LEASES

12 Months Ended

Jul. 03, 2021

Leases [Abstract]

LEASES

LEASES

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 Sheets at July 3, 2021 and June 27, 2020:

	Consolidated Balance Sheet Location	Jul. 3, 2021		Jun. 27, 2020
		(In thousands)
Finance lease right-of-use assets	Plant and equipment at cost, less accumulated depreciation	$	76,381	$	99,918
Current finance lease liabilities	Current maturities of long-term debt	27,910		33,670
Long-term finance lease liabilities	Long-term debt	51,282		68,942

The following table presents lease costs for each of the presented periods ended July 3, 2021 and June 27, 2020:

	Consolidated Results of Operations Location		Jul. 3, 2021		Jun. 27, 2020
		(In thousands)
Operating lease cost	Operating expenses		$	131,503	$	123,269
Financing lease cost:
Amortization of right-of-use assets	Operating expenses		36,981		38,285
Interest on lease obligations	Interest expense		3,824		4,667
Variable lease cost	Operating expenses		6,083		7,606
Short-term lease cost	Operating expenses		10,845		13,602
Net lease cost			$	189,236	$	187,429

Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of July 3, 2021 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
2022	$	120,286	$	30,890
2023	105,458		22,625
2024	77,844		14,459
2025	71,422		9,199
2026	63,922		4,847
Thereafter	441,768		4,410
Total undiscounted lease obligations	880,700		86,430
Less imputed interest	(143,560)		(7,238)
Present value of lease obligations	$	737,140	$	79,192

Other information related to lease agreements was as follows:

	Jul. 3, 2021			Jun. 27, 2020
Cash Paid For Amounts Included In Measurement of Liabilities:	(Dollars in thousands)
Operating cash flows for operating leases	$	142,351		$	124,040
Operating cash flows for financing leases	3,824			4,666
Financing cash flows for financing leases	37,103			34,145
Supplemental Non-cash Information on Lease Liabilities:
Assets obtained in exchange for operating lease obligations	$	93,416		$	64,968
Assets obtained in exchange for finance lease obligations	8,687			17,019
Operating lease asset adjustments, including renewals and remeasurements	82,026			(9,087)
Operating lease liability adjustments, including renewals and remeasurements	90,578			18,621
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	12.34 years			11.54 years
Financing leases	3.67 years			4.03 years
Weighted-average discount rate:
Operating leases	2.84		%	2.37		%
Financing leases	4.04		%	4.24		%

LEASES

LEASES

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 Sheets at July 3, 2021 and June 27, 2020:

	Consolidated Balance Sheet Location	Jul. 3, 2021		Jun. 27, 2020
		(In thousands)
Finance lease right-of-use assets	Plant and equipment at cost, less accumulated depreciation	$	76,381	$	99,918
Current finance lease liabilities	Current maturities of long-term debt	27,910		33,670
Long-term finance lease liabilities	Long-term debt	51,282		68,942

The following table presents lease costs for each of the presented periods ended July 3, 2021 and June 27, 2020:

	Consolidated Results of Operations Location		Jul. 3, 2021		Jun. 27, 2020
		(In thousands)
Operating lease cost	Operating expenses		$	131,503	$	123,269
Financing lease cost:
Amortization of right-of-use assets	Operating expenses		36,981		38,285
Interest on lease obligations	Interest expense		3,824		4,667
Variable lease cost	Operating expenses		6,083		7,606
Short-term lease cost	Operating expenses		10,845		13,602
Net lease cost			$	189,236	$	187,429

Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of July 3, 2021 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
2022	$	120,286	$	30,890
2023	105,458		22,625
2024	77,844		14,459
2025	71,422		9,199
2026	63,922		4,847
Thereafter	441,768		4,410
Total undiscounted lease obligations	880,700		86,430
Less imputed interest	(143,560)		(7,238)
Present value of lease obligations	$	737,140	$	79,192

Other information related to lease agreements was as follows:

	Jul. 3, 2021			Jun. 27, 2020
Cash Paid For Amounts Included In Measurement of Liabilities:	(Dollars in thousands)
Operating cash flows for operating leases	$	142,351		$	124,040
Operating cash flows for financing leases	3,824			4,666
Financing cash flows for financing leases	37,103			34,145
Supplemental Non-cash Information on Lease Liabilities:
Assets obtained in exchange for operating lease obligations	$	93,416		$	64,968
Assets obtained in exchange for finance lease obligations	8,687			17,019
Operating lease asset adjustments, including renewals and remeasurements	82,026			(9,087)
Operating lease liability adjustments, including renewals and remeasurements	90,578			18,621
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	12.34 years			11.54 years
Financing leases	3.67 years			4.03 years
Weighted-average discount rate:
Operating leases	2.84		%	2.37		%
Financing leases	4.04		%	4.24		%