Lease Commitments

6 Months Ended

Jul. 03, 2022

(5)

Lease Commitments

The Company has operating and finance leases for the Company’s retail store facilities, distribution center, corporate offices, information technology hardware, and distribution center delivery tractors and equipment, and accounts for these leases in accordance with ASC 842.

Certain of the leases for the Company’s retail store facilities provide for variable payments for property taxes, insurance, common area maintenance payments related to triple net leases, rental payments based on future sales volumes at the leased location, as well as certain equipment sales taxes, licenses, fees and repairs, which are not measurable at the inception of the lease, or rental payments that are adjusted periodically for inflation. The Company recognizes variable lease expense for these leases in the period incurred which, for contingent rent, begins in the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In accordance with ASC 842, the components of lease expense were as follows:


	13 Weeks Ended				26 Weeks Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
	(In thousands)
Lease expense:
Operating lease expense	$	20,749	$	20,384	$	41,310	$	40,720
Variable lease expense		4,881		4,711		9,504		9,203
Sublease income		—		—		—		(78	)
Operating lease expense		25,630		25,095		50,814		49,845
Amortization of right-of-use assets		900		720		1,802		1,369
Interest on lease liabilities		67		62		141		121
Finance lease expense		967		782		1,943		1,490
Total lease expense	$	26,597	$	25,877	$	52,757	$	51,335

In accordance with ASC 842, other information related to leases was as follows:


	26 Weeks Ended
	July 3, 2022			July 4, 2021
	(In thousands)
Operating cash flows from operating leases	$	43,300		$	43,168
Financing cash flows from finance leases		1,899			1,559
Operating cash flows from finance leases		147			134
Cash paid for amounts included in the measurement of lease liabilities	$	45,346		$	44,861

Right-of-use assets obtained in exchange for new finance lease liabilities	$	957		$	4,652
Right-of-use assets obtained in exchange for new operating lease liabilities	$	58,624		$	32,529
Weighted-average remaining lease term—finance leases	3.7 years			3.5 years
Weighted-average remaining lease term—operating leases	5.1 years			4.8 years
Weighted-average discount rate—finance leases		3.1	%		3.4	%
Weighted-average discount rate—operating leases		4.9	%		5.6	%

In accordance with ASC 842, maturities of finance and operating lease liabilities as of July 3, 2022 were as follows:


Year Ending:	Finance Leases			Operating Leases
	(In thousands)
2022 (remaining six months)	$	1,970		$	47,108
2023		2,737			78,567
2024		1,953			71,132
2025		1,470			53,984
2026		1,007			37,950
Thereafter		355			54,535
Undiscounted cash flows	$	9,492		$	343,276
Reconciliation of lease liabilities:
Weighted-average remaining lease term	3.7 years			5.1 years
Weighted-average discount rate		3.1	%		4.9	%
Present values	$	9,017		$	304,636
Lease liabilities - current		3,481			77,421
Lease liabilities - long-term		5,536			227,215
Lease liabilities - total	$	9,017		$	304,636
Difference between undiscounted and discounted cash flows	$	475		$	38,640