Leases
A contract contains a lease when we have the right to control the use of an identified asset for a period of time in exchange for consideration. A majority of our lease arrangements are operating leases. We also have certain leases that qualify as finance leases. We lease certain facilities, vehicles and equipment under non-cancelable operating leases, many of which include options to renew. Options that are reasonably certain to be exercised are included in the calculation of the right-of-use asset and lease liability. Our finance leases are those that contain a purchase option which we are reasonably certain to exercise at the end of the lease term. Our leases do not contain residual value guarantees or significant restrictions that impact the accounting for leases. As implicit rates are not available for the leases, we use the incremental borrowing rate as of the lease commencement date in order to measure the right-of-use asset and liability. Operating lease expense is generally recognized on a straight-line basis over the lease term. Finance lease expense is generally recognized on a straight-line basis over the life of the underlying leased asset.
We elected the practical expedient to account for lease and non-lease components as a single lease component for all leases. For leases with a term of one year or less, we elected not to record a right-of-use asset or lease liability and to account for the associated lease payments as they become due.
The components of lease expense and supplemental information were as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| (In millions, except percentage) |
| Operating lease cost | $ | 102 | | | $ | 93 | | | $ | 79 | |
| Finance lease cost: | | | | | |
| Amortization of right-of-use assets | $ | 2 | | | $ | — | | | $ | — | |
| Interest on lease liabilities | $ | 3 | | | $ | — | | | $ | — | |
| Weighted-average remaining lease term (in years) - operating leases | 5.7 | | 6.3 | | 5.1 |
| Weighted-average remaining lease term (in years) - finance leases | 0.9 | | n/a | | n/a |
| Weighted-average discount rate - operating leases | 3.1 | % | | 2.5 | % | | 1.7 | % |
| Weighted-average discount rate - finance leases | 4.6 | % | | n/a | | n/a |
Supplemental cash flow information related to leases are as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| (In millions) |
| Operating cash flows paid for operating leases | $ | 112 | | | $ | 107 | | | $ | 79 | |
| Operating cash flows paid for finance leases | $ | 3 | | | $ | — | | | $ | — | |
| Financing cash flows paid for finance leases | $ | 7 | | | $ | — | | | $ | — | |
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | 106 | | | $ | 204 | | | $ | 123 | |
| Right-of-use assets obtained in exchange for finance lease liabilities | $ | 109 | | | $ | — | | | $ | — | |
As of October 29, 2023, the maturities of lease liabilities are as follows:
| | | | | | | | | | | |
| | Operating Leases | | Finance Leases |
| Fiscal | (In millions) |
| 2024 | $ | 93 | | | $ | 106 | |
| 2025 | 82 | | | — | |
| 2026 | 47 | | | — | |
| 2027 | 37 | | | — | |
| 2028 | 30 | | | — | |
| Thereafter | 81 | | | — | |
| Total lease payments | 370 | | | 106 | |
| Less imputed interest | (34) | | | (4) | |
| Total | $ | 336 | | | $ | 102 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.