Leases

9 Months Ended

Apr. 30, 2020

7. Leases

We lease office facilities under non-cancellable operating lease arrangements. Our facility leases generally provide for periodic rent increases and may contain escalation clauses and renewal options. Our leases have remaining lease terms of up to 11 years, some of which include one or more options to extend the leases for up to 10 years per option, generally at rates to be determined in accordance with the agreements. Options to extend the lease are included in the lease liability if they are reasonably certain of being exercised. We do not have significant finance leases.

We sublease certain office facilities to third parties. These subleases have remaining lease terms of up to 5 years.

In March 2020, we entered into an agreement to terminate an office facility lease and related sublease, which were due to expire in 2025 and 2022, respectively. As a result, we reduced our operating lease right-of-use assets and lease liabilities by $61 million.

The components of lease expense were as follows:



	Three Months Ended			Nine Months Ended
(In millions)	April 30, 2020			April 30, 2020
Operating lease cost ⁽¹⁾	$	16		$	53
Variable lease cost	3			9
Sublease income	(5		)	(19		)
Total net lease cost	$	14		$	43


⁽¹⁾	Includes short-term leases, which are not significant for the three or nine months ended April 30, 2020.

Supplemental cash flow information related to operating leases was as follows:



	Nine Months Ended
	April 30, 2020
(In millions)
Cash paid for amounts included in the measurement of operating lease liabilities	$	50

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽¹⁾	$	328


⁽¹⁾	For the nine months ended April 30, 2020, this includes $319 million for operating leases existing on August 1, 2019 and $9 million for operating leases that commenced in the first nine months of fiscal 2020.

Other information related to operating leases was as follows at the date indicated:



	April 30, 2020
Weighted-average remaining lease term for operating leases (in years)	5.4
Weighted-average discount rate for operating leases	2.9	%

Future minimum lease payments under non-cancellable operating leases as of April 30, 2020 were as follows:



(In millions)	Operating Leases ⁽¹⁾
Fiscal year ending July 31,
2020 (excluding the nine months ended April 30, 2020)	$	13
2021	59
2022	56
2023	47
2024	45
Thereafter	66
Total future minimum lease payments	286
Less imputed interest	(21		)
Present value of lease liabilities	$	265


(1)	Non-cancellable sublease proceeds for the remainder of the fiscal year ending July 31, 2020 and the fiscal years ending July 31, 2021, 2022, 2023, 2024, and thereafter of $5 million, $13 million, $8 million, $1 million, $1 million, and $1 million, respectively, are not included in the table above.

Supplemental balance sheet information related to operating leases was as follows at the date indicated:



(In millions)	April 30, 2020

Operating lease right-of-use assets	$	220

Other current liabilities	$	50
Operating lease liabilities	215
Total operating lease liabilities	$	265

As of April 30, 2020, we have additional operating leases of $80 million, primarily for office facilities, that have not yet commenced and therefore are not reflected on the condensed consolidated balance sheet nor in the tables above. These

operating leases will commence between fiscal year 2020 and fiscal year 2022 with lease terms of 3 to 11 years. One of these leases allows for acceleration of the term from 10 years to 3 years if certain conditions are met, which would reduce the future obligations by $18 million.