XML 21 R11.htm IDEA: XBRL DOCUMENT v3.20.2
LEASES
 9 Months Ended
Sep. 26, 2020
Leases [Abstract]  
LEASES LEASES
We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of September 26, 2020, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components compromise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facility asset class. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.
The following table presents the assets and liabilities related to operating and finance leases (in thousands):

Balance Sheet LocationSeptember 26, 2020
Assets:
Operating lease assetsOperating lease right-of-use assets$34,652 
Finance lease assetsProperty and equipment962 
Total lease assets$35,614 
Liabilities:
Current
Operating lease liabilitiesOperating lease liabilities$8,425 
Finance lease liabilitiesCurrent maturities of long-term debt194 
Non-current
Operating lease liabilitiesOperating lease liabilities, non-current37,679 
Finance lease liabilitiesLong-term debt, net of current portion804 
Total lease liabilities$47,102 

The following table presents the components of lease costs (in thousands):
Three Months EndedNine Months Ended
September 26, 2020September 26, 2020
Operating lease costs$2,410 $7,021 
Finance lease cost - amortization of right-of-use assets53 159 
Finance lease cost - interest on lease liabilities15 49 
Short-term lease cost36 140 
Variable lease cost838 2,492 
Sublease income(186)(557)
Total lease cost$3,166 $9,304 

The following table presents lease terms and discount rates:

September 26, 2020
Weighted average remaining lease term:
Operating leases6.39 years
Finance leases3.93 years
Weighted average discount rate:
Operating leases6.52 %
Finance leases6.24 %
Minimum lease payments have not been reduced by minimum sublease rentals of $3.4 million due in the future under non-cancelable subleases. We received $0.2 million in sublease income for both the three months ended September 26, 2020 and September 28, 2019, and $0.6 million in sublease income for both the nine months ended September 26, 2020 and September 28, 2019. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of September 26, 2020 (in thousands):

Operating LeasesFinance LeasesTotal
2020$3,326 $62 $3,388 
202110,391 249 10,640 
20227,454 249 7,703 
20237,878 249 8,127 
20247,575 330 7,905 
Thereafter20,107 — 20,107 
Total lease payments56,731 1,139 57,870 
Less: Effect of discounting to net present value10,627 141 10,768 
Present value of lease liabilities$46,104 $998 $47,102 

The following table presents supplemental cash flow information related to our leases (in thousands):

Nine Months Ended September 26, 2020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows used in operating leases$7,770 
Operating cash flows used in finance leases49
Financing cash flows used in finance leases138
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$1,580 
LEASES LEASES
We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of September 26, 2020, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet.

Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components compromise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facility asset class. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term.
The following table presents the assets and liabilities related to operating and finance leases (in thousands):

Balance Sheet LocationSeptember 26, 2020
Assets:
Operating lease assetsOperating lease right-of-use assets$34,652 
Finance lease assetsProperty and equipment962 
Total lease assets$35,614 
Liabilities:
Current
Operating lease liabilitiesOperating lease liabilities$8,425 
Finance lease liabilitiesCurrent maturities of long-term debt194 
Non-current
Operating lease liabilitiesOperating lease liabilities, non-current37,679 
Finance lease liabilitiesLong-term debt, net of current portion804 
Total lease liabilities$47,102 

The following table presents the components of lease costs (in thousands):
Three Months EndedNine Months Ended
September 26, 2020September 26, 2020
Operating lease costs$2,410 $7,021 
Finance lease cost - amortization of right-of-use assets53 159 
Finance lease cost - interest on lease liabilities15 49 
Short-term lease cost36 140 
Variable lease cost838 2,492 
Sublease income(186)(557)
Total lease cost$3,166 $9,304 

The following table presents lease terms and discount rates:

September 26, 2020
Weighted average remaining lease term:
Operating leases6.39 years
Finance leases3.93 years
Weighted average discount rate:
Operating leases6.52 %
Finance leases6.24 %
Minimum lease payments have not been reduced by minimum sublease rentals of $3.4 million due in the future under non-cancelable subleases. We received $0.2 million in sublease income for both the three months ended September 26, 2020 and September 28, 2019, and $0.6 million in sublease income for both the nine months ended September 26, 2020 and September 28, 2019. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of September 26, 2020 (in thousands):

Operating LeasesFinance LeasesTotal
2020$3,326 $62 $3,388 
202110,391 249 10,640 
20227,454 249 7,703 
20237,878 249 8,127 
20247,575 330 7,905 
Thereafter20,107 — 20,107 
Total lease payments56,731 1,139 57,870 
Less: Effect of discounting to net present value10,627 141 10,768 
Present value of lease liabilities$46,104 $998 $47,102 

The following table presents supplemental cash flow information related to our leases (in thousands):

Nine Months Ended September 26, 2020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows used in operating leases$7,770 
Operating cash flows used in finance leases49
Financing cash flows used in finance leases138
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$1,580