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Leasing Arrangements

6 Months Ended

Jun. 30, 2023

Note 15. Leasing Arrangements

The components of total real estate operating lease cost for leases recorded under ASC 842 were as follows:


	Three Months Ended June 30, 2023
		Reported in:
							Selling,		Restructuring
			Location		Pre-opening		General and		and Other
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		Related (Gains) Costs		Total
Lease cost contractually paid or payable for the period			$	628	$	4	$	4	$	23	$	659
Non-cash GAAP straight-line lease cost			16		5		—		3		24
Amortization of lease incentives			(67)		(1)		—		(3)		(71)
Total real estate operating lease cost			$	577	$	8	$	4	$	23	$	612

Early termination fees and related (gain)/loss			$	—	$	—	$	—	$	(150)	$	(150)


	Six Months Ended June 30, 2023
		Reported in:
							Selling,		Restructuring
			Location		Pre-opening		General and		and Other
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		Related (Gains) Costs		Total
Lease cost contractually paid or payable for the period			$	1,246	$	9	$	7	$	54	$	1,316
Non-cash GAAP straight-line lease cost			37		7		—		6		50
Amortization of lease incentives			(132)		(2)		—		(6)		(140)
Total real estate operating lease cost			$	1,151	$	14	$	7	$	54	$	1,226

Early termination fees and related (gain)/loss			$	—	$	—	$	—	$	(257)	$	(257)


	Three Months Ended June 30, 2022
		Reported in:
							Selling,
			Location		Pre-opening		General and		Restructuring
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		and Other Related Costs		Total
Lease cost contractually paid or payable for the period			$	623	$	28	$	3	$	9	$	663
Non-cash GAAP straight-line lease cost			30		14		—		2		46
Amortization of lease incentives			(66)		(5)		—		(1)		(72)
Total real estate operating lease cost			$	587	$	37	$	3	$	10	$	637
Early termination fees and related (gain)/loss			$	—	$	—	$	—	$	(50)	$	(50)


	Six Months Ended June 30, 2022
		Reported in:
							Selling,
			Location		Pre-opening		General and		Restructuring
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		and Other Related Costs		Total
Lease cost contractually paid or payable for the period			$	1,247	$	61	$	8	$	21	$	1,337
Non-cash GAAP straight-line lease cost			60		30		—		6		96
Amortization of lease incentives			(136)		(10)		(1)		(2)		(149)
Total real estate operating lease cost			$	1,171	$	81	$	7	$	25	$	1,284
Early termination fees and related (gain)/loss			$	—	$	—	$	—	$	(204)	$	(204)

The Company's total ASC 842 operating lease costs included both fixed and variable components as follows:


	Three Months Ended June 30, 2023
		Reported in:
							Selling,		Restructuring
			Location		Pre-opening		General and		and Other
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		Related (Gains) Costs		Total
Fixed real estate lease costs			$	457	$	6	$	3	$	19	$	485
Fixed equipment and other lease costs			—		—		—		—		—

Total fixed lease costs			$	457	$	6	$	3	$	19	$	485

Variable real estate lease costs			$	120	$	2	$	1	$	4	$	127
Variable equipment and other lease costs			1		—		—		—		1

Total variable lease costs			$	121	$	2	$	1	$	4	$	128


	Six Months Ended June 30, 2023
		Reported in:
							Selling,		Restructuring
			Location		Pre-opening		General and		and Other
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		Related (Gains) Costs		Total
Fixed real estate lease costs			$	924	$	12	$	6	$	49	$	991
Fixed equipment and other lease costs			—		—		—		—		—

Total fixed lease costs			$	924	$	12	$	6	$	49	$	991

Variable real estate lease costs			$	227	$	2	$	1	$	5	$	235
Variable equipment and other lease costs			1		—		—		—		1

Total variable lease costs			$	228	$	2	$	1	$	5	$	236


	Three Months Ended June 30, 2022
		Reported in:
							Selling,
			Location		Pre-opening		General and		Restructuring
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		and Other Related Costs		Total
Fixed real estate lease costs			$	481	$	33	$	3	$	9	$	526
Fixed equipment and other lease costs			—		—		—		—		—
Total fixed lease costs			$	481	$	33	$	3	$	9	$	526
Variable real estate lease costs			$	106	$	4	$	—	$	1	$	111
Variable equipment and other lease costs			1		—		—		—		1
Total variable lease costs			$	107	$	4	$	—	$	1	$	112


