LEASES

12 Months Ended

Jun. 27, 2020

Sysco leases certain of its distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment. The company determines if an arrangement is a lease at inception and recognizes a finance or operating lease liability and right-of-use (ROU) asset in the consolidated balance sheets if a lease exists. Lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. If the borrowing rate implicit in the lease is not readily determinable, Sysco uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The lease term is defined as the noncancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the company will exercise one of these options. Leases with an initial term of 12 months or less are not recorded in Sysco’s consolidated balance sheets, and the company recognizes expense for these leases on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. For leases in which the lease and non-lease components have been combined, the variable lease

expense includes expenses such as common area maintenance, utilities, and repairs and maintenance. Sysco’s leases do not contain significant residual value guarantees and do not impose significant restrictions or covenants.

The following table presents the location of the finance lease ROU assets and lease liabilities in the company’s Consolidated Balance Sheet at June 27, 2020:

Consolidated Balance Sheet Location

Jun. 27, 2020

(In thousands)

Finance lease right-of-use assets

Plant and equipment at cost, less accumulated depreciation

99,918

Current finance lease liabilities

Current maturities of long-term debt

33,670

Long-term finance lease liabilities

Long-term debt

68,942

The following table presents lease costs for each of the presented periods ended June 27, 2020:

Consolidated Results of Operations Location

2020

(In thousands)

Operating lease cost

Operating expenses

123,269

Financing lease cost:

Amortization of right-of-use assets

Operating expenses

38,285

Interest on lease obligations

Interest expense

4,667

Variable lease cost

Operating expenses

7,606

Short-term lease cost

Operating expenses

13,602

Net lease cost

187,429

Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of June 27, 2020 are as follows:


	Operating Leases		Finance Leases
	(In thousands)
2021	$	120,815	$	37,218
2022	91,755		26,889
2023	75,845		19,916
2024	52,480		12,786
2025	46,746		7,828
Thereafter	343,056		7,102
Total undiscounted lease obligations	730,697		111,739
Less imputed interest	(100,034)		(9,127)
Present value of lease obligations	$	630,663	$	102,612

Other information related to lease agreements was as follows:


	2020
Cash Paid For Amounts Included In Measurement of Liabilities:	(Dollars in thousands)
Operating cash flows for operating leases	$	124,040
Operating cash flows for financing leases	4,666
Financing cash flows for financing leases	34,145

Supplemental Non-cash Information on Lease Liabilities:
Assets obtained in exchange for operating lease obligations	$	64,968
Assets obtained in exchange for finance lease obligations	17,019

Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	11.54 years
Financing leases	4.03 years
Weighted-average discount rate:
Operating leases	2.37		%
Financing leases	4.24		%