Leases

9 Months Ended

Sep. 29, 2019

Leases [Abstract]

Leases

LEASES

General

On December 31, 2018, the Company adopted the new lease standard using the transition methodology allowed by the standard to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative prior year periods presented in these financial statements continue to be in accordance with previous GAAP. We have operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. Our leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. Our lease terms may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.

We record a right-of-use asset and lease liability for operating and finance leases once a contract that contains a lease is executed and we have the right to control the use of the leased asset. The right-of-use asset is measured as the present value of the lease obligation. The discount rate used to calculate the present value of the lease liability was the Company’s incremental borrowing rate for the applicable geographical region.

As of September 29, 2019, there were no significant right-of-use assets and lease obligations from leases that had not commenced as of the end of the third quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheet related to our leases as of September 29, 2019:

	September 29, 2019
	(In thousands)
Balance Sheet Location	Operating Leases		Finance Leases
Operating lease right-of-use assets	$	110,051
Current portion of operating lease liabilities	$	15,780
Operating lease liabilities	91,480
Total operating lease liabilities	$	107,260
Property and equipment			$	3,951
Accrued expenses			$	1,150
Other long-term liabilities			972
Total finance lease liabilities			$	2,122

Lease Costs

	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	112	$	536
Interest on lease liabilities	12		31
Operating lease cost	6,023		17,624
Short-term lease cost	363		1,509
Variable lease cost	561		1,319
Total lease cost	$	7,071	$	21,019
Other supplemental information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	12	$	31
Operating cash flows from operating leases	5,653		16,158
Financing cash flows from finance leases	291		808
Right-of-use assets obtained in exchange for new finance lease liabilities	252		803
Right-of-use assets obtained in exchange for new operating lease liabilities	1,437		7,973

	September 29, 2019
Weighted-average remaining lease term – finance leases (in years)	2.25
Weighted-average remaining lease term – operating leases (in years)	10.75
Weighted-average discount rate – finance leases	2.25	%
Weighted-average discount rate – operating leases	5.85	%

Maturity Analysis

Maturity analysis of lease payments under non-cancellable leases were as follows:

Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2019 (excluding the nine months ended September 29, 2019)	$	5,690		$	304
2020	20,432			1,141
2021	16,257			469
2022	13,007			174
2023	10,924			84
Thereafter	83,263			14
Total future minimum lease payments (undiscounted)	149,573			2,186
Less: Present value discount	(42,313		)	(64		)
Total lease liability	$	107,260		$	2,122

At December 30, 2018, aggregate minimum rent commitments under operating leases with initial or remaining terms of one year or more consisted of the following:

Fiscal Year	Amount
	(In thousands)
2019	$	26,113
2020	22,066
2021	16,453
2022	8,692
2023	5,186
Thereafter	15,237
Total minimum rent commitments	$	93,747

Practical Expedients and Policy Elections

The Company elected the package of practical expedients permitted under the transition guidance of the new lease standard, which, among other things, allows us to carry forward the historical lease classification and not reassess any initial direct costs for existing leases. In addition, we elected the hindsight practical expedient to determine the lease term, which allows us to use hindsight when considering the impact of options to extend or terminate a lease as well as the option to purchase the underlying asset. We also made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and will account for the lease payments as a single component.

We made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated condensed balance sheet. These leases primarily represent month-to-month operating leases for vehicles and office equipment where we were reasonably certain that we would not elect an option to extend the lease.

Leases

LEASES

General

On December 31, 2018, the Company adopted the new lease standard using the transition methodology allowed by the standard to initially apply the new lease guidance at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative prior year periods presented in these financial statements continue to be in accordance with previous GAAP. We have operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. Our leases have terms ranging from 1 to 20 years, some of which may include options to extend the lease term for up to 5 years, and certain leases may include an option to terminate the lease. Our lease terms may include these options to extend or terminate a lease when it is reasonably certain that we will exercise that option.

We record a right-of-use asset and lease liability for operating and finance leases once a contract that contains a lease is executed and we have the right to control the use of the leased asset. The right-of-use asset is measured as the present value of the lease obligation. The discount rate used to calculate the present value of the lease liability was the Company’s incremental borrowing rate for the applicable geographical region.

As of September 29, 2019, there were no significant right-of-use assets and lease obligations from leases that had not commenced as of the end of the third quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheet related to our leases as of September 29, 2019:

	September 29, 2019
	(In thousands)
Balance Sheet Location	Operating Leases		Finance Leases
Operating lease right-of-use assets	$	110,051
Current portion of operating lease liabilities	$	15,780
Operating lease liabilities	91,480
Total operating lease liabilities	$	107,260
Property and equipment			$	3,951
Accrued expenses			$	1,150
Other long-term liabilities			972
Total finance lease liabilities			$	2,122

Lease Costs

	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	112	$	536
Interest on lease liabilities	12		31
Operating lease cost	6,023		17,624
Short-term lease cost	363		1,509
Variable lease cost	561		1,319
Total lease cost	$	7,071	$	21,019
Other supplemental information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	12	$	31
Operating cash flows from operating leases	5,653		16,158
Financing cash flows from finance leases	291		808
Right-of-use assets obtained in exchange for new finance lease liabilities	252		803
Right-of-use assets obtained in exchange for new operating lease liabilities	1,437		7,973

	September 29, 2019
Weighted-average remaining lease term – finance leases (in years)	2.25
Weighted-average remaining lease term – operating leases (in years)	10.75
Weighted-average discount rate – finance leases	2.25	%
Weighted-average discount rate – operating leases	5.85	%

Maturity Analysis

Maturity analysis of lease payments under non-cancellable leases were as follows:

Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2019 (excluding the nine months ended September 29, 2019)	$	5,690		$	304
2020	20,432			1,141
2021	16,257			469
2022	13,007			174
2023	10,924			84
Thereafter	83,263			14
Total future minimum lease payments (undiscounted)	149,573			2,186
Less: Present value discount	(42,313		)	(64		)
Total lease liability	$	107,260		$	2,122

At December 30, 2018, aggregate minimum rent commitments under operating leases with initial or remaining terms of one year or more consisted of the following:

Fiscal Year	Amount
	(In thousands)
2019	$	26,113
2020	22,066
2021	16,453
2022	8,692
2023	5,186
Thereafter	15,237
Total minimum rent commitments	$	93,747

Practical Expedients and Policy Elections

The Company elected the package of practical expedients permitted under the transition guidance of the new lease standard, which, among other things, allows us to carry forward the historical lease classification and not reassess any initial direct costs for existing leases. In addition, we elected the hindsight practical expedient to determine the lease term, which allows us to use hindsight when considering the impact of options to extend or terminate a lease as well as the option to purchase the underlying asset. We also made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and will account for the lease payments as a single component.

We made an accounting policy election to exclude leases with an initial term of 12 months or less from the calculation of the right-of-use asset and lease liability recorded on the consolidated condensed balance sheet. These leases primarily represent month-to-month operating leases for vehicles and office equipment where we were reasonably certain that we would not elect an option to extend the lease.