Leases

6 Months Ended

Jun. 28, 2019

Leases of Lessee Disclosure [Text Block]

Leases

The Company leases warehouse and manufacturing real estate, and manufacturing and computer equipment under operating leases with lease terms ranging up to 25 years. Several operating lease agreements contain options to extend the lease term and/or options for early termination. The lease term consists of the non-cancelable period of the lease, periods covered by options to extend the lease if the Company is reasonably certain to exercise the option, and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise the option. The weighted average remaining lease term for the Company's operating and finance leases as of June 28, 2019 was 5.09 years and 19.87 years, respectively.

The discount rate implicit within the leases is generally not determinable, and, therefore, the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for leases is determined based on the lease term in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rate used to measure the Company's operating and finance lease liabilities as of June 28, 2019 was 5.55% and 5.31%, respectively.

The components of operating and finance lease cost for the second quarter and first six months of 2019 were as follows:



	Second Quarter Ended		Six Months Ended
	June 28,		June 28,
(Thousands)	2019		2019
Components of lease expense
Operating lease cost	$	2,291	$	5,003

Finance lease cost
Amortization of right-of-use assets	354		710
Interest on lease liabilities	259		522
Total lease cost	$	2,904	$	6,235

Operating lease expense amounted to $2.3 million and $3.0 million during the second quarter of 2019 and 2018, respectively, and $5.0 million and $6.1 million during the first six months of 2019 and 2018, respectively. The Company straight-lines its expense of fixed payments for operating leases over the lease term and expenses the variable lease payments in the period incurred. These variable lease payments are not included in the calculation of right-of-use assets or lease liabilities.

Supplemental balance sheet information related to the Company's operating and finance leases as of June 28, 2019 was as follows:



	June 28,
(Thousands)	2019
Supplemental balance sheet information

Operating Leases
Operating lease right-of-use assets	$	26,788
Other liabilities and accrued items	6,927
Operating lease liabilities	21,118

Finance Leases
Property, plant, and equipment	$	26,330
Allowances for depreciation, depletion, and amortization	(3,140		)
Finance lease assets, net	$	23,190
Other liabilities and accrued items	$	1,238
Finance lease liabilities	18,325
Total principal payable on finance leases	$	19,563

Future maturities of the Company's lease liabilities as of June 28, 2019 are as follows:



	Finance		Operating
(Thousands)	Leases		Leases
2019	$	1,122	$	4,201
2020	2,244		7,618
2021	2,244		6,619
2022	2,244		4,727
2023	1,534		3,818
2024 and thereafter	22,414		5,148
Total lease payments	31,802		32,131
Less amount of lease payment representing interest	12,239		4,086
Total present value of lease payments	$	19,563	$	28,045

Supplemental cash flow information related to leases for the first six months of 2019 was as follows:



	Six Months Ended
	June 28,
(Thousands)	2019
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,710
Operating cash flows from finance leases	522
Financing cash flows from finance leases	599