	Six Months Ended June 30, 2022
		Reported in:
							Selling,
			Location		Pre-opening		General and		Restructuring
(Amounts in millions)			Operating Expenses		Location Expenses		Administrative Expenses		and Other Related Costs		Total
Fixed real estate lease costs			$	963	$	71	$	7	$	23	$	1,064
Fixed equipment and other lease costs			—		—		—		—		—
Total fixed lease costs			$	963	$	71	$	7	$	23	$	1,064
Variable real estate lease costs			$	209	$	10	$	—	$	2	$	221
Variable equipment and other lease costs			2		—		—		—		2
Total variable lease costs			$	211	$	10	$	—	$	2	$	223

The Company also has certain leases accounted for as finance leases. Total lease costs for finance leases were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(Amounts in millions)	2023		2022		2023		2022
Depreciation and amortization	$	1	$	1	$	2	$	2
Interest expense	1		1		2		2
Total	$	2	$	2	$	4	$	4

The below table presents the lease related assets and liabilities recorded on the accompanying Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, as recorded in accordance with ASC 842:


		June 30,		December 31,
(Amounts in millions)	Balance Sheet Captions	2023		2022
Assets:
Operating lease right-of-use assets	Lease right-of-use assets, net	$	9,275	$	11,243
Finance lease right-of-use assets(1)	Property and equipment, net	35		46
Total leased assets		$	9,310	$	11,289

Liabilities:
Current liabilities
Operating lease liabilities	Current lease obligations	$	879	$	931
Finance lease liabilities	Current lease obligations	4		5
Total current liabilities		883		936

Non-current liabilities
Operating lease obligations	Long-term lease obligations	13,262		15,565
Finance lease obligations	Long-term lease obligations	18		33
Total non-current liabilities		13,280		15,598
Total lease obligations		$	14,163	$	16,534

(1)Finance lease right-of-use assets are recorded net of accumulated amortization of $24 million and $26 million as of June 30, 2023 and December 31, 2022, respectively.

The weighted average remaining lease term and weighted average discount rate for operating and finance leases as of June 30, 2023 and December 31, 2022 were as follows:


	June 30, 2023				December 31, 2022
	Operating		Finance		Operating		Finance
Weighted average remaining lease term (in years)	11		6		12		8
Weighted average discount rate percentage	11.2	%	8.4	%	9.3	%	7.5	%

The Company's aggregate annual lease obligations relating to non-cancelable finance and operating leases in possession as of June 30, 2023 as presented in accordance with ASC 842:


	Finance		Operating
(Amounts in millions)	Leases		Leases		Total
Remainder of 2023	$	3	$	1,149	$	1,152
2024	6		2,200		2,206
2025	5		2,257		2,262
2026	5		2,275		2,280
2027	4		2,269		2,273
2028 and beyond	8		14,630		14,638
Total undiscounted fixed minimum lease cost payments	31		24,780		24,811
Less: Amount representing lease incentive receivables, net(1)	—		(110)		(110)
Less: Amount representing interest	(9)		(10,364)		(10,373)
Present value of future lease payments	22		14,306		14,328
Less: Obligations classified as held for sale	—		(165)		(165)
Less: Current portion of lease obligation	(4)		(879)		(883)
Total long-term lease obligation	$	18	$	13,262	$	13,280

(1)Lease incentive receivables primarily represent amounts expected to be received by the Company relating to payments for leasehold improvements that are reimbursable pursuant to lease provisions with relevant landlords and receivables for broker

commissions earned for negotiating certain of the Company’s leases. Lease incentive receivables are presented net of deferred tenant incentives for contingent lease arrangements of $37 million as of June 30, 2023.

The future undiscounted fixed minimum lease cost payments for the leases presented above exclude approximately an additional $313 million relating to executed non-cancelable leases that the Company has not yet taken possession of as of June 30, 2023. See Note 14 for details on non-cancellable membership agreements recognized in accordance with ASC 842.

Leasing Arrangements