Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
 9 Months Ended
Sep. 28, 2019
Leases [Abstract]  
Leases
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 thirty-nine weeks ended September 28, 2019 were as follows:

 
 
Thirteen Weeks Ended
September 28, 2019
 
Thirty-nine Weeks Ended
September 28, 2019
Operating lease cost
 
$
5,101

 
$
14,399

Short term lease costs
 
668

 
2,644

Variable lease costs
 
720

 
1,795

Finance lease cost:
 
 
 
 
Amortization of right of use assets
 
190

 
425

Interest on lease liabilities
 
35

 
78




Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $6,489 and $4,730 in the thirteen weeks ended September 28, 2019 and thirteen weeks ended September 29, 2018, respectively. Rent expense totaled $18,838 and $13,554 in the thirty-nine weeks ended September 28, 2019 and thirty-nine weeks ended September 29, 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 September 28, 2019:

 
 
Operating Leases(1)
 
Finance Leases
Weighted average remaining lease term
 
8.00

 
3.71

Weighted average discount rate
 
7.80
%
 
6.53
%

(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 September 28, 2019:
 
 
September 28, 2019
Finance lease assets, net, included in property plant and equipment
 
$
2,075

 
 
 
Current portion of long-term debt
 
675

Long-term debt, less current portion
 
1,601

Total principal payable on finance leases
 
2,276



Supplemental cash flow information related to our operating leases was as follows for the thirty-nine weeks ended September 28, 2019:

 
 
Thirty-nine Weeks Ended
September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash outflow from operating leases
 
$
13,872

Operating cash outflow from finance leases
 
66

Financing cash outflow from finance leases
 
484



As of September 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 September 28, 2019:
 
 
Operating Leases
 
Finance Leases
Less than one year
 
$
17,582

 
$
799

1 to 2 years
 
15,703

 
699

2 to 3 years
 
13,557

 
478

3 to 4 years
 
11,442

 
376

4 to 5 years
 
10,529

 
208

After 5 years
 
44,060

 
—

Total future minimum rental commitments
 
112,873

 
2,560

Less - amounts representing interest
 
(30,100
)
 
(284
)
Present value of lease liabilities
 
$
82,773

 
$
2,276




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
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 thirty-nine weeks ended September 28, 2019 were as follows:

 
 
Thirteen Weeks Ended
September 28, 2019
 
Thirty-nine Weeks Ended
September 28, 2019
Operating lease cost
 
$
5,101

 
$
14,399

Short term lease costs
 
668

 
2,644

Variable lease costs
 
720

 
1,795

Finance lease cost:
 
 
 
 
Amortization of right of use assets
 
190

 
425

Interest on lease liabilities
 
35

 
78




Rent expense is recognized on a straight-line basis over the expected lease term. Rent expense totaled $6,489 and $4,730 in the thirteen weeks ended September 28, 2019 and thirteen weeks ended September 29, 2018, respectively. Rent expense totaled $18,838 and $13,554 in the thirty-nine weeks ended September 28, 2019 and thirty-nine weeks ended September 29, 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 September 28, 2019:

 
 
Operating Leases(1)
 
Finance Leases
Weighted average remaining lease term
 
8.00

 
3.71

Weighted average discount rate
 
7.80
%
 
6.53
%

(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 September 28, 2019:
 
 
September 28, 2019
Finance lease assets, net, included in property plant and equipment
 
$
2,075

 
 
 
Current portion of long-term debt
 
675

Long-term debt, less current portion
 
1,601

Total principal payable on finance leases
 
2,276



Supplemental cash flow information related to our operating leases was as follows for the thirty-nine weeks ended September 28, 2019:

 
 
Thirty-nine Weeks Ended
September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash outflow from operating leases
 
$
13,872

Operating cash outflow from finance leases
 
66

Financing cash outflow from finance leases
 
484



As of September 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 September 28, 2019:
 
 
Operating Leases
 
Finance Leases
Less than one year
 
$
17,582

 
$
799

1 to 2 years
 
15,703

 
699

2 to 3 years
 
13,557

 
478

3 to 4 years
 
11,442

 
376

4 to 5 years
 
10,529

 
208

After 5 years
 
44,060

 
—

Total future minimum rental commitments
 
112,873

 
2,560

Less - amounts representing interest
 
(30,100
)
 
(284
)
Present value of lease liabilities
 
$
82,773

 
$
2,276




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.