Leases

9 Months Ended

Mar. 24, 2022

Note 3 – Leases

Description of Leases

We lease equipment used in the transportation of goods in our warehouses, as well as a limited number of automobiles and a small warehouse near our Bainbridge, Georgia facility. Our leases generally do not contain

non-lease

components and do not contain any explicit guarantees of residual value. Our leases for warehouse transportation equipment generally require the equipment to be returned to the lessor in good working order.

We determine if an arrangement is a lease at inception and analyze the lease to determine if it is operating or finance. Operating lease

right-of-use

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. Operating lease

right-of-use

assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental collateralized borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Implicit rates are used when readily determinable. None of our leases currently contain options to extend the term. In the event of an option to extend the term of a lease, the lease term used in measuring the liability would include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the respective lease term. Our leases have remaining terms of up to 4.9 years.

It is our accounting policy to not apply lease recognition requirements to short term leases, defined as leases with an initial term of 12 months or less. As such, leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheet. We have also made the policy election to not separate lease and

non-lease

components for all leases.

The following table provides supplemental information related to operating lease

right-of-use

assets and liabilities:


	March 24, 2022		June 24, 2021		March 25, 2021		Affected Line Item in Consolidated Balance Sheet
Assets

Operating lease right-of-use assets	$	2,570	$	3,484	$	3,758	Operating lease right-of-use assets

Total lease right-of-use assets	$	2,570	$	3,484	$	3,758

Liabilities
Current:
Operating leases	$	1,355	$	1,430	$	1,449	Other accrued expenses
Noncurrent:
Operating leases		1,241		2,103		2,359	Long-term operating lease liabilities

Total lease liabilities	$	2,596	$	3,533	$	3,808

The following tables summarize the Company’s total lease costs and other information arising from operating lease transactions:


	For the Quarter Ended				For the Thirty-Nine Weeks Ended
	March 24, 2022		March 25, 2021		March 24, 2022		March 25, 2021
Operating lease costs (a)	$	470	$	437	$	1,384	$	1,387
Variable lease costs (b)		15		17		51		54

Total Lease Cost	$	485	$	454	$	1,435	$	1,441

(a)	Includes short-term leases which are immaterial.

(b)	Variable lease costs consist of sales tax.

Supplemental cash flow and other information related to leases is as follows:


	For the Thirty-Nine Weeks Ended
	March 24, 2022		March 25, 2021
Operating cash flows information:
Cash paid for amounts included in measurements for lease liabilities	$	1,199	$	1,171
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease obligations	$	167	$	490


	March 24, 2022			June 24, 2021			March 25, 2021
Weighted Average Remaining Lease Term (in years)		2.4			2.8			3.0
Weighted Average Discount Rate		4.2	%		4.3	%		4.3	%

Maturities of operating lease liabilities as of March 24, 2022 are as follows:


Fiscal year ending
June 30, 2022 (excluding the thirty-nine weeks ended March 24, 2022)	$	373
June 29, 2023		1,297
June 27, 2024		654
June 26, 2025		278
June 25, 2026		103
June 24, 2027		18
Thereafter		—

Total lease payments		2,723
Less imputed interest		(127	)

Present value of operating lease liabilities	$	2,596

At March 24, 2022, the Company has additional operating leases of approximately $670 that have not yet commenced and therefore are not reflected in the Consolidated Balance Sheet and tables above. The leases are scheduled to commence in the fourth quarter of fiscal 2022 or early fiscal 2023 with an initial lease term ranging from 3 to 5 years.

Lessor Accounting

We lease office space in our four-story office building located in Elgin, Illinois. As a lessor, we retain substantially all of the risks and benefits of ownership of the investment property and under Topic 842: Leases we continue to account for all of our leases as operating leases. Lease agreements may include options to renew. We accrue fixed lease income on a

straight-line

basis over the terms of the leases. There is generally no variable lease consideration and an immaterial amount of

non-lease

components such as recurring utility and storage fees. Leases between related parties are immaterial.

Leasing revenue is as follows:


	For the Quarter Ended				For the Thirty-Nine Weeks Ended
	March 24, 2022		March 25, 2021		March 24, 2022		March 25, 2021
Lease income related to lease payments	$	402	$	451	$	1,220	$	1,354

The future minimum, undiscounted fixed cash flows under

non-cancelable

tenant operating leases for each of the next five years and thereafter is presented below.


Fiscal year ending
June 30, 2022 (excluding the thirty-nine weeks ended March 24, 2022)	$	443
June 29, 2023		1,794
June 27, 2024		1,818
June 26, 2025		1,228
June 25, 2026		670
June 24, 2027		614
Thereafter		—

	$	6,567