Dell Technologies Inc. - 10-Q filing on 2021-06-07

LEASES

3 Months Ended

Apr. 30, 2021

NOTE 4 — LEASES

The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are typically classified as operating leases. The Company’s lease contracts are generally for office buildings used to conduct its business, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. The Company also leases certain global logistics warehouses, employee vehicles, and equipment. As of April 30, 2021, the remaining terms of the Company’s leases range from less than one month to approximately 25 years.

The Company also enters into leasing transactions in which the Company is the lessor, primarily through customer financing arrangements offered through DFS. DFS originates leases that are primarily classified as either sales-type leases or operating leases. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for more information on the DFS lease portfolio and related lease disclosures.

Financial information associated with the Company’s leases in which the Company is the lessee is contained in this Note. As of both April 30, 2021 and January 29, 2021, there were no material finance leases for which the Company was a lessee.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Operating lease costs	$	142	$	131
Variable costs	33		44
Total lease costs	$	175	$	175

During both the three months ended April 30, 2021 and May 1, 2020, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


	Classification	April 30, 2021			January 29, 2021
		(in millions, except for term and discount rate)
Operating lease ROU assets	Other non-current assets	$	2,088		$	2,117

Current operating lease liabilities	Accrued and other current liabilities	$	440		$	436
Non-current operating lease liabilities	Other non-current liabilities	1,791			1,787
Total operating lease liabilities		$	2,231		$	2,223

Weighted-average remaining lease term (in years)		8.76			8.85
Weighted-average discount rate		3.40		%	3.47		%

The following table presents supplemental cash flow information related to leases for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	134	$	131

ROU assets obtained in exchange for new operating lease liabilities	$	117	$	120

The following table presents the future maturities of the Company’s operating lease liabilities under non-cancelable leases and reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:


	April 30, 2021
	(in millions)
Fiscal 2022 (remaining nine months)	$	351
Fiscal 2023	469
Fiscal 2024	347
Fiscal 2025	260
Fiscal 2026	211
Thereafter	1,010
Total lease payments	2,648
Less: Imputed interest	(417)
Total	$	2,231
Current operating lease liabilities	$	440
Non-current operating lease liabilities	$	1,791

Future lease commitments after Fiscal 2026 include the ground lease on VMware, Inc.’s Palo Alto, California headquarters facilities, which expires in Fiscal 2047.

As of April 30, 2021, the Company has additional operating leases that have not yet commenced of $97 million. These operating leases will commence during Fiscal 2022 with lease terms of one year to 10 years.