LEASES
We lease certain equipment, buildings and land related to transportation, distribution, storage, production, livestock grower assets and office activities. These lease arrangements can be structured as a standard lease agreement or embedded in a service or supply agreement and are primarily classified as operating leases. For further description of our lease accounting policy, refer to Note 1: Business and Summary of Significant Accounting Policies. Operating lease ROU assets and liabilities presented in our Consolidated Balance Sheets were as follows as of September 30, 2023 and October 1, 2022 (in millions):
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| | | |
| 2023 | | 2022 |
| Other Assets | $ | 544 | | | $ | 507 | |
| Other current liabilities | 153 | | | 145 | |
| Other Liabilities | 376 | | | 350 | |
The components of lease costs for fiscal years 2023, 2022 and 2021 were as follows (in millions):
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| | | | | |
| 2023 | | 2022 | | 2021 |
Operating lease cost (a) | $ | 181 | | | $ | 175 | | | $ | 183 | |
Variable lease cost (b) | 531 | | | 508 | | | 473 | |
| Short-term lease cost | 39 | | | 30 | | | 33 | |
| Total | $ | 751 | | | $ | 713 | | | $ | 689 | |
(a) Sublease income is immaterial and not deducted from operating lease cost.
(b) Variable lease costs are determined based on volume of output received, flocks placed or other performance metrics.
Other operating lease information includes the following for fiscal years 2023, 2022 and 2021:
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| 2023 | | 2022 | | 2021 |
| Operating cash outflows from operating leases (in millions) | $ | 191 | | | $ | 194 | | | $ | 204 | |
| ROU assets obtained in exchange for new operating lease liabilities (in millions) | $ | 288 | | | $ | 159 | | | $ | 197 | |
| Weighted-average remaining lease term | 5 years | | 5 years | | |
| Weighted-average discount rate | 4 | % | | 3 | % | | |
At September 30, 2023, future maturities of operating leases were as follows (in millions):
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| |
| Operating Lease Commitments |
| 2024 | $ | 171 | |
| 2025 | 132 | |
| 2026 | 89 | |
| 2027 | 57 | |
| 2028 | 43 | |
| 2029 and beyond | 99 | |
| Total undiscounted operating lease payments | $ | 591 | |
| Less: Imputed interest | 62 | |
| Present value of total operating lease liabilities | $ | 529 | |
At September 30, 2023, our leases that had not yet commenced were not significant.
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.