Leases

6 Months Ended

Jun. 29, 2019

11. 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 thirteen and twenty-six weeks ended June 29, 2019 were as follows:



	Thirteen Weeks Ended June 29, 2019		Twenty-six Weeks Ended June 29, 2019
Operating lease cost	$	4,575	$	9,298
Short term lease costs	742		1,975
Variable lease costs	352		540
Finance lease cost:
Amortization of right of use assets	143		235
Interest on lease liabilities	28		43

Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $5,669 and $4,429 in the thirteen weeks ended June 29, 2019 and thirteen weeks ended June 30, 2018, respectively. Rent expense totaled $11,813 and $8,824 in the twenty-six weeks ended June 29, 2019 and twenty-six weeks ended June 30, 2018, 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 June 29, 2019:

(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

Supplemental balance sheet information related to the Company's finance leases as of June 29, 2019:



	June 29, 2019
Finance lease assets, net, included in property plant and equipment	$	1,922

Current portion of long-term debt	626
Long-term debt, less current portion	1,507
Total principal payable on finance leases	2,133

Supplemental cash flow information related to our operating leases was as follows for the twenty-six weeks ended June 29, 2019:



	Twenty-six Weeks Ended June 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	9,129
Operating cash outflow from finance leases	31
Financing cash outflow from finance leases	283

Maturities of our lease liabilities for all operating and finance leases are as follows as of June 29, 2019:



	Operating Leases			Finance Leases
Less than one year	$	15,960		$	755
1 to 2 years	13,546			617
2 to 3 years	11,541			468
3 to 4 years	9,866			371
4 to 5 years	8,296			218
After 5 years	34,265			—
Total future minimum rental commitments	93,474			2,429
Less - amounts representing interest	(19,981		)	(296		)
Present value of lease liabilities	$	73,493		$	2,133

As of June 29, 2019, the Company has additional operating leases for warehouse equipment and a new office building being constructed by the Company’s landlord that had not yet commenced with estimated future minimum rental commitments of approximately $21,232.

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

Operating Leases⁽¹⁾

Finance Leases

Weighted average remaining lease term

Weighted average discount rate