Leases

6 Months Ended

Jul. 05, 2020

Leases [Abstract]

Leases

LEASES

General

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 accounting 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 leases extending beyond one year 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 July 5, 2020, there were no significant right-of-use assets and lease obligations from leases that had not commenced as of the end of the second quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to our leases as of July 5, 2020 and December 29, 2019:

	July 5, 2020				December 29, 2019
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(In thousands)
Operating lease right-of-use assets	$	100,091			$	107,044
Current portion of operating lease liabilities	$	14,124			$	15,914
Operating lease liabilities	86,716				91,829
Total operating lease liabilities	$	100,840			$	107,743
Property and equipment			$	4,954			$	5,007
Accrued expenses			$	1,455			$	1,489
Other long-term liabilities			1,485				1,673
Total finance lease liabilities			$	2,940			$	3,162

Lease Costs

	Three Months Ended				Six Months Ended
	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	335	$	278	$	635	$	424
Interest on lease liabilities	16		11		34		19
Operating lease cost	6,759		5,930		12,981		11,601
Short-term lease cost	166		408		341		1,146
Variable lease cost	924		613		1,570		758
Total lease cost	$	8,200	$	7,240	$	15,561	$	13,948
Other supplemental information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	16	$	11	$	34	$	19
Operating cash flows from operating leases	5,569		5,395		11,450		10,505
Financing cash flows from finance leases	411		271		810		517
Right-of-use assets obtained in exchange for new finance lease liabilities	340		551		553		551
Right-of-use assets obtained in exchange for new operating lease liabilities	3,088		4,069		4,065		6,536

Lease Term and Discount Rate

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of July 5, 2020 and December 29, 2019:

	July 5, 2020		December 29, 2019
Weighted-average remaining lease term – finance leases (in years)	2.70		2.76
Weighted-average remaining lease term – operating leases (in years)	10.62		10.60
Weighted-average discount rate – finance leases	2.37	%	2.06	%
Weighted-average discount rate – operating leases	5.93	%	5.86	%

Maturity Analysis

A maturity analysis of lease payments under non-cancellable leases is presented as follows:

Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2020 (excluding the six months ended July 5, 2020)	$	10,334		$	816
2021	17,476			1,063
2022	14,369			619
2023	11,850			400
2024	10,120			141
Thereafter	75,880			—
Total future minimum lease payments (undiscounted)	140,029			3,039
Less: Present value discount	(39,189		)	(99		)
Total lease liability	$	100,840		$	2,940

Policy Elections

We 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 also 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 sheets. 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

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 accounting 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 leases extending beyond one year 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 July 5, 2020, there were no significant right-of-use assets and lease obligations from leases that had not commenced as of the end of the second quarter.

The table below represents a summary of the balances recorded in the consolidated condensed balance sheets related to our leases as of July 5, 2020 and December 29, 2019:

	July 5, 2020				December 29, 2019
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(In thousands)
Operating lease right-of-use assets	$	100,091			$	107,044
Current portion of operating lease liabilities	$	14,124			$	15,914
Operating lease liabilities	86,716				91,829
Total operating lease liabilities	$	100,840			$	107,743
Property and equipment			$	4,954			$	5,007
Accrued expenses			$	1,455			$	1,489
Other long-term liabilities			1,485				1,673
Total finance lease liabilities			$	2,940			$	3,162

Lease Costs

	Three Months Ended				Six Months Ended
	July 5, 2020		June 30, 2019		July 5, 2020		June 30, 2019
Lease cost	(In thousands)
Finance lease cost:
Amortization of right-of-use assets	$	335	$	278	$	635	$	424
Interest on lease liabilities	16		11		34		19
Operating lease cost	6,759		5,930		12,981		11,601
Short-term lease cost	166		408		341		1,146
Variable lease cost	924		613		1,570		758
Total lease cost	$	8,200	$	7,240	$	15,561	$	13,948
Other supplemental information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	16	$	11	$	34	$	19
Operating cash flows from operating leases	5,569		5,395		11,450		10,505
Financing cash flows from finance leases	411		271		810		517
Right-of-use assets obtained in exchange for new finance lease liabilities	340		551		553		551
Right-of-use assets obtained in exchange for new operating lease liabilities	3,088		4,069		4,065		6,536

Lease Term and Discount Rate

The table below presents the weighted average remaining lease terms and discount rates for finance and operating leases as of July 5, 2020 and December 29, 2019:

	July 5, 2020		December 29, 2019
Weighted-average remaining lease term – finance leases (in years)	2.70		2.76
Weighted-average remaining lease term – operating leases (in years)	10.62		10.60
Weighted-average discount rate – finance leases	2.37	%	2.06	%
Weighted-average discount rate – operating leases	5.93	%	5.86	%

Maturity Analysis

A maturity analysis of lease payments under non-cancellable leases is presented as follows:

Fiscal Year	Operating Leases			Finance Leases
	(In thousands)
2020 (excluding the six months ended July 5, 2020)	$	10,334		$	816
2021	17,476			1,063
2022	14,369			619
2023	11,850			400
2024	10,120			141
Thereafter	75,880			—
Total future minimum lease payments (undiscounted)	140,029			3,039
Less: Present value discount	(39,189		)	(99		)
Total lease liability	$	100,840		$	2,940

Policy Elections

We 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 also 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 sheets. 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.