LEASES

3 Months Ended

Mar. 29, 2020

Leases [Abstract]

LEASES

LEASES

The Company is party to operating lease agreements for warehouses, office space, vehicle maintenance facilities and livestock growing farms in the U.S., distribution centers, hatcheries and office space in Mexico and farms, processing facilities and office space in the U.K. and Europe. Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three geographic business segments. The Company is also party to a limited number of finance lease agreements in the U.S.

Our leases have remaining lease terms of one year to 39 years, some of which may include options to extend the lease for up to one year and some which may include options to terminate the lease within one year. The exercise of options to extend lease terms is at our sole discretion. Certain leases also include options to purchase the leased property.

Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index are recognized as incurred. Certain lease agreements contain residual value guarantees, primarily vehicle and transportation equipment leases.

The following table presents components of lease expense. Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, Selling, general and administrative expense and Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income.

	Three Months Ended
	March 29, 2020		March 31, 2019
	(In thousands)
Operating lease cost(a)	$	22,467	$	24,794
Amortization of finance lease assets	109		27
Interest on finance leases	28		4
Short-term lease cost	16,720		14,218
Variable lease cost(a)	1,042		869
Net lease cost	$	40,366	$	39,912

(a)Variable lease cost of $0.9 million was previously presented in Operating lease cost on our interim report on Form 10-Q for the quarterly period ended March 31, 2019 that was reclassified to conform to Variable lease cost presented as of March 29, 2020.

The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated Balance Sheets are as follows:

	Three Months Ended
	March 29, 2020	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases	5.65	6.35
Finance leases	4.32	1.75
Weighted-average discount rate:
Operating leases	4.74%	4.80%
Finance leases	5.10%	8.51%

Supplemental cash flow information related to leases is as follows:

	Three Months Ended
	March 29, 2020		March 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,128	$	23,994
Operating cash flows from finance leases	28		4
Financing cash flows from finance leases	121		27
Operating lease assets obtained in exchange for operating lease liabilities	8,028		22,798

Future minimum lease payments under noncancellable leases at March 29, 2020 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
Future minimum lease payments:
Year 1	$	76,240	$	562
Year 2	64,417		494
Year 3	54,918		494
Year 4	44,389		494
Year 5	31,797		223
Thereafter	52,712		—
Total future minimum lease payments	324,473		2,267
Less: imputed interest	(40,351)		(237)
Present value of lease liabilities	$	284,122	$	2,030

Lease liabilities as of March 29, 2020 are included in our Condensed Consolidated Balance Sheets as follows:

	Operating Leases		Finance Leases
	(In thousands)
Accrued expenses and other current liabilities	$	64,262	$	—
Current maturities of long-term debt	—		469
Noncurrent operating lease liability, less current maturities	219,860		—
Long-term debt, less current maturities	—		1,561
Total lease liabilities	$	284,122	$	2,030

Lease liabilities as of December 29, 2019 are included in our Condensed Consolidated Balance Sheets as follows:

	Operating Leases		Finance Leases
	(In thousands)
Accrued expenses and other current liabilities	$	66,239	$	—
Current maturities of long-term debt	—		486
Noncurrent operating lease liability, less current maturities	235,382		—
Long-term debt, less current maturities	—		1,664
Total lease liabilities	$	301,621	$	2,150

As of March 29, 2020, the Company had immaterial operating leases and did not have finance leases that have not commenced.

LEASES

LEASES

The Company is party to operating lease agreements for warehouses, office space, vehicle maintenance facilities and livestock growing farms in the U.S., distribution centers, hatcheries and office space in Mexico and farms, processing facilities and office space in the U.K. and Europe. Additionally, the Company leases equipment, over-the-road transportation vehicles and other assets in all three geographic business segments. The Company is also party to a limited number of finance lease agreements in the U.S.

Our leases have remaining lease terms of one year to 39 years, some of which may include options to extend the lease for up to one year and some which may include options to terminate the lease within one year. The exercise of options to extend lease terms is at our sole discretion. Certain leases also include options to purchase the leased property.

Certain lease agreements include rental payment increases over the lease term that can be either fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index are recognized as incurred. Certain lease agreements contain residual value guarantees, primarily vehicle and transportation equipment leases.

The following table presents components of lease expense. Operating lease cost, finance lease amortization and finance lease interest are respectively included in Cost of sales, Selling, general and administrative expense and Interest expense, net of capitalized interest in the Condensed Consolidated Statements of Income.

	Three Months Ended
	March 29, 2020		March 31, 2019
	(In thousands)
Operating lease cost(a)	$	22,467	$	24,794
Amortization of finance lease assets	109		27
Interest on finance leases	28		4
Short-term lease cost	16,720		14,218
Variable lease cost(a)	1,042		869
Net lease cost	$	40,366	$	39,912

(a)Variable lease cost of $0.9 million was previously presented in Operating lease cost on our interim report on Form 10-Q for the quarterly period ended March 31, 2019 that was reclassified to conform to Variable lease cost presented as of March 29, 2020.

The weighted-average remaining lease term and discount rate for lease liabilities included in our Condensed Consolidated Balance Sheets are as follows:

	Three Months Ended
	March 29, 2020	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases	5.65	6.35
Finance leases	4.32	1.75
Weighted-average discount rate:
Operating leases	4.74%	4.80%
Finance leases	5.10%	8.51%

Supplemental cash flow information related to leases is as follows:

	Three Months Ended
	March 29, 2020		March 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,128	$	23,994
Operating cash flows from finance leases	28		4
Financing cash flows from finance leases	121		27
Operating lease assets obtained in exchange for operating lease liabilities	8,028		22,798

Future minimum lease payments under noncancellable leases at March 29, 2020 are as follows:

	Operating Leases		Finance Leases
	(In thousands)
Future minimum lease payments:
Year 1	$	76,240	$	562
Year 2	64,417		494
Year 3	54,918		494
Year 4	44,389		494
Year 5	31,797		223
Thereafter	52,712		—
Total future minimum lease payments	324,473		2,267
Less: imputed interest	(40,351)		(237)
Present value of lease liabilities	$	284,122	$	2,030

Lease liabilities as of March 29, 2020 are included in our Condensed Consolidated Balance Sheets as follows:

	Operating Leases		Finance Leases
	(In thousands)
Accrued expenses and other current liabilities	$	64,262	$	—
Current maturities of long-term debt	—		469
Noncurrent operating lease liability, less current maturities	219,860		—
Long-term debt, less current maturities	—		1,561
Total lease liabilities	$	284,122	$	2,030

Lease liabilities as of December 29, 2019 are included in our Condensed Consolidated Balance Sheets as follows:

	Operating Leases		Finance Leases
	(In thousands)
Accrued expenses and other current liabilities	$	66,239	$	—
Current maturities of long-term debt	—		486
Noncurrent operating lease liability, less current maturities	235,382		—
Long-term debt, less current maturities	—		1,664
Total lease liabilities	$	301,621	$	2,150

As of March 29, 2020, the Company had immaterial operating leases and did not have finance leases that have not commenced.