Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.4
Leases
12 Months Ended
Dec. 31, 2022
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 1) the right to obtain substantially all of the economic benefits from the use of the asset and 2) 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 31, 2022 and December 25, 2021 were as follows:
Year Ended December 31, 2022 Year Ended
December 25, 2021
Operating lease cost $ 19,670  $ 20,860 
Short term lease costs 6,960  4,827 
Variable lease costs 2,028  1,496 
Finance lease cost:
Amortization of right of use assets 1,563  914 
Interest on lease liabilities 122  123 
Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $28,658, $27,183 and $22,491 in the years ended December 31, 2022, December 25, 2021 and December 26, 2020, 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 the 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 31, 2022 and December 25, 2021:
December 31, 2022 December 25, 2021
Operating Leases Finance Leases Operating Leases Finance Leases
Weighted average remaining lease term 6.13 2.65 6.60 2.60
Weighted average discount rate 7.22% 2.99% 7.88% 5.59%
Supplemental balance sheet information related to the Company's finance leases as of December 31, 2022 and December 25, 2021:
December 31, 2022 December 25, 2021
Finance lease assets, net, included in property plant and equipment $ 4,540  $ 1,768 
Current portion of long-term debt 1,862  767 
Long-term debt, less current portion 2,767  1,015 
Total principal payable on finance leases $ 4,629  $ 1,782 

Supplemental cash flow information related to our operating leases was as follows for the years ended December 31, 2022 and December 25, 2021:
Year Ended December 31, 2022 Year Ended
December 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases $ 19,377  $ 19,767 
Operating cash outflow from finance leases 119  127 
Financing cash outflow from finance leases 1,470  938 

As of December 31, 2022, 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 31, 2022:
Operating Leases Finance Leases
Less than one year $ 16,947  $ 1,977 
1 to 2 years 14,784  1,646 
2 to 3 years 14,218  1,048 
3 to 4 years 13,549  112 
4 to 5 years 11,549  13 
After 5 years 18,885  — 
Total future minimum rental commitments 89,932  4,796 
Less - amounts representing interest (16,291) (167)
Present value of lease liabilities $ 73,641  $ 4,629 

In the first quarter of 2023 the Company began an additional operating lease for a new property located in Shannon, Georgia for the purposes of office, warehouse, and distribution. The estimated future minimum rental commitments are approximately $26,721. In addition, on February 1, 2023, the Company began a new operating lease for a distribution center located in Belton, Missouri. The estimated future minimum rental commitments are approximately $13,636.
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 1) the right to obtain substantially all of the economic benefits from the use of the asset and 2) 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 31, 2022 and December 25, 2021 were as follows:
Year Ended December 31, 2022 Year Ended
December 25, 2021
Operating lease cost $ 19,670  $ 20,860 
Short term lease costs 6,960  4,827 
Variable lease costs 2,028  1,496 
Finance lease cost:
Amortization of right of use assets 1,563  914 
Interest on lease liabilities 122  123 
Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $28,658, $27,183 and $22,491 in the years ended December 31, 2022, December 25, 2021 and December 26, 2020, 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 the 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 31, 2022 and December 25, 2021:
December 31, 2022 December 25, 2021
Operating Leases Finance Leases Operating Leases Finance Leases
Weighted average remaining lease term 6.13 2.65 6.60 2.60
Weighted average discount rate 7.22% 2.99% 7.88% 5.59%
Supplemental balance sheet information related to the Company's finance leases as of December 31, 2022 and December 25, 2021:
December 31, 2022 December 25, 2021
Finance lease assets, net, included in property plant and equipment $ 4,540  $ 1,768 
Current portion of long-term debt 1,862  767 
Long-term debt, less current portion 2,767  1,015 
Total principal payable on finance leases $ 4,629  $ 1,782 

Supplemental cash flow information related to our operating leases was as follows for the years ended December 31, 2022 and December 25, 2021:
Year Ended December 31, 2022 Year Ended
December 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases $ 19,377  $ 19,767 
Operating cash outflow from finance leases 119  127 
Financing cash outflow from finance leases 1,470  938 

As of December 31, 2022, 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 31, 2022:
Operating Leases Finance Leases
Less than one year $ 16,947  $ 1,977 
1 to 2 years 14,784  1,646 
2 to 3 years 14,218  1,048 
3 to 4 years 13,549  112 
4 to 5 years 11,549  13 
After 5 years 18,885  — 
Total future minimum rental commitments 89,932  4,796 
Less - amounts representing interest (16,291) (167)
Present value of lease liabilities $ 73,641  $ 4,629 

In the first quarter of 2023 the Company began an additional operating lease for a new property located in Shannon, Georgia for the purposes of office, warehouse, and distribution. The estimated future minimum rental commitments are approximately $26,721. In addition, on February 1, 2023, the Company began a new operating lease for a distribution center located in Belton, Missouri. The estimated future minimum rental commitments are approximately $13,636.
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.