PAYCHEX INC Leases Disclosure
Note I — Leases
The Company’s lease portfolio consists primarily of operating leases for office space and has remaining terms from less than one year up to twelve years, with contractual terms expiring from 2026 to 2038. Lease contracts may include one or more renewal options that allow the Company to extend the lease term, typically from one year to five years per renewal option. The exercise of lease options is generally at the discretion of the Company. None of the Company’s leases contain residual value guarantees, substantial restrictions, or covenants.
Supplemental balance sheet information related to the Company’s leases were as follows:
|
|
May 31, |
|
|||||||
$ in millions |
|
2026 |
|
|
2025 |
|
||||
Operating lease ROU assets, net of accumulated amortization |
|
$ |
|
63.9 |
|
|
$ |
|
63.8 |
|
(1) |
|
|
|
22.0 |
|
|
|
|
22.5 |
|
Operating lease liabilities, non-current |
|
|
|
52.2 |
|
|
|
|
55.5 |
|
|
|
|
|
|
|
|
|
|
||
Weighted average remaining lease term (in years) |
|
|
|
5.1 |
|
|
|
|
4.0 |
|
Weighted average discount rate |
|
|
|
4.13 |
% |
|
|
|
3.73 |
% |
The components of lease expense were as follows:
|
|
Year ended May 31, |
|
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In millions |
|
2026 |
|
|
2025 |
|
|
|
2024 |
|
|||||
Fixed payment operating lease expense |
|
$ |
|
19.8 |
|
|
$ |
|
27.7 |
|
|
$ |
|
28.7 |
|
Variable payment operating lease expense |
|
|
|
4.1 |
|
|
|
|
4.8 |
|
|
|
|
5.8 |
|
Short-term lease expense |
|
|
|
0.0 |
|
|
|
|
0.0 |
|
|
|
|
0.0 |
|
During the fiscal fourth quarter ended May 31, 2024, the Company focused on cost optimization initiatives, including further reductions to the Company's geographic footprint. As part of this initiative the Company ceased the use of certain leased property and accelerated the amortization of certain ROU assets, resulting in an additional $9.7 million of expense. This expense is included in cost of service revenue and selling, general and administrative expenses on the Consolidated Statements of Income and Comprehensive Income. The related lease liabilities will be satisfied under the original terms of the lease arrangements, unless buy-outs can be negotiated.
Supplemental cash flow information related to the Company’s leases were as follows:
|
|
Year ended May 31, |
|
||||||||||||
In millions |
|
2026 |
|
|
2025 |
|
|
|
2024 |
|
|||||
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
|
23.7 |
|
|
$ |
|
24.9 |
|
|
$ |
|
20.9 |
|
Amortization of ROU assets |
|
|
|
16.0 |
|
|
|
|
14.0 |
|
|
|
|
25.8 |
|
ROU assets obtained in exchange for new operating lease liabilities |
|
|
|
21.6 |
|
|
|
|
32.0 |
|
|
|
|
7.2 |
|
Lease incentives received in the form of tenant allowances and free rent |
|
|
|
0.4 |
|
|
|
|
0.6 |
|
|
|
|
0.8 |
|
Future lease payments are as follows:
|
|
May 31, |
|
||
In millions |
|
2026 |
|
||
2027 |
|
$ |
|
21.4 |
|
2028 |
|
|
|
17.1 |
|
2029 |
|
|
|
14.7 |
|
2030 |
|
|
|
11.1 |
|
2031 |
|
|
|
7.4 |
|
Thereafter |
|
|
|
11.7 |
|
Total future lease payments |
|
|
|
83.4 |
|
Less: imputed interest |
|
|
|
9.2 |
|
Total operating lease liabilities |
|
$ |
|
74.2 |
|
Current portion |
|
$ |
|
22.0 |
|
Non-current portion |
|
$ |
|
52.2 |
|
As of May 31, 2026, the Company has entered into one lease agreement that had not yet commenced for a term of 7.58 years. This lease will require lease payments over the term of approximately $14.5 million.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jul 17, 2026 | Showing above |
| 2025 | Jul 11, 2025 | |
| 2024 | Jul 11, 2024 | |
| 2023 | Jul 14, 2023 | |
| 2022 | Jul 15, 2022 | |
| 2021 | Jul 16, 2021 | |
| 2020 | Jul 17, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.