LEASES

12 Months Ended

Jul. 02, 2022

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 2, 2022 and July 3, 2021:

	Consolidated Balance Sheet Location	Jul. 2, 2022		Jul. 3, 2021
		(In thousands)
Finance lease right-of-use assets	Plant and equipment at cost, less accumulated depreciation	$	222,372	$	76,381
Current finance lease liabilities	Current maturities of long-term debt	39,121		27,910
Long-term finance lease liabilities	Long-term debt	187,225		51,282

The following table presents lease costs for each of the presented periods ended July 2, 2022 and July 3, 2021:

	Consolidated Results of Operations Location		Jul. 2, 2022		Jul. 3, 2021
		(In thousands)
Operating lease cost	Operating expenses		$	126,743	$	131,503
Financing lease cost:
Amortization of right-of-use assets	Operating expenses		41,606		36,981
Interest on lease obligations	Interest expense		6,506		3,824
Variable lease cost	Operating expenses		44,734		6,083
Short-term lease cost	Operating expenses		31,659		10,845
Net lease cost			$	251,248	$	189,236

Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of July 2, 2022 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
2023	$	124,640	$	45,499
2024	99,585		33,135
2025	92,018		26,899
2026	83,072		19,611
2027	82,587		15,545
Thereafter	422,708		150,465
Total undiscounted lease obligations	904,610		291,154
Less imputed interest	(162,504)		(64,809)
Present value of lease obligations	$	742,106	$	226,345

Other information related to lease agreements was as follows:

	Jul. 2, 2022			Jul. 3, 2021
Cash Paid For Amounts Included In Measurement of Liabilities:	(Dollars in thousands)
Operating cash flows for operating leases	$	125,741		$	142,351
Operating cash flows for financing leases	6,506			3,824
Financing cash flows for financing leases	40,238			37,103
Supplemental Non-cash Information on Lease Liabilities:
Assets obtained in exchange for operating lease obligations	$	156,505		$	93,416
Assets obtained in exchange for finance lease obligations	191,523			8,687
Operating lease asset adjustments, including renewals and remeasurements	22,087			82,026
Operating lease liability adjustments, including renewals and remeasurements	13,045			90,578
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	11.04 years			12.34 years
Financing leases	14.65 years			3.67 years
Weighted-average discount rate:
Operating leases	2.85		%	2.84		%
Financing leases	3.17		%	4.04		%

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 2, 2022 and July 3, 2021:

	Consolidated Balance Sheet Location	Jul. 2, 2022		Jul. 3, 2021
		(In thousands)
Finance lease right-of-use assets	Plant and equipment at cost, less accumulated depreciation	$	222,372	$	76,381
Current finance lease liabilities	Current maturities of long-term debt	39,121		27,910
Long-term finance lease liabilities	Long-term debt	187,225		51,282

The following table presents lease costs for each of the presented periods ended July 2, 2022 and July 3, 2021:

	Consolidated Results of Operations Location		Jul. 2, 2022		Jul. 3, 2021
		(In thousands)
Operating lease cost	Operating expenses		$	126,743	$	131,503
Financing lease cost:
Amortization of right-of-use assets	Operating expenses		41,606		36,981
Interest on lease obligations	Interest expense		6,506		3,824
Variable lease cost	Operating expenses		44,734		6,083
Short-term lease cost	Operating expenses		31,659		10,845
Net lease cost			$	251,248	$	189,236

Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of July 2, 2022 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
2023	$	124,640	$	45,499
2024	99,585		33,135
2025	92,018		26,899
2026	83,072		19,611
2027	82,587		15,545
Thereafter	422,708		150,465
Total undiscounted lease obligations	904,610		291,154
Less imputed interest	(162,504)		(64,809)
Present value of lease obligations	$	742,106	$	226,345

Other information related to lease agreements was as follows:

	Jul. 2, 2022			Jul. 3, 2021
Cash Paid For Amounts Included In Measurement of Liabilities:	(Dollars in thousands)
Operating cash flows for operating leases	$	125,741		$	142,351
Operating cash flows for financing leases	6,506			3,824
Financing cash flows for financing leases	40,238			37,103
Supplemental Non-cash Information on Lease Liabilities:
Assets obtained in exchange for operating lease obligations	$	156,505		$	93,416
Assets obtained in exchange for finance lease obligations	191,523			8,687
Operating lease asset adjustments, including renewals and remeasurements	22,087			82,026
Operating lease liability adjustments, including renewals and remeasurements	13,045			90,578
Lease Term and Discount Rate:
Weighted-average remaining lease term (years):
Operating leases	11.04 years			12.34 years
Financing leases	14.65 years			3.67 years
Weighted-average discount rate:
Operating leases	2.85		%	2.84		%
Financing leases	3.17		%	4.04		%