Lease Commitments

12 Months Ended

Dec. 29, 2018

The Company leases office and production space under various non-cancellable operating leases that expire no later than 2025. Certain real estate leases include one or more options to renew. The exercise of lease renewal options is at the Company's sole discretion. Options to extend the lease are included in the lease term when it is reasonably certain the Company will exercise the option. The Company also has production equipment, office equipment and vehicles under operating leases. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option that is reasonably certain of exercise. Certain leases include rental payments adjusted periodically for inflation. The lease agreements do not contain any material residual value guarantee or material restrictive covenants.

The Company does not have a published credit rating because it has no publicly traded debt; therefore, the Company is generating its incremental borrowing rate (IBR), using a