PROPERTY AND LEASES

Net Property and Equipment

Net property and equipment includes accumulated depreciation and amortization of $20.9 billion as of May 5, 2019 and $20.6 billion as of February 3, 2019.

Leases

We lease certain retail locations, office space, warehouse and distribution space, equipment, and vehicles. While most of these leases are operating leases, certain retail locations and equipment are leased under finance leases. We consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we will renew or replace the lease. A substantial majority of our leases have remaining lease terms of one to 20 years, typically with the option to extend the leases for up to five years. Some of our leases may include the option to terminate in less than five years. In the event we are reasonably certain to exercise the option to extend a lease, we will include the extended terms in the operating lease right-of-use asset and operating lease liability. Real estate taxes, insurance, maintenance, and operating expenses applicable to the leased property are our obligations under the lease agreements.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Further, certain lease agreements include rental payments based on an index or rate and others include rental payments based on a percentage of sales.

The gross amounts of assets and liabilities related to both operating and finance leases follow.



in millions	Balance Sheet Caption	May 5, 2019
Assets:
Operating lease assets	Operating lease right-of-use assets	$	5,629
Finance lease assets	Net property and equipment	830
Total lease assets		$	6,459

Liabilities:
Current:
Operating lease liabilities	Current operating lease liabilities	$	793
Finance lease liabilities	Current installments of long-term debt	84
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	5,145
Finance lease liabilities	Long-term debt, excluding current installments	972
Total lease liabilities		$	6,994

The components of lease cost follow.



in millions	Statement of Earnings Caption	Three Months Ended May 5, 2019
Operating lease cost	Selling, general and administrative	$	210
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	21
Interest on lease liabilities	Interest expense	23
Short-term lease costs	Selling, general and administrative	25
Variable lease cost	Selling, general and administrative	58
Sublease income	Selling, general and administrative	(3		)
Net lease cost		$	334

ASU 2016-02 requires that public companies use a secured incremental borrowing rate as the discount rate for present value of lease payments. We determine a secured rate on a quarterly basis and update the weighted average discount rate accordingly. Lease terms and discount rates follow.



	May 5, 2019
Weighted Average Remaining Lease Term (Years):
Operating leases	11
Finance leases	14

Weighted Average Discount Rate:
Operating leases	3.1	%
Finance leases	11.7	%

The approximate future minimum lease payments under operating and finance leases at May 5, 2019 follow.



in millions	Operating Leases		Finance Leases
Fiscal 2019	$	706	$	123
Fiscal 2020	907		176
Fiscal 2021	796		149
Fiscal 2022	696		146
Fiscal 2023	601		139
Thereafter	3,249		970
Total lease payments	6,955		1,703
Less imputed interest	1,017		647
Present value of lease liabilities	$	5,938	$	1,056

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Note: Amounts presented do not include payments relating to immaterial leases excluded from the balance sheets as part of transition elections adopted upon implementation of Topic 842. Additionally, we have excluded approximately $1 billion of leases (undiscounted basis) that have not yet commenced. These leases will commence between 2019 and 2020 with lease terms of one to 20 years.

The approximate future minimum lease payments under capital and operating leases at February 3, 2019 follow.



in millions	Operating Leases		Capital Leases
Fiscal 2019	$	976	$	150
Fiscal 2020	912		167
Fiscal 2021	792		143
Fiscal 2022	682		142
Fiscal 2023	584		137
Thereafter	3,090		970
	$	7,036	1,709
Less imputed interest			660
Net present value of capital lease obligations			1,049
Less current installments			57
Long-term capital lease obligations, excluding current installments			$	992

Other lease information follows.



in millions	Three Months Ended May 5, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases	$	249
Operating cash flows – finance leases	23
Financing cash flows – finance leases	14
Leased assets obtained in exchange for new operating lease liabilities	166
Leased assets obtained in exchange for new finance lease liabilities	1