Leases (Tables)

3 Months Ended

May 04, 2019

The following table summarizes our operating and finance leases and where they are presented in our Balance Sheet as of May 4, 2019 and our Statement of Income and Statement of Cash Flows for the quarter ended May 4, 2019:

(Dollars in Millions)	Classification
Balance Sheet
Assets
Operating leases	Operating leases	$	2,453
Finance leases	Property and equipment, net		490
Total operating and finance leases			2,943
Liabilities
Current
Operating leases	Current portion of operating leases		158
Finance leases	Current portion of finance leases and financing obligations		69
Noncurrent
Operating leases	Operating leases		2,680
Finance leases	Finance leases and financing obligations		722
Total operating and finance leases		$	3,629

Income Statement
Operating leases	Selling, general, and administrative	$	77
Finance leases
Amortization of leased assets	Depreciation and amortization		17
Interest on lease liabilities	Interest expense, net		24
Total operating and finance leases		$	118

Cash Flow Statement
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	89
Operating cash flows from finance leases			24
Financing cash flows from finance leases			17

Summary of Future Lease Payments

The following table summarizes future lease payments at May 4, 2019:

(Dollars in Millions)	Operating Leases			Finance Leases			Total
May 2019 - April 2020	$	301		$	157		$	458
May 2020 - April 2021		307			155			462
May 2021 - April 2022		298			133			431
May 2022 - April 2023		283			117			400
May 2023 - April 2024		264			104			368
May 2024 and after		3,525			1,608			5,133
Total lease payments		4,978			2,274			7,252
Amount representing interest		(2,140	)		(1,483	)		(3,623	)
Lease liabilities	$	2,838		$	791		$	3,629

Summary of Weighted-Average Remaining Lease Term and Discount Rates

The following table summarizes weighted-average remaining lease term and discount rates:

	May 4, 2019
Weighted-average remaining term (years)
Operating leases		20
Finance leases		17
Weighted-average discount rate
Operating leases		6	%
Finance leases		12	%

Summary of Financing Obligations

The tables below summarize our financing obligations and where they are presented in our Balance Sheet as of May 4, 2019 and our Statement of Income and Statement of Cash Flows for the quarter ended May 4, 2019.

(Dollars in Millions)	Classification
Balance Sheet
Assets
Financing obligations	Property and equipment, net	$	84
Liabilities
Current	Current portion of finance lease and financing obligations		46
Noncurrent	Finance leases and financing obligations		503
Total financing obligations		$	549

Income Statement
Amortization of financing obligation assets	Depreciation and amortization	$	3
Interest on financing obligations	Interest expense, net		9
Total		$	12

Cash Flow
Cash paid for amounts included in the measurement of financing obligations
Operating cash flows from financing obligations		$	9
Financing cash flows from financing obligations			14

Summary of Future Financing Obligation Payments

The following table summarizes future financing obligation payments:

(Dollars in Millions)	May 4, 2019
May 2019 - April 2020	$	65
May 2020 - April 2021		70
May 2021 - April 2022		70
May 2022 - April 2023		67
May 2023 - April 2024		64
May 2024 and after		220
Total financing obligations payments		556
Non-cash gain on future sale of property		231
Amount representing interest		(238	)
Financing obligation liability	$	549

Summary of Weighted-Average Remaining Term and Discount Rate for Financing Obligations

The following table summarizes the weighted-average remaining term and discount rate for financing obligations:

May 4,

2019

Weighted-average remaining term (years)

Weighted-average discount rate

ASU No. 2016-02 [Member]

Summary of Changes in Balance Sheet upon Adoption of New Standard

The following table summarizes changes in our balance sheet upon adoption of the new standard:

(Dollars in Millions)
Assets
Property and equipment, net	$	(174	)	(a)
Operating leases		2,446		(b)
Other assets		(32	)	(c)
Total assets	$	2,240

Liabilities and Shareholders' Equity
Finance leases and financing obligations	$	(237	)	(a)
Operating leases		2,771		(b)
Accrued and other liabilities		(413	)	(c)
Deferred taxes		31		(d)
Shareholders' equity		88		(d)
Total liabilities and shareholders' equity	$	2,240

(a)

The reductions are primarily due to historical failed sale leaseback and build to suit arrangements where we were deemed owner for accounting purposes. In accordance with ASC 842 transition provisions, they became operating or finance leases.

(b)

The increases include land and other operating leases which were not previously recorded on our balance sheet or were previously recorded as financing obligations.

(c)

The reductions are primarily due to the reclassification of lease-related assets and liabilities such as straight-line rent and reserves for closed stores to operating lease assets and liabilities.

(d)

The cumulative effect of lease adjustments, net of the deferred tax impact, was recorded as an adjustment to retained earnings. In addition, retained earnings include a $26 million lease impairment charge.