LEASES

12 Months Ended

May 26, 2024

LEASES

LEASES

15. LEASES

We have operating and finance leases of certain warehouses, plants, land, office space, production and distribution equipment, automobiles, and office equipment. We determine whether an agreement is or contains a lease at lease inception. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

As most of our leases do not provide an implicit interest rate, we calculate the lease liability at lease commencement as the present value of unpaid lease payments using our estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.

We have elected not to separate lease and non-lease components of an agreement for all underlying asset classes prospectively from the ASU 2016-02, Leases, Topic 842 adoption date.

Any lease arrangements with an initial term of twelve months or less are not recorded on our Consolidated Balance Sheet. We recognize lease cost for these lease arrangements on a straight-line basis over the lease term.

Our lease terms may include options to extend or terminate the lease. We consider these options in determining the lease term used to establish our ROU asset and lease liabilities. A limited number of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

During fiscal 2024, we took control of a third-party distribution facility that was assessed to be a finance lease. At lease commencement, the term of the lease was 20 years with a discount rate of 5.42%. As a result, we recorded a $165.3 million finance lease right-of-use asset reflected in property, plant and equipment along with a corresponding finance lease obligation reflected in long-term debt (including current installments) within our Consolidated Balance Sheets.

Leases reported in our Consolidated Balance Sheets were as follows, excluding balances related to assets and liabilities classified as held for sale:

	Operating Leases
	Balance Sheet Location	May 26, 2024		May 28, 2023
ROU assets, net	Other assets	$	176.8	$	197.5
Lease liabilities (current)	Other accrued liabilities		39.4		42.1
Lease liabilities (noncurrent)	Other noncurrent liabilities		172.2		185.6

	Finance Leases
	Balance Sheet Location	May 26, 2024		May 28, 2023
ROU assets, at cost	Property, plant and equipment	$	377.0	$	203.5
Less accumulated depreciation	Less accumulated depreciation		(97.5)		(77.2)
ROU assets, net	Property, plant and equipment, net		279.5		126.3
Lease liabilities (current)	Current installments of long-term debt		20.2		17.4
Lease liabilities (noncurrent)	Senior long-term debt, excluding current installments		253.5		95.2

The components of total lease cost were as follows:

	2024		2023		2022
Operating lease cost	$	53.1	$	55.3	$	52.9
Finance lease cost
Depreciation of leased assets		23.2		16.8		16.4
Interest on lease liabilities		12.0		5.3		6.5
Short-term lease cost		11.2		11.0		7.3
Total lease cost	$	99.5	$	88.4	$	83.1

The weighted-average remaining lease terms and weighted-average discount rate for our leases as of May 26, 2024 and May 28, 2023 were as follows:

	Operating Leases		Finance Leases
	2024	2023	2024	2023
Weighted-average remaining lease term (in years)	6.5	6.7	14.8	6.9
Weighted-average discount rate	3.87%	3.55%	5.25%	4.24%

Cash flows arising from lease transactions were as follows:

	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	52.1	$	57.7	$	55.7
Operating cash outflows from finance leases		5.8		5.3		6.5
Financing cash outflows from finance leases		22.7		25.0		31.2
ROU assets obtained in exchange for new lease liabilities:
Operating leases		27.5		34.2		68.5
Finance leases		177.3		7.8		23.6

Maturities of lease liabilities by fiscal year as of May 26, 2024 were as follows (inclusive of amounts classified as held for sale):

	Operating Leases		Finance Leases		Total
2025	$	47.1	$	40.6	$	87.7
2026		42.4		35.5		77.9
2027		35.0		42.3		77.3
2028		32.2		24.7		56.9
2029		23.2		25.9		49.1
Later years		63.6		257.8		321.4
Total lease payments		243.5		426.8		670.3
Less: Imputed interest		(31.9)		(153.1)		(185.0)
Total lease liabilities	$	211.6	$	273.7	$	485.3

We have entered into contracts that are or contain a lease that have not yet commenced with aggregate payments totaling $87.1 million as of May 26, 2024. This amount primarily relates to a warehouse facility with a future minimum lease commitment of $81.8 million over a term of 10 years. We expect to take control of this leased asset in fiscal 2025.