Leases

9 Months Ended

Oct. 01, 2022

Leases

Leases

(11) Leases

Operating Leases and Finance Lease. Operating leases and a finance lease are included in the accompanying unaudited consolidated balance sheets in the following line items (in thousands):

	October 1,		January 1,
	2022		2022
Right-of-use assets:
Operating lease right-of-use assets	$	69,565	$	65,166
Finance lease right-of-use assets		3,155		—
Total lease right-of-use assets	$	72,720	$	65,166
Operating lease liabilities:
Current portion of operating lease liabilities	$	15,038	$	12,420
Long-term operating lease liabilities, net of current portion		55,032		55,607
Total operating lease liabilities	$	70,070	$	68,027
Finance lease liabilities:
Current portion of finance lease liabilities	$	1,040	$	—
Long-term finance lease liabilities, net of current portion		2,058		—
Total finance lease liabilities	$	3,098	$	—

We determine whether an arrangement is a lease at inception. We have operating leases for certain of our manufacturing facilities, distribution centers, warehouse and storage facilities, machinery and equipment, and office equipment. Our leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years, and some of which include options to terminate the lease within one year. In connection with the Yuma acquisition, we acquired a finance lease along with several operating leases. We consider these options in determining the lease term used to establish our right-of use assets and lease liabilities.

The following table shows supplemental information related to leases (in thousands):

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
	October 1,		October 2,		October 1,		October 2,
	2022		2021		2022		2021
Operating cash flow information:
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,311	$	3,359	$	12,505	$	9,782
The components of operating lease costs were as follows:
Cost of goods sold	$	2,720	$	1,168	$	7,569	$	3,510
Selling, general and administrative expenses		1,646		2,186		4,970		6,391
Total operating lease costs	$	4,366	$	3,354	$	12,539	$	9,901
The components of finance lease costs were as follows:
Depreciation of finance right-of-use assets	$	264	$	—	$	373	$	—
Interest on finance lease liabilities		19		—		27		—
Total finance lease costs	$	283	$	—	$	400	$	—
Total net lease costs	$	4,649	$	3,354	$	12,939	$	9,901

Total rent expense was $4.9 million, including the operating lease costs of $4.4 million stated above, for the third quarter of 2022, and $14.0 million, including the operating lease costs of $12.5 million stated above, for the first three quarters of 2022. Total rent expense was $4.0 million, including the operating lease costs of $3.4 million stated

above, for the third quarter of 2021, and $12.1 million, including the operating lease costs of $9.9 million stated above, for the first three quarters of 2021.

Because neither our operating leases nor our finance lease provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We have lease agreements that contain both lease and non-lease components. With the exception of our real estate leases, we account for our leases as a single lease component.

The following table shows the weighted average lease term and weighted average discount rate for our ROU assets:

	October 1,		January 1,
	2022		2022
Weighted average remaining lease term (years)
Operating leases		5.6		5.5
Finance lease		3.0		N/A
Weighted average discount rate
Operating leases		2.54%		2.61%
Finance lease		2.30%		N/A

As of October 1, 2022, the maturities of lease liabilities were as follows (in thousands):

	Operating Leases		Finance Lease		Total Maturities of Lease Liabilities
Fiscal year:
2022 remaining	$	4,332	$	275	$	4,607
2023		16,027		1,099		17,126
2024		14,240		1,099		15,339
2025		13,558		732		14,290
2026		10,152		—		10,152
Thereafter		16,661		—		16,661
Total undiscounted future minimum lease payments		74,970		3,205		78,175
Less: Imputed interest		(4,900)		(107)		(5,007)
Total present value of future lease payments	$	70,070	$	3,098	$	73,168