XML 44 R26.htm IDEA: XBRL DOCUMENT v3.20.4
Leases (Notes)
 12 Months Ended
Dec. 26, 2020
Leases [Abstract]  
Leases Leases
We adopted ASU 2016-02, Leases (Topic 842), in the first quarter of 2019 using a modified retrospective transition method. The most significant impact of adoption on our consolidated financial statements was the recognition of ROU assets and lease liabilities for operating leases. Upon adoption, we had total lease assets of $821 million and total lease liabilities of $887 million. The adoption of this ASU in the first quarter of 2019 did not result in a cumulative-effect adjustment to the opening balance of retained earnings/(deficit) and did not impact our consolidated statements of income or our cash flows.
We have operating and finance leases, primarily for warehouse, production, and office facilities and equipment. Our lease contracts have remaining contractual lease terms of up to 20 years, some of which include options to extend the term by up to 10 years. We include renewal options that are reasonably certain to be exercised as part of the lease term. Additionally, some lease contracts include termination options. We do not expect to exercise the majority of our termination options and generally exclude such options when determining the term of our leases. See Note 2, Significant Accounting Policies, for our lease accounting policy.
The components of our lease costs were (in millions):
December 26, 2020December 28, 2019
Operating lease costs$173 $191 
Finance lease costs:
Amortization of right-of-use assets31 27 
Interest on lease liabilities7 6 
Short-term lease costs20 13 
Variable lease costs1,313 1,270 
Sublease income(11)(14)
Total lease costs$1,533 $1,493 
Our variable lease costs primarily consist of inventory related costs, such as materials, labor, and overhead components in our manufacturing and distribution arrangements that also contain a fixed component related to an embedded lease. These variable lease costs are determined based on usage or output or may vary for other reasons such as changes in material prices, taxes, or insurance. Certain of our variable lease costs are based on fluctuating indices or rates. These leases are included in our ROU assets and lease liabilities based on the index or rate at the lease commencement date. The future variability in these indices and rates is unknown; therefore, it is excluded from our future minimum lease payments and is not a component of our ROU assets or lease liabilities.
We had no losses/(gains) on sale and leaseback transactions in 2020. Losses/(gains) on sale and leaseback transactions, net, were insignificant for 2019.
Supplemental balance sheet information related to our leases was (in millions, except lease term and discount rate):
December 26, 2020December 28, 2019
Operating
Leases		Finance
Leases		Operating
Leases		Finance
Leases
Right-of-use assets$562 $195 $542 $185 
Lease liabilities (current)135 78 147 28 
Lease liabilities (non-current)475 116 454 158 
Weighted average remaining lease term7 years9 years6 years9 years
Weighted average discount rate3.8 %3.7 %4.0 %3.4 %
Operating lease ROU assets are included in other non-current assets and finance lease ROU assets are included in property, plant and equipment, net, on our consolidated balance sheets. The current portion of operating lease liabilities is included in other current liabilities, and the current portion of finance lease liabilities is included in the current portion of long-term debt on our consolidated balance sheets. The non-current portion of operating lease liabilities is included in other non-current liabilities, and the non-current portion of finance lease liabilities is included in long-term debt on our consolidated balance sheets. At December 26, 2020, operating and finance lease ROU assets, the current portion of operating and finance lease liabilities, and the non-current portion of operating and finance lease liabilities excluded amounts classified as held for sale. At December 28, 2019, operating lease ROU assets, the current portion of operating lease liabilities, and the non-current portion of operating lease liabilities excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
Cash flows arising from lease transactions were (in millions):
December 26, 2020December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash inflows/(outflows) from operating leases$(191)$(196)
Operating cash inflows/(outflows) from finance leases(7)(6)
Financing cash inflows/(outflows) from finance leases(35)(28)
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases147 42 
Finance leases39 12 
Future minimum lease payments for leases in effect at December 26, 2020 were (in millions):
Operating
Leases		Finance
Leases
2021$156 $84 
2022118 30 
202389 16 
202473 11 
202565 9 
Thereafter193 86 
Total future undiscounted lease payments694 236 
Less imputed interest(84)(42)
Total lease liability$610 $194 
At December 26, 2020, our operating and finance leases that had not yet commenced were approximately $123 million. This balance is primarily composed of a 20-year lease for a warehouse facility with a future minimum lease commitment of $109 million. We expect to take control of the leased asset in 2022.
