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Leases

3 Months Ended

Jun. 29, 2019

Leases

The Company leases certain production and retail locations, office space and equipment. The Company determines if a contract or arrangement is, or contains, a lease at inception. Lease agreements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more. Generally, the exercise of lease renewal options is at the Company’s discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or a purchase option that the Company is reasonably certain to exercise.

Certain of the Company's lease agreements include rental payments adjusted periodically for inflation. These lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since the Company’s leases do not provide a readily determinable implicit interest rate, the Company must estimate an incremental borrowing rate. In determining the estimated incremental borrowing rate, the Company considers the lease period and comparable market interest rates, as well as any other information available at the lease commencement date. The lease term includes the options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The following table provides information about the financial statement classification of the Company's lease balances reported within the Consolidated Balance Sheets as of June 29, 2019 (in thousands):



	Classification	June 29, 2019
ROU assets
Operating lease assets	Operating lease right-of-use assets	$	12,248
Finance lease assets	Property, plant and equipment, net ⁽¹⁾	1,670
Total lease assets		$	13,918

Lease Liabilities
Current
Operating lease liabilities	Accrued liabilities	$	3,626
Finance lease liabilities	Current portion of secured financings and other	724
Non-current
Operating lease liabilities	Operating lease liabilities	9,260
Finance lease liabilities	Securitized financings and other	330
Total lease liabilities		$	13,940

(1) Recorded net of accumulated amortization of $79,000 as of June 29, 2019.

The following table provides information about the financial statement classification of the Company's lease expenses reported within the Consolidated Statement of Comprehensive Income for the three months ended June 29, 2019 (in thousands):



Lease Expense Category	Classification	Three Months Ended June 29, 2019
Operating lease expense ⁽¹⁾
	Cost of sales	$	209
	Selling, general and administrative expenses	753
Finance lease expense
Amortization of leased assets	Cost of sales	9
Interest on lease liabilities	Interest expense, net	13
Total lease expense		$	984

(1) Excludes short-term and variable lease expenses, which are immaterial.

Cash payments for the three months ended June 29, 2019 were $786,000 for operating leases and $34,000 for finance leases.

The present value of the minimum payments for future fiscal years under non-cancelable leases as of June 29, 2019 are as follows (in thousands):



	Operating Leases			Finance Leases			Total
Remainder of 2020	$	2,517		$	732		$	3,249
2021	3,699			73			3,772
2022	2,778			73			2,851
2023	1,824			73			1,897
2024	1,445			73			1,518
Thereafter	2,612			123			2,735
Total lease payments	14,875			1,147			16,022
Less: Amount representing interest	(1,989		)	(93		)	(2,082		)
Present value of lease liabilities	$	12,886		$	1,054		$	13,940

The following table provides information about the remaining lease terms and discount rates as of June 29, 2019:



Weighted average remaining lease term (years)
Operating leases	4.9
Finance leases	2.8
Weighted average discount rate
Operating leases	4.5	%
Finance leases	5.0	%

Operating Leases pre-Topic 842 adoption:

The Company has non-cancelable operating leases with third parties, primarily for administrative and distribution center space and computer equipment. The Company's facilities leases generally provide for periodic rent increases and many contain escalation clauses and renewal options. Rent expense for these third-party operating leases was $5.2 million for the fiscal year ended March 30, 2019 and $5.3 million for each of the fiscal years ended March 31, 2018 and April 1, 2017, and is included in Cost of sales and Selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income.

Future minimum lease commitments for future fiscal years under all non-cancelable operating leases having a remaining term in excess of one year as of March 30, 2019 are as follows (in thousands):



2020	$	2,292
2021	2,197
2022	1,389
2023	1,072
Thereafter	1,372
Total remaining lease payments	$	8,322

Finance Leases