Operating leases

6 Months Ended

Jun. 29, 2024

The Company leases certain warehouses, equipment, vehicles, and office space primarily through operating lease agreements. The Company recorded operating lease costs of $4 million and $7 million for the quarter and year-to-date period ended June 29, 2024, respectively. Operating lease costs for the quarter and year-to-date period ended July 1, 2023 were immaterial to the consolidated financial statements. Right-of-use assets and liabilities associated with the operating leases are classified in Other assets and Other liabilities, respectively, on the Unaudited Consolidated Balance Sheets.


	Quarter ended				Year-to-date period ended
(millions)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3	$	—	$	5	$	—
Right-of-use assets obtained in exchange for operating lease liabilities
New leases	$	16	$	—	$	52	$	—
Modified leases	$	—	$	—	$	—	$	—

At June 29, 2024 future maturities of operating leases were as follows:


(millions)	Operating leases
2024 (remaining)	$	8
2025	16
2026	15
2027	14
2028	13
2029 and beyond	11
Total minimum payments	$	77
Less interest	(8)
Present value of lease liabilities	$	69

Weighted-average remaining lease term - operating leases	4.7 years
Weighted-average discount rate - operating leases	6.7%

During the first and second quarters of 2024, the Company entered into lease agreements with unrelated third parties for distribution centers previously leased by Kellanova. The leases were either transferred to the Company or subleased directly from Kellanova as outlined in the Separation and Distribution Agreement. Payments for these leases are made on a monthly basis. Prior to the execution of these leases, use of the distribution centers was managed under the Transition Services Agreement.

The new lease agreement executed in the first quarter resulted in an increase to operating lease assets of $34 million, which is recorded within Other assets on the Unaudited Consolidated Balance Sheet. This also resulted in an increase to operating lease liabilities of $34 million, of which $3 million is classified as short-term and included in Other current liabilities and $31 million is classified as long-term, which is included in Other liabilities within the Unaudited Consolidated Balance Sheet.

The new sublease agreement executed in the second quarter resulted in an increase to operating lease assets of $14 million, which is recorded within Other assets on the Unaudited Consolidated Balance Sheet. This also resulted in an increase to operating lease liabilities of $14 million, of which $2 million is classified as short-term and included in Other current liabilities and $12 million is classified as long-term, which is included in Other liabilities within the Unaudited Consolidated Balance Sheet.