Leases

6 Months Ended

Jul. 04, 2021

Leases [Abstract]

Leases

LEASES

General

The Company has operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. The Company’s 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.

The Company records 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 4, 2021, there were no significant 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 the Company’s leases as of July 4, 2021 and January 3, 2021:

	July 4, 2021				January 3, 2021
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(in thousands)
Operating lease right-of-use assets	$	94,316			$	98,013
Current portion of operating lease liabilities	$	13,116			$	13,555
Operating lease liabilities	83,034				86,468
Total operating lease liabilities	$	96,150			$	100,023
Property, plant and equipment, net			$	7,738			$	6,138
Accrued expenses			$	1,862			$	1,496
Other long-term liabilities			3,916				2,688
Total finance lease liabilities			$	5,778			$	4,184

Lease Costs

	Three Months Ended				Six Months Ended
	July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	305	$	335	$	584	$	635
Interest on lease liabilities	35		16		67		34
Operating lease cost	5,914		6,759		11,800		12,981
Short-term lease cost	179		166		642		341
Variable lease cost	482		924		1,288		1,570
Total lease cost	$	6,915	$	8,200	$	14,381	$	15,561

Other Supplemental Information

	Three Months Ended				Six Months Ended
	July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	35	$	16	$	67	$	34
Operating cash flows from operating leases	5,476		5,569		10,676		11,450
Financing cash flows from finance leases	589		411		1,116		810
Right-of-use assets obtained in exchange for new finance lease liabilities	1,471		340		2,744		553
Right-of-use assets obtained in exchange for new operating lease liabilities	3,267		3,088		5,645		4,065

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 4, 2021 and January 3, 2021:

	July 4, 2021		January 3, 2021
Weighted-average remaining lease term – finance leases (in years)	3.46		3.35
Weighted-average remaining lease term – operating leases (in years)	10.26		10.61
Weighted-average discount rate – finance leases	2.82	%	2.64	%
Weighted-average discount rate – operating leases	5.96	%	5.98	%

Maturity Analysis

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

Fiscal Year	Operating Leases		Finance Leases
	(in thousands)
2021 (excluding the six months ended July 4, 2021)	$	9,439	$	1,046
2022	16,838		1,850
2023	13,798		1,579
2024	11,563		1,053
2025	10,341		419
Thereafter	69,793		140
Total future minimum lease payments (undiscounted)	131,772		6,087
Less: Present value discount	(35,622)		(309)
Total lease liability	$	96,150	$	5,778

Policy Elections

The Company made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and accounts for the lease payments as a single component. The Company 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

The Company has operating and finance leases for manufacturing equipment, corporate offices, showrooms, distribution facilities, design centers, as well as computer and office equipment. The Company’s 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.

The Company records 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 4, 2021, there were no significant 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 the Company’s leases as of July 4, 2021 and January 3, 2021:

	July 4, 2021				January 3, 2021
Balance Sheet Location	Operating Leases		Finance Leases		Operating Leases		Finance Leases
	(in thousands)
Operating lease right-of-use assets	$	94,316			$	98,013
Current portion of operating lease liabilities	$	13,116			$	13,555
Operating lease liabilities	83,034				86,468
Total operating lease liabilities	$	96,150			$	100,023
Property, plant and equipment, net			$	7,738			$	6,138
Accrued expenses			$	1,862			$	1,496
Other long-term liabilities			3,916				2,688
Total finance lease liabilities			$	5,778			$	4,184

Lease Costs

	Three Months Ended				Six Months Ended
	July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
	(in thousands)
Finance lease cost:
Amortization of right-of-use assets	$	305	$	335	$	584	$	635
Interest on lease liabilities	35		16		67		34
Operating lease cost	5,914		6,759		11,800		12,981
Short-term lease cost	179		166		642		341
Variable lease cost	482		924		1,288		1,570
Total lease cost	$	6,915	$	8,200	$	14,381	$	15,561

Other Supplemental Information

	Three Months Ended				Six Months Ended
	July 4, 2021		July 5, 2020		July 4, 2021		July 5, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	35	$	16	$	67	$	34
Operating cash flows from operating leases	5,476		5,569		10,676		11,450
Financing cash flows from finance leases	589		411		1,116		810
Right-of-use assets obtained in exchange for new finance lease liabilities	1,471		340		2,744		553
Right-of-use assets obtained in exchange for new operating lease liabilities	3,267		3,088		5,645		4,065

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 4, 2021 and January 3, 2021:

	July 4, 2021		January 3, 2021
Weighted-average remaining lease term – finance leases (in years)	3.46		3.35
Weighted-average remaining lease term – operating leases (in years)	10.26		10.61
Weighted-average discount rate – finance leases	2.82	%	2.64	%
Weighted-average discount rate – operating leases	5.96	%	5.98	%

Maturity Analysis

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

Fiscal Year	Operating Leases		Finance Leases
	(in thousands)
2021 (excluding the six months ended July 4, 2021)	$	9,439	$	1,046
2022	16,838		1,850
2023	13,798		1,579
2024	11,563		1,053
2025	10,341		419
Thereafter	69,793		140
Total future minimum lease payments (undiscounted)	131,772		6,087
Less: Present value discount	(35,622)		(309)
Total lease liability	$	96,150	$	5,778

Policy Elections

The Company made an accounting policy election not to separate lease and non-lease components for all asset classes, except for data center assets, and accounts for the lease payments as a single component. The Company 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.