments including rent) and non-lease components (e.g., real estate taxes, insurance costs and common-area maintenance costs) as a single lease component. Many lease agreements contain tenant improvement allowances, rent holidays, and/or rent escalation clauses. Certain leases contain provisions for additional rent to be paid if sales exceed a specified amount, though such payments have been immaterial during the periods presented. The Company subleases certain real estate to third parties, consisting mainly of operating leases for space within the retail stores. The components of lease expense were as follows:
|  | Third Quarter |  |  | Year-to-Date |
(In millions) |  | 2019 |  |  | 2019 |
Finance lease cost: |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  | $ | 5 |  |  | $ | 13 |
Interest on lease liabilities |  |  | 2 |  |  |  | 4 |
Operating lease cost |  |  | 107 |  |  |  | 327 |
Short-term lease cost |  |  | 2 |  |  |  | 5 |
Variable lease cost |  |  | 27 |  |  |  | 92 |
Sublease income |  |  | (1 | ) |  |  | (2 | )
Total lease cost |  | $ | 142 |  |  | $ | 439 |
Supplemental cash flow information related to leases was as follows:
|  | Year-to-Date |
(In millions) |  | 2019 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from finance leases |  | $ | 4 |
Operating cash flows from operating leases |  |  | 366 |
Financing cash flows from finance leases |  |  | 16 |
Right-of-use assets obtained in exchange for new finance lease liabilities |  |  | 21 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  |  | 211 |
Supplemental balance sheet information related to leases was as follows:
|  | September 28, |
(In millions, except lease term and discount rate) |  | 2019 |
Property and equipment, net |  | $ | 51 |
Operating lease right-of-use assets |  |  | 1,374 |
Accrued expenses and other current liabilities |  |  | 368 |
Short-term borrowings and current maturities of long-term debt |  |  | 18 |
Long-term debt, net of current maturities |  |  | 59 |
Operating lease liabilities |  |  | 1,181 |
Weighted-average remaining lease term – finance leases |  | 5 years |
Weighted-average remaining lease term – operating leases |  | 5 years |
Weighted-average discount rate – finance leases |  |  | 6.4 | %
Weighted-average discount rate – operating leases |  |  | 6.8 | %
Maturities of lease liabilities as of September 28, 2019 were as follows:
|  | September 28, 2019 |
|  | Operating |  |  | Finance |
(In millions) |  | Leases(1) |  |  | Leases |
2019 (excluding year-to-date 2019) |  | $ | 124 |  |  | $ | 7 |
2020 |  |  | 442 |  |  |  | 21 |
2021 |  |  | 358 |  |  |  | 20 |
2022 |  |  | 289 |  |  |  | 16 |
2023 |  |  | 220 |  |  |  | 12 |
Thereafter |  |  | 435 |  |  |  | 15 |
|  |  | 1,868 |  |  |  | 91 |
Less imputed interest |  |  | (319 | ) |  |  | (14 | )
Total |  | $ | 1,549 |  |  | $ | 77 |
Reported as of September 28, 2019 |  |  |  |  |  |  |  |
Accrued expenses and other current liabilities |  | $ | 368 |  |  | $ | — |
Short-term borrowings and current maturities of long-term debt |  |  | — |  |  |  | 18 |
Long-term debt, net of current maturities |  |  | — |  |  |  | 59 |
Operating lease liabilities |  |  | 1,181 |  |  |  | — |
Total |  | $ | 1,549 |  |  | $ | 77 |
(1) | Operating lease payments include $122 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $3 million of legally binding lease payments for an additional operating lease signed but not yet commenced. This operating lease will commence in fiscal year 2020 with a lease term of 10 years.
Adoption of the new lease accounting standard using the alternative transition method required the Company to provide relevant disclosures in accordance with ASC 840, Leases for all prior periods presented. The table below represents future minimum lease payments due under the non-cancelable portions of leases including facility leases that were accrued as store closure costs as of December 29, 2018. The table was updated from the version previously included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018 within the Notes to Consolidated Financial Statements to adjust for certain inconsistencies that management identified in the first quarter of fiscal year 2019 during the implementation of ASC 842, Leases. Specifically, the Company corrected the schedule to include additional lease commitments for option periods at the time of execution as opposed to the original extension date.
|  | December 29, |
(In millions) |  | 2018 |
2019 |  | $ | 466 |
2020 |  |  | 374 |
2021 |  |  | 285 |
2022 |  |  | 214 |
2023 |  |  | 144 |
Thereafter |  |  | 235 |
|  |  | 1,718 |
Less sublease income |  |  | (11 | )
Total |  | $ | 1,707 |

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