Leases

9 Months Ended

Jun. 27, 2020

Leases [Abstract]

Leases

Leases

The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space. These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options, some of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component for leases of retail, corporate, and data center facilities.

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $381 million and $1.1 billion for the three- and nine-month periods ended June 27, 2020, respectively. Lease costs associated with variable payments on the Company’s leases were $1.8 billion and $6.6 billion for the three- and nine-month periods ended June 27, 2020, respectively.

For the three- and nine-month periods ended June 27, 2020, the Company made $388 million and $1.1 billion of fixed cash payments related to operating leases, respectively. Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $403 million and $9.7 billion for the three- and nine-month periods ended June 27, 2020, respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of June 27, 2020 (in millions):

Lease-Related Assets and Liabilities	Financial Statement Line Items	June 27, 2020
Right-of-use assets:
Operating leases	Other non-current assets	$	8,164
Finance leases	Property, plant and equipment, net	625
Total right-of-use assets		$	8,789
Lease liabilities:
Operating leases	Other current liabilities	$	1,353
	Other non-current liabilities	7,460
Finance leases	Other current liabilities	20
	Other non-current liabilities	630
Total lease liabilities		$	9,463

Lease liability maturities as of June 27, 2020, are as follows (in millions):

	Operating Leases		Finance Leases		Total
2020 (remaining three months)	$	309	$	5	$	314
2021	1,504		41		1,545
2022	1,356		39		1,395
2023	1,183		50		1,233
2024	994		27		1,021
Thereafter	4,511		920		5,431
Total undiscounted liabilities	9,857		1,082		10,939
Less: Imputed interest	(1,044)		(432)		(1,476)
Total lease liabilities	$	8,813	$	650	$	9,463

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of June 27, 2020 were 10.5 years and 2.2%, respectively. The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

As of June 27, 2020, the Company had $1.8 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2020 and 2022, with lease terms ranging from less than 1 year to 20 years.

Leases

Leases

The Company has lease arrangements for certain equipment and facilities, including retail, corporate, manufacturing and data center space. These leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options, some of which are reasonably certain of exercise. The Company’s lease arrangements may contain both lease and non-lease components. The Company has elected to combine and account for lease and non-lease components as a single lease component for leases of retail, corporate, and data center facilities.

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $381 million and $1.1 billion for the three- and nine-month periods ended June 27, 2020, respectively. Lease costs associated with variable payments on the Company’s leases were $1.8 billion and $6.6 billion for the three- and nine-month periods ended June 27, 2020, respectively.

For the three- and nine-month periods ended June 27, 2020, the Company made $388 million and $1.1 billion of fixed cash payments related to operating leases, respectively. Non-cash activities involving ROU assets obtained in exchange for lease liabilities were $403 million and $9.7 billion for the three- and nine-month periods ended June 27, 2020, respectively, including the impact of adopting the new leases standard in the first quarter of 2020.

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of June 27, 2020 (in millions):

Lease-Related Assets and Liabilities	Financial Statement Line Items	June 27, 2020
Right-of-use assets:
Operating leases	Other non-current assets	$	8,164
Finance leases	Property, plant and equipment, net	625
Total right-of-use assets		$	8,789
Lease liabilities:
Operating leases	Other current liabilities	$	1,353
	Other non-current liabilities	7,460
Finance leases	Other current liabilities	20
	Other non-current liabilities	630
Total lease liabilities		$	9,463

Lease liability maturities as of June 27, 2020, are as follows (in millions):

	Operating Leases		Finance Leases		Total
2020 (remaining three months)	$	309	$	5	$	314
2021	1,504		41		1,545
2022	1,356		39		1,395
2023	1,183		50		1,233
2024	994		27		1,021
Thereafter	4,511		920		5,431
Total undiscounted liabilities	9,857		1,082		10,939
Less: Imputed interest	(1,044)		(432)		(1,476)
Total lease liabilities	$	8,813	$	650	$	9,463

The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of June 27, 2020 were 10.5 years and 2.2%, respectively. The Company’s lease discount rates are generally based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.

As of June 27, 2020, the Company had $1.8 billion of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2020 and 2022, with lease terms ranging from less than 1 year to 20 years.