Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.23.2
Leases
 6 Months Ended
Jul. 01, 2023
Leases [Abstract]  
Finance 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 2033. 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 costs for the thirteen and twenty-six weeks ended July 1, 2023 and thirteen and twenty-six weeks ended June 25, 2022 were as follows:
Thirteen Weeks Ended
July 1, 2023		 Thirteen Weeks Ended
June 25, 2022		 Twenty-six Weeks Ended
July 1, 2023		 Twenty-six Weeks Ended
June 25, 2022
Operating lease costs $ 5,596  $ 4,953  $ 11,043  $ 9,948 
Short term lease costs 1,743  2,135  3,092  3,987 
Variable lease costs 641  551  976  877 
Finance lease costs:
Amortization of right of use assets 588  332  1,094  597 
Interest on lease liabilities 60  27  96  53 
Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $7,980 and $15,111 in the thirteen and twenty-six weeks ended July 1, 2023 and $7,639 and $14,812 in the thirteen and twenty-six weeks ended June 25, 2022. Rent expense includes operating lease costs as well as expenses 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 July 1, 2023 and December 31, 2022:
July 1, 2023 December 31, 2022
Operating Leases Finance Leases Operating Leases Finance Leases
Weighted average remaining lease term 6.76 2.72 6.13 2.65
Weighted average discount rate 7.21  % 4.42  % 7.22  % 2.99  %
Supplemental balance sheet information related to the Company's finance leases was as follows as of July 1, 2023 and December 31, 2022:
July 1, 2023 December 31, 2022
Finance lease assets, net, included in property plant and equipment $ 5,635  $ 4,540 
Current portion of long-term debt 2,330  1,862 
Long-term debt, less current portion 3,405  2,767 
Total principal payable on finance leases $ 5,735  $ 4,629 
Supplemental cash flow information related to the Company's operating leases was as follows for the twenty-six weeks ended July 1, 2023 and twenty-six weeks ended June 25, 2022:
Twenty-six Weeks Ended
July 1, 2023		 Twenty-six Weeks Ended
June 25, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases $ 10,038  $ 9,637 
Operating cash outflow from finance leases 87  53 
Financing cash outflow from finance leases 1,039  556 
As of July 1, 2023, 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 July 1, 2023:
Operating Leases Finance Leases
Less than one year $ 19,611  $ 2,539 
1 to 2 years 19,228  1,995 
2 to 3 years 18,292  1,212 
3 to 4 years 17,341  253 
4 to 5 years 15,571  97 
After 5 years 32,558  11 
Total future minimum rental commitments 122,601  6,107 
Less - amounts representing interest (25,184) (372)
Present value of lease liabilities $ 97,417  $ 5,735 
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.
Operating 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 2033. 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 costs for the thirteen and twenty-six weeks ended July 1, 2023 and thirteen and twenty-six weeks ended June 25, 2022 were as follows:
Thirteen Weeks Ended
July 1, 2023		 Thirteen Weeks Ended
June 25, 2022		 Twenty-six Weeks Ended
July 1, 2023		 Twenty-six Weeks Ended
June 25, 2022
Operating lease costs $ 5,596  $ 4,953  $ 11,043  $ 9,948 
Short term lease costs 1,743  2,135  3,092  3,987 
Variable lease costs 641  551  976  877 
Finance lease costs:
Amortization of right of use assets 588  332  1,094  597 
Interest on lease liabilities 60  27  96  53 
Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $7,980 and $15,111 in the thirteen and twenty-six weeks ended July 1, 2023 and $7,639 and $14,812 in the thirteen and twenty-six weeks ended June 25, 2022. Rent expense includes operating lease costs as well as expenses 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 July 1, 2023 and December 31, 2022:
July 1, 2023 December 31, 2022
Operating Leases Finance Leases Operating Leases Finance Leases
Weighted average remaining lease term 6.76 2.72 6.13 2.65
Weighted average discount rate 7.21  % 4.42  % 7.22  % 2.99  %
Supplemental balance sheet information related to the Company's finance leases was as follows as of July 1, 2023 and December 31, 2022:
July 1, 2023 December 31, 2022
Finance lease assets, net, included in property plant and equipment $ 5,635  $ 4,540 
Current portion of long-term debt 2,330  1,862 
Long-term debt, less current portion 3,405  2,767 
Total principal payable on finance leases $ 5,735  $ 4,629 
Supplemental cash flow information related to the Company's operating leases was as follows for the twenty-six weeks ended July 1, 2023 and twenty-six weeks ended June 25, 2022:
Twenty-six Weeks Ended
July 1, 2023		 Twenty-six Weeks Ended
June 25, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases $ 10,038  $ 9,637 
Operating cash outflow from finance leases 87  53 
Financing cash outflow from finance leases 1,039  556 
As of July 1, 2023, 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 July 1, 2023:
Operating Leases Finance Leases
Less than one year $ 19,611  $ 2,539 
1 to 2 years 19,228  1,995 
2 to 3 years 18,292  1,212 
3 to 4 years 17,341  253 
4 to 5 years 15,571  97 
After 5 years 32,558  11 
Total future minimum rental commitments 122,601  6,107 
Less - amounts representing interest (25,184) (372)
Present value of lease liabilities $ 97,417  $ 5,735 
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.