Annual report pursuant to Section 13 and 15(d)

Leases

v3.20.1
Leases
12 Months Ended
Dec. 28, 2019
Leases [Abstract]  
Leases
Lessee
The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company leases certain distribution center locations, vehicles, forklifts, computer equipment, and its corporate headquarters with expiration dates through 2032. Certain lease arrangements include escalating rent payments and options to extend the lease term. Expected lease terms include these options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. The Company's leasing arrangements do not contain material residual value guarantees nor material restrictive covenants.
The components of operating and finance lease cost for the year ended December 28, 2019 were as follows:
 
 
Year Ended
December 28, 2019
Operating lease cost
 
$
19,456

Short term lease costs
 
2,587

Variable lease costs
 
2,731

Finance lease cost:
 
 
Amortization of right of use assets
 
616

Interest on lease liabilities
 
115


Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $24,774, $19,281 and $16,814 in the year ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. Rent expense includes operating lease cost as well as expense for non-lease components such as common area maintenance, real estate taxes, real estate insurance, variable costs related to our leased vehicles and also short-term rental expenses.
The implicit rate is not determinable in most of the Company’s leases, as such management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of December 28, 2019:
 
 
Operating Leases(1)
 
Finance Leases
Weighted average remaining lease term
 
7.88

 
3.46

Weighted average discount rate
 
7.81
%
 
6.49
%
(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established on December 30, 2018.

Supplemental balance sheet information related to the Company's finance leases as of December 28, 2019:
 
 
December 28, 2019
Finance lease assets, net, included in property plant and equipment
 
$
2,101

 
 
 
Current portion of long-term debt
 
749

Long-term debt, less current portion
 
1,526

Total principal payable on finance leases
 
$
2,275

Supplemental cash flow information related to our operating leases was as follows for the year ended December 28, 2019:
 
 
Year Ended
December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash outflow from operating leases
 
$
18,668

Operating cash outflow from finance leases
 
104

Financing cash outflow from finance leases
 
683


As of December 28, 2019, our future minimum rental commitments are immaterial for lease agreements beginning after the current reporting period. Maturities of our lease liabilities for all operating and finance leases are as follows as of December 28, 2019:
 
 
Operating Leases
 
Finance Leases
Less than one year
 
$
17,525

 
$
873

1 to 2 years
 
15,956

 
712

2 to 3 years
 
13,925

 
456

3 to 4 years
 
12,045

 
383

4 to 5 years
 
11,716

 
127

After 5 years
 
43,591

 

Total future minimum rental commitments
 
114,758

 
2,551

Less - amounts representing interest
 
(30,072
)
 
(276
)
Present value of lease liabilities
 
$
84,686

 
$
2,275



As of December 29, 2018, minimum lease payments under non-cancellable operating leases by period were expected to be as follows:
 
 
Operating Leases
Less than one year
 
$
17,326

1 to 2 years
 
14,736

2 to 3 years
 
13,305

3 to 4 years
 
12,012

4 to 5 years
 
9,541

After 5 years
 
16,664

Total future minimum rental commitments
 
$
83,584


Lessor
The Company has certain arrangements for key duplication equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.
Leases
Lessee
The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company leases certain distribution center locations, vehicles, forklifts, computer equipment, and its corporate headquarters with expiration dates through 2032. Certain lease arrangements include escalating rent payments and options to extend the lease term. Expected lease terms include these options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. The Company's leasing arrangements do not contain material residual value guarantees nor material restrictive covenants.
The components of operating and finance lease cost for the year ended December 28, 2019 were as follows:
 
 
Year Ended
December 28, 2019
Operating lease cost
 
$
19,456

Short term lease costs
 
2,587

Variable lease costs
 
2,731

Finance lease cost:
 
 
Amortization of right of use assets
 
616

Interest on lease liabilities
 
115


Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $24,774, $19,281 and $16,814 in the year ended December 28, 2019, December 29, 2018 and December 30, 2017, respectively. Rent expense includes operating lease cost as well as expense for non-lease components such as common area maintenance, real estate taxes, real estate insurance, variable costs related to our leased vehicles and also short-term rental expenses.
The implicit rate is not determinable in most of the Company’s leases, as such management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of December 28, 2019:
 
 
Operating Leases(1)
 
Finance Leases
Weighted average remaining lease term
 
7.88

 
3.46

Weighted average discount rate
 
7.81
%
 
6.49
%
(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established on December 30, 2018.

Supplemental balance sheet information related to the Company's finance leases as of December 28, 2019:
 
 
December 28, 2019
Finance lease assets, net, included in property plant and equipment
 
$
2,101

 
 
 
Current portion of long-term debt
 
749

Long-term debt, less current portion
 
1,526

Total principal payable on finance leases
 
$
2,275

Supplemental cash flow information related to our operating leases was as follows for the year ended December 28, 2019:
 
 
Year Ended
December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash outflow from operating leases
 
$
18,668

Operating cash outflow from finance leases
 
104

Financing cash outflow from finance leases
 
683


As of December 28, 2019, our future minimum rental commitments are immaterial for lease agreements beginning after the current reporting period. Maturities of our lease liabilities for all operating and finance leases are as follows as of December 28, 2019:
 
 
Operating Leases
 
Finance Leases
Less than one year
 
$
17,525

 
$
873

1 to 2 years
 
15,956

 
712

2 to 3 years
 
13,925

 
456

3 to 4 years
 
12,045

 
383

4 to 5 years
 
11,716

 
127

After 5 years
 
43,591

 

Total future minimum rental commitments
 
114,758

 
2,551

Less - amounts representing interest
 
(30,072
)
 
(276
)
Present value of lease liabilities
 
$
84,686

 
$
2,275



As of December 29, 2018, minimum lease payments under non-cancellable operating leases by period were expected to be as follows:
 
 
Operating Leases
Less than one year
 
$
17,326

1 to 2 years
 
14,736

2 to 3 years
 
13,305

3 to 4 years
 
12,012

4 to 5 years
 
9,541

After 5 years
 
16,664

Total future minimum rental commitments
 
$
83,584


Lessor
The Company has certain arrangements for key duplication equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.