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Leases
12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Leases
(5)
Leases

 

The Company leases certain retail store and supply chain center locations, vehicles, equipment and its corporate headquarters with expiration dates through 2045.

The components of operating and finance lease cost for 2023, 2022 and 2021 were as follows:

 

 

2023

 

 

2022

 

 

2021

 

Operating lease cost

 

$

47,579

 

 

$

47,039

 

 

$

44,913

 

 

 

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

 

5,545

 

 

 

5,235

 

 

 

4,373

 

Interest on lease liabilities

 

 

4,340

 

 

 

4,369

 

 

 

4,233

 

Total finance lease cost

 

$

9,885

 

 

$

9,604

 

 

$

8,606

 

 

Rent expense totaled $85.6 million, $79.6 million and $78.6 million in 2023, 2022 and 2021, 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 $5.4 million, $7.0 million and $8.0 million in 2023, 2022 and 2021, respectively. Variable rent expense and rent expense for other short-term leases were immaterial for 2023, 2022 and 2021.

 

Supplemental balance sheet information related to the Company’s finance leases as of December 31, 2023 and January 1, 2023 was as follows:

 

 

December 31,
2023

 

 

January 1,
2023

 

Land and buildings

 

$

83,969

 

 

$

83,902

 

Equipment

 

 

4,284

 

 

 

1,606

 

Finance lease assets

 

 

88,253

 

 

 

85,508

 

Accumulated depreciation and amortization

 

 

(24,159

)

 

 

(19,405

)

Finance lease assets, net

 

$

64,094

 

 

$

66,103

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

4,778

 

 

$

3,313

 

Long-term debt, less current portion

 

 

68,704

 

 

 

70,886

 

Total principal payable on finance leases

 

$

73,482

 

 

$

74,199

 

 

As of December 31, 2023 and January 1, 2023, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:

 

 

2023

 

 

2022

 

 

 

Operating

 

 

Finance

 

 

Operating

 

 

Finance

 

 

 

Leases

 

 

Leases

 

 

Leases

 

 

Leases

 

Weighted average remaining lease term

 

7 years

 

 

13 years

 

 

7 years

 

 

14 years

 

Weighted average discount rate

 

 

4.3

%

 

 

6.1

%

 

 

3.9

%

 

 

6.0

%

 

Supplemental cash flow information related to leases for 2023, 2022 and 2021 was as follows:

 

 

2023

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

46,936

 

 

$

45,082

 

 

$

44,176

 

Operating cash flows from finance leases

 

 

4,340

 

 

 

4,369

 

 

 

4,233

 

Financing cash flows from finance leases

 

 

4,184

 

 

 

4,176

 

 

 

3,212

 

Cash paid for amounts included in the measurement of
   financing obligation from sale leaseback:

 

 

 

 

 

 

 

 

 

Operating cash flows from sale leaseback

 

 

201

 

 

 

 

 

 

 

Financing cash flows from sale leaseback

 

 

21

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for new lease obligations:

 

 

 

 

 

 

 

 

 

Operating leases

 

 

34,313

 

 

 

64,660

 

 

 

29,549

 

Finance leases

 

 

3,842

 

 

 

478

 

 

 

18,991

 

 

Maturities of lease liabilities as of December 31, 2023 were as follows:

 

 

 

Operating

 

 

Finance

 

 

 

Leases

 

 

Leases

 

2024

 

$

49,267

 

 

$

8,954

 

2025

 

 

42,647

 

 

 

8,937

 

2026

 

 

41,130

 

 

 

9,555

 

2027

 

 

33,239

 

 

 

8,344

 

2028

 

 

26,278

 

 

 

7,214

 

Thereafter

 

 

64,997

 

 

 

60,946

 

Total future minimum rental commitments

 

 

257,558

 

 

 

103,950

 

Less, amounts representing interest

 

 

(38,680

)

 

 

(30,468

)

Total lease liabilities

 

$

218,878

 

 

$

73,482

 

 

In the fourth quarter of 2023, a subsidiary of the Company entered into a purchase and sale agreement with a developer to sell one of the Company’s owned supply chain center buildings and the associated land for $14.9 million. Concurrently, a separate subsidiary of the Company entered into a lease agreement with the developer to construct a new supply chain center which includes both the existing building as well as an adjoined new construction on the adjacent properties owned by the developer.

The leaseback of the Company’s building on a standalone basis for the construction period plus the 20-year term using the discount rate implicit in the lease resulted in a finance lease classification, and therefore, the transaction was accounted for as a failed sale leaseback. The Company retained the existing land and buildings on its consolidated balance sheet which are included in property, plant and equipment and the Company continues to depreciate the building as if it owned it. The $14.9 million cash proceeds from the transaction were recorded as a financing obligation which is classified as long-term debt in the Company’s consolidated balance sheet and will be amortized into principal and interest expense over the term of the lease agreement. The $119.5 million of future minimum rent payments associated with the new construction on a standalone basis is included in the disclosure for material leases not yet commenced, below.

As of December 31, 2023, in addition to the lease for the new supply chain construction on a standalone basis discussed above, the Company also had additional leases for certain supply chain and U.S. Company-owned store vehicles that had not yet commenced. The total estimated future minimum rental commitments for all of these arrangements is $146.3 million. These leases are expected to commence in 2024 and 2025 with lease terms of up to 20 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 $18.5 million and $24.5 million as of December 31, 2023 and January 1, 2023, 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.