The Company determines if an arrangement is a lease at inception and recognizes a financing or operating lease liability and right-of-use asset in the Company’s consolidated balance sheet. Right-of-use assets and lease liabilities for both operating and finance leases are recognized based on the present value of lease payments over the lease term at commencement date. When the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. This rate is determined by using the yield curve based on the Company’s credit rating adjusted for the Company’s specific debt profile and secured debt risk. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease expenses for these short-term leases are recognized on a straight-line basis over the lease term. The Company has several lease agreements that contain lease and non-lease components, such as maintenance, taxes, and insurance, which are accounted for separately. The difference between the operating lease right-of-use assets and operating lease liabilities primarily relates to adjustments for deferred rent, favorable leases, and prepaid rent.

Subsidiaries of the Company have entered into numerous operating and finance leases for various warehouses, office facilities, equipment, tractors, and trailers. Our leases have remaining lease terms of less than 1 year to 25 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within 1 year. Certain full-service fleet lease agreements include variable lease payments associated with usage, which are recorded and paid as incurred. When calculating lease liabilities, lease terms will include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Certain of the leases for tractors, trailers, and other vehicles and equipment provide for residual value guarantees to the lessors. Circumstances that would require the subsidiary to perform under the guarantees include either (1) default on the leases with the leased assets being sold for less than the specified residual values in the lease agreements, or (2) decisions not to purchase the assets at the end of the lease terms combined with the sale of the assets, with sales proceeds less than the residual value of the leased assets specified in the lease agreements. Residual value guarantees under these operating lease agreements typically range between 6% and 20% of the value of the leased assets at inception of the lease. These leases have original terms ranging from 5 to 10 years and expiration dates ranging from 2024 to 2032. As of June 29, 2024, the undiscounted maximum amount of potential future payments for lease residual value guarantees totaled approximately $10.9 million, which would be mitigated by the fair value of the leased assets at lease expiration.

The following table presents the location of the right-of-use assets and lease liabilities in the Company’s consolidated balance sheet as of June 29, 2024 and July 1, 2023 (in millions), as well as the weighted-average lease term and discount rate for the Company’s leases:


Leases	Consolidated Balance Sheet Location	As of June 29, 2024			As of July 1, 2023
Assets:
Operating	Operating lease right-of-use assets	$	875.5		$	703.6
Finance	Property, plant and equipment, net		868.8			566.2
Total lease assets		$	1,744.3		$	1,269.8
Liabilities:
Current
Operating	Operating lease obligations—current installments	$	108.2		$	105.5
Finance	Finance lease obligations—current installments		147.2			102.6
Non-current
Operating	Operating lease obligations, excluding current installments		819.3			628.9
Finance	Finance lease obligations, excluding current installments		703.2			447.3
Total lease liabilities		$	1,777.9		$	1,284.3

Weighted average remaining lease term
Operating leases		10.7 years			8.7 years
Finance leases		6.0 years			5.7 years
Weighted average discount rate
Operating leases			5.4	%		4.7	%
Finance leases			5.1	%		4.2	%

The following table presents the location of lease costs in the Company consolidated statement of operations for the periods reported (in millions):


		Fiscal year ended
Lease Cost	Statement of Operations Location	June 29, 2024		July 1, 2023		July 2, 2022
Finance lease cost:
Amortization of finance lease assets	Operating expenses	$	118.5	$	88.4	$	71.8
Interest on lease liabilities	Interest expense		33.8		19.6		16.4
Total finance lease cost		$	152.3	$	108.0	$	88.2
Operating lease cost	Operating expenses		161.4		147.9		149.3
Short-term lease cost	Operating expenses		60.2		73.7		51.6
Total lease cost		$	373.9	$	329.6	$	289.1

Supplemental cash flow information related to leases for the periods reported is as follows (in millions):


	Fiscal year ended
(In millions)	June 29, 2024		July 1, 2023		July 2, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	147.3	$	135.7	$	134.5
Operating cash flows from finance leases		33.8		19.6		16.4
Financing cash flows from finance leases		122.2		88.5		72.1
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		290.6		201.3		75.0
Finance leases		412.4		191.8		109.4

Future minimum lease payments under non-cancelable leases as of June 29, 2024, are as follows (in millions):


Fiscal Year	Operating Leases		Finance Leases
2025	$	155.1	$	187.1
2026		139.4		182.3
2027		127.1		166.2
2028		116.5		140.1
2029		101.5		118.5
Thereafter		645.3		205.2
Total future minimum lease payments	$	1,284.9	$	999.4
Less: Interest		357.4		149.0
Present value of future minimum lease payments	$	927.5	$	850.4

As of June 29, 2024, the Company had additional operating and finance leases that had not yet commenced which total $756.7 million in future minimum lease payments. These leases relate primarily to build-to-suit warehouse leases which will replace existing distribution centers and will commence upon building completion with terms of 25 years. In addition, these leases include vehicle leases expected to commence in fiscal 2025 with lease terms of 3 to 8 years.