XML 34 R21.htm IDEA: XBRL DOCUMENT

Leases

12 Months Ended

Jan. 02, 2021

The Corporation leases certain showrooms, office space, manufacturing facilities, distribution centers, retail stores, and equipment and determines if an arrangement is a lease at inception. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets; expense for these leases is recognized on a straight-line basis over the lease term.

As the rates implicit in its leases cannot be readily determined, the Corporation estimates secured incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments. The Corporation uses separate discount rates for its United States operations and overseas operations.

Certain real estate leases include one or more options to renew with renewal terms that can extend the lease term from one to ten years. The exercise of lease renewal options is at the Corporation's sole discretion. Certain real estate leases include an option to terminate the lease term earlier than the specified lease term for a fee. These options are not included as part of the lease term unless they are reasonably certain to be exercised.

Many of the Corporation's real estate lease agreements include periods of rent holidays and payments that escalate over the lease term by specified amounts. While not significant, certain equipment leases have variable lease payments based on machine hours and certain real estate leases have rate changes based on the Consumer Price Index. The Corporation's lease agreements do not contain any material residual value guarantees.

The Corporation has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

On occasion, the Corporation rents or subleases certain real estate to third parties. This sublease portfolio consists mainly of operating leases for office furniture showrooms and is not significant.

Leases included in the Consolidated Balance Sheets consisted of the following (in thousands):


Classification	January 2, 2021		December 28, 2019
Assets
Right-of-use operating leases	$	70,219	$	72,883
Right-of-use finance leases	6,095		2,129
Total Right-of-use operating / finance leases	$	76,314	$	75,012

Liabilities
Current lease obligations - operating	$	19,970	$	22,219
Current lease obligations - finance	1,589		563
Total Current lease obligations - operating / finance	21,559		22,782

Long-term lease obligations - operating	53,249		58,233
Long-term lease obligations - finance	4,516		1,581
Total Long-term lease obligations - operating / finance	57,765		59,814

Total lease obligations - operating / finance	$	79,324	$	82,596

As of January 2, 2021, approximately 84 percent of the value of the leased assets is for real estate. The remaining 16 percent of the value of the leased assets is for equipment.

Lease costs included in the Consolidated Statements of Comprehensive Income consisted of the following (in thousands):


	Classification	2020		2019
Operating lease costs
Fixed	Cost of sales	$	1,819	$	1,803
	Selling and administrative expenses	25,357		24,149
Short-term / variable	Cost of sales	434		700
	Selling and administrative expenses	1,772		1,140
Finance lease costs
Amortization	Cost of sales, selling and administrative, and interest expense	738		480
Less: Sublease income		130		181
Total lease costs		$	29,990	$	28,091

Prior to the adoption of ASU 2016-02 at the beginning of 2019, the Company recognized rental expense for operating leases on a straight-line basis over the lease term. Rent expense associated with operating leases was $31.0 million for the year ended December 29, 2018.

Maturity of lease liabilities as of January 2, 2021 is as follows (in thousands):


	Operating Leases (a)		Finance Leases (b)		Total
2021	$	22,292	$	1,696	$	23,988
2022	16,513		1,482		17,995
2023	12,986		1,387		14,373
2024	8,912		1,047		9,959
2025	7,485		737		8,222
Thereafter	12,403		—		12,403
Total lease payments	80,591		6,349		86,940
Less: Interest	7,372		244		7,616
Present value of lease liabilities	$	73,219	$	6,105	$	79,324

(a)At this time there are no operating lease options to extend lease terms that are reasonably certain of being exercised. Currently the Corporation has no legally binding minimum lease payments for operating leases signed but not yet commenced.

(b)At this time there are no finance lease options to extend lease terms that are reasonably certain of being exercised. Currently the Corporation has $4.6 million of legally binding minimum lease payments for finance leases signed but not yet commenced, which are excluded from finance lease liabilities.

The following table summarizes the weighted-average discount rates and weighted-average remaining lease terms for operating and finance leases as of January 2, 2021:


	Weighted-Average Discount Rate (percent)		Weighted-Average Remaining Lease Term (years)
Operating leases	3.5	%	4.9
Finance leases	1.9	%	4.3

The following table summarizes cash paid for amounts included in the measurements of lease liabilities and the leased assets obtained in exchange for new operating and finance lease liabilities (in thousands):


	2020		2019
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flows from operating / finance leases	$	31,461	$	26,446
Financing cash flows from finance leases	$	674	$	419
Leased assets obtained in exchange for new operating / finance lease liabilities	$	27,260	$	25,268

As part of the Corporation's continued efforts to drive efficiency and simplification, the Corporation entered into a sale-leaseback transaction in the first quarter of 2018, selling a manufacturing facility and subsequently leasing back a portion of the facility for a term of 10 years. The net proceeds from the sale of the facility of $16.9 million were reflected in "Proceeds from sale of property, plant, and equipment" in the Consolidated Statements of Cash Flows in 2018. In accordance with ASC 840, the $5.1 million gain on the sale of the facility was deferred and was amortized as a reduction to rent expense evenly over the term of the lease. In accordance with the ASU 2016-02 adoption, the remaining unamortized deferred gain related to the sale-leaseback as of December 29, 2018 was recognized directly in "Retained earnings" in the Condensed Consolidated Balance Sheets in the first quarter of 2019 as a cumulative-effect adjustment as the Corporation transferred control of the asset.

Leases