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Leases
6 Months Ended
Jun. 27, 2020
Leases [Abstract]  
Leases

5.

Leases

We adopted ASU No. 2016-02, Leases, on December 30, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases include both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and, as such, are accounted for as short-term leases as we have elected the practical expedient.

Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of June 27, 2020.

We have operating leases for distribution centers, sales offices and certain warehouse and office equipment. Our leases have remaining lease terms of 1 to 11 years, many of which include one or more renewal options. We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.

As of June 27, 2020, there were no material variable lease costs or sublease income. Cash paid for operating leases was $4.0 million and $2.5 million in the twenty-six weeks ended June 27, 2020 and June 29, 2019, respectively, which is classified in operating activities. The following table summarizes the lease expense for the twenty-six weeks ended June 27, 2020 and June 29, 2019:

 

 

 

Thirteen Weeks Ended

 

 

Twenty-Six Weeks Ended

 

(in thousands)

 

June 27, 2020

 

 

 

 

June 29, 2019

 

 

June 27, 2020

 

 

 

 

June 29, 2019

 

Operating lease expense

 

$

2,001

 

 

 

 

$

1,869

 

 

$

3,930

 

 

 

 

$

3,797

 

Short-term lease expense

 

 

976

 

 

 

 

 

1,272

 

 

 

2,062

 

 

 

 

 

2,342

 

Total lease expense

 

$

2,977

 

 

 

 

$

3,141

 

 

$

5,992

 

 

 

 

$

6,139

 

 

Supplemental balance sheet information related to our operating leases is as follows:

(in thousands)

 

June 27, 2020

 

Operating lease right-of-use assets

 

$

36,034

 

 

 

 

 

 

Other accrued liabilities

 

$

4,771

 

Long-term operating lease liabilities

 

 

34,175

 

Total operating lease liabilities

 

$

38,946

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

9.58

 

Weighted average discount rate

 

 

5.14

%

 

During the twenty-six weeks ended June 27, 2020, we added $6.4 million of right of use asset and lease liability related to the expansion of our Portland, Tennessee distribution facility.

The following table summarizes the maturities of our lease liabilities for all operating leases as of June 27, 2020:

 

(in thousands)

 

June 27, 2020

 

2020 (Remainder of 2020)

 

$

3,502

 

2021

 

 

6,253

 

2022

 

 

5,713

 

2023

 

 

4,090

 

2024

 

 

4,159

 

2025 and thereafter

 

 

26,448

 

Total lease payments

 

 

50,165

 

Less: Imputed interest

 

 

(11,219

)

Present value of lease liabilities

 

$

38,946