Leases

12 Months Ended

Jan. 02, 2022

(5)

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 2021, 2020 and 2019 were as follows:


	2021		2020		2019
Operating lease cost	$	44,913	$	44,679	$	42,903

Finance lease cost:
Amortization of right-of-use assets		4,373		2,186		1,167
Interest on lease liabilities		4,233		3,340		1,952
Total finance lease cost	$	8,606	$	5,526	$	3,119

Rent expense totaled $78.6 million, $73.7 million and $69.7 million in 2021, 2020 and 2019, 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. Rent expense for certain short-term supply chain center tractor and trailer rentals was $8.0 million, $4.2 million and $4.0 million in 2021, 2020 and 2019, respectively. Variable rent expense and rent expense for other short-term leases were immaterial for 2021, 2020 and 2019.

Supplemental balance sheet information related to the Company’s leases as of January 2, 2022 and January 3, 2021 was as follows:


	January 2, 2022			January 3, 2021
Land and buildings	$	86,965		$	68,084
Accumulated depreciation and amortization		(14,423	)		(10,049	)
Finance lease assets, net	$	72,542		$	58,035

Current portion of long-term debt	$	4,088		$	2,855
Long-term debt, less current portion		72,250			57,700
Total principal payable on finance leases	$	76,338		$	60,555

As of January 2, 2022 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:


	2021						2020
	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		3.5	%		5.8	%		3.7	%		6.8	%

Supplemental cash flow information related to leases for 2021, 2020 and 2019 was as follows:


	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	44,176	$	43,679	$	43,608
Operating cash flows from finance leases		4,233		3,340		1,952
Financing cash flows from finance leases		3,212		2,058		647
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases		29,549		37,375		63,685
Finance leases		18,991		42,894		3,255

Maturities of lease liabilities as of January 2, 2022 were as follows:


	Operating			Finance
	Leases			Leases
2022	$	45,347		$	8,084
2023		39,057			7,536
2024		38,027			8,115
2025		32,417			7,935
2026		29,280			8,633
Thereafter		65,645			78,071
Total future minimum rental commitments		249,773			118,374
Less – amounts representing interest		(28,147	)		(42,036	)
Total lease liabilities	$	221,626		$	76,338

As of January 2, 2022, the Company had 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 $66.7 million. These leases are expected to commence in 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 $9.1 million and $12.6 million as of January 2, 2022 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 or expenses, capital expenditures or liquidity.