Leases

8 Months Ended

Sep. 12, 2021

8. Leases

The Company leases certain retail store and supply chain center locations, supply chain vehicles, equipment and its corporate headquarters with expiration dates through 2041.

The components of operating and finance lease cost for the third quarter and three fiscal quarters of 2021 and the third quarter and three fiscal quarters of 2020 were as follows:


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 12,		September 6,		September 12,		September 6,
	2021		2020		2021		2020
Operating lease cost	$	10,451	$	10,267	$	31,201	$	30,099
Finance lease cost:
Amortization of right-of-use assets		1,022		548		2,944		1,248
Interest on lease liabilities		1,050		794		2,798		2,066
Total finance lease cost	$	2,072	$	1,342	$	5,742	$	3,314

Rent expense totaled $18.3 million and $54.4 million in the third quarter and three fiscal quarters of 2021, respectively. Rent expense totaled $17.4 million and $50.0 million in the third quarter and three fiscal quarters of 2020, respectively. Rent expense includes operating lease cost, as well as expense for non-lease components including common area maintenance, real estate taxes and insurance for the Company’s real estate leases. Rent expense also includes the variable rate per mile driven and fixed maintenance charges for the Company’s supply chain center tractors and trailers and expense for short-term rentals. Variable rent expense and rent expense for short-term leases were immaterial for the third quarter and three fiscal quarters of 2021 and 2020, respectively.

Supplemental balance sheet information related to the Company’s finance leases as of September 12, 2021 and January 3, 2021 was as follows:


	September 12,			January 3,
	2021			2021
Land and buildings	$	74,085		$	68,084
Accumulated depreciation and amortization		(12,991	)		(10,049	)
Finance lease assets, net	$	61,094		$	58,035

Current portion of long-term debt	$	3,346		$	2,855
Long-term debt, less current portion		61,180			57,700
Total principal payable on finance leases	$	64,526		$	60,555

As of September 12, 2021 and January 3, 2021, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:


	September 12, 2021		January 3, 2021
	Operating	Finance	Operating	Finance
	Leases	Leases	Leases	Leases
Weighted average remaining lease term	7 years	15 years	7 years	16 years
Weighted average discount rate	3.7%	6.5%	3.7%	6.8%

Supplemental cash flow information related to leases for the third quarter and three fiscal quarters of 2021 and the third quarter and three fiscal quarters of 2020 were as follows:


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 12,		September 6,		September 12,		September 6,
	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,236	$	9,288	$	29,528	$	29,455
Operating cash flows from finance leases		1,050		794		2,798		2,066
Financing cash flows from finance leases		771		348		2,068		1,388
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		7,785		10,719		19,138		26,297
Finance leases		390		1,717		6,050		20,463

Maturities of lease liabilities as of September 12, 2021 were as follows:


	Operating			Finance
	Leases			Leases
2021	$	16,203		$	2,394
2022		44,458			7,197
2023		39,019			6,759
2024		37,769			7,216
2025		31,375			7,018
Thereafter		92,261			74,509
Total future minimum rental commitments		261,085			105,093
Less – amounts representing interest		(30,968	)		(40,567	)
Total lease liabilities	$	230,117		$	64,526

As of September 12, 2021, the Company has additional leases for one supply chain center and certain supply chain tractors and trailers that had not yet commenced with estimated future minimum rental commitments of approximately $66.6 million. These leases are expected to commence in 2021 and 2022 with lease terms of up to 16 years. These undiscounted amounts are not included in the table above.

The Company has guaranteed lease payments related to certain franchisees’ lease arrangements. The maximum amount of potential future payments under these guarantees was $10.3 million and $12.6 million as of September 12, 2021 and January 3, 2021, respectively. The Company does not believe these arrangements have or are likely to have a material effect on its results of operations, financial condition, revenues, expenses or liquidity.