Leases Leases
We adopted ASU 2016-02, Leases (Topic 842), in the first quarter of 2019 using a modified retrospective transition method. The most significant impact of adoption on our consolidated financial statements was the recognition of ROU assets and lease liabilities for operating leases. Upon adoption, we had total lease assets of $821 million and total lease liabilities of $887 million. The adoption of this ASU in the first quarter of 2019 did not result in a cumulative-effect adjustment to the opening balance of retained earnings/(deficit) and did not impact our consolidated statements of income or our cash flows.
We have operating and finance leases, primarily for warehouse, production, and office facilities and equipment. Our lease contracts have remaining contractual lease terms of up to 20 years, some of which include options to extend the term by up to 10 years. We include renewal options that are reasonably certain to be exercised as part of the lease term. Additionally, some lease contracts include termination options. We do not expect to exercise the majority of our termination options and generally exclude such options when determining the term of our leases. See Note 2, Significant Accounting Policies, for our lease accounting policy.
The components of our lease costs were (in millions):
December 26, 2020December 28, 2019
Operating lease costs$173 $191 
Finance lease costs:
Amortization of right-of-use assets31 27 
Interest on lease liabilities7 6 
Short-term lease costs20 13 
Variable lease costs1,313 1,270 
Sublease income(11)(14)
Total lease costs$1,533 $1,493 
Our variable lease costs primarily consist of inventory related costs, such as materials, labor, and overhead components in our manufacturing and distribution arrangements that also contain a fixed component related to an embedded lease. These variable lease costs are determined based on usage or output or may vary for other reasons such as changes in material prices, taxes, or insurance. Certain of our variable lease costs are based on fluctuating indices or rates. These leases are included in our ROU assets and lease liabilities based on the index or rate at the lease commencement date. The future variability in these indices and rates is unknown; therefore, it is excluded from our future minimum lease payments and is not a component of our ROU assets or lease liabilities.
We had no losses/(gains) on sale and leaseback transactions in 2020. Losses/(gains) on sale and leaseback transactions, net, were insignificant for 2019.
Supplemental balance sheet information related to our leases was (in millions, except lease term and discount rate):
December 26, 2020December 28, 2019
Operating
Leases		Finance
Leases		Operating
Leases		Finance
Leases
Right-of-use assets$562 $195 $542 $185 
Lease liabilities (current)135 78 147 28 
Lease liabilities (non-current)475 116 454 158 
Weighted average remaining lease term7 years9 years6 years9 years
Weighted average discount rate3.8 %3.7 %4.0 %3.4 %
Operating lease ROU assets are included in other non-current assets and finance lease ROU assets are included in property, plant and equipment, net, on our consolidated balance sheets. The current portion of operating lease liabilities is included in other current liabilities, and the current portion of finance lease liabilities is included in the current portion of long-term debt on our consolidated balance sheets. The non-current portion of operating lease liabilities is included in other non-current liabilities, and the non-current portion of finance lease liabilities is included in long-term debt on our consolidated balance sheets. At December 26, 2020, operating and finance lease ROU assets, the current portion of operating and finance lease liabilities, and the non-current portion of operating and finance lease liabilities excluded amounts classified as held for sale. At December 28, 2019, operating lease ROU assets, the current portion of operating lease liabilities, and the non-current portion of operating lease liabilities excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
Cash flows arising from lease transactions were (in millions):
December 26, 2020December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash inflows/(outflows) from operating leases$(191)$(196)
Operating cash inflows/(outflows) from finance leases(7)(6)
Financing cash inflows/(outflows) from finance leases(35)(28)
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases147 42 
Finance leases39 12 
Future minimum lease payments for leases in effect at December 26, 2020 were (in millions):
Operating
Leases		Finance
Leases
2021$156 $84 
2022118 30 
202389 16 
202473 11 
202565 9 
Thereafter193 86 
Total future undiscounted lease payments694 236 
Less imputed interest(84)(42)
Total lease liability$610 $194 
At December 26, 2020, our operating and finance leases that had not yet commenced were approximately $123 million. This balance is primarily composed of a 20-year lease for a warehouse facility with a future minimum lease commitment of $109 million. We expect to take control of the leased asset in 2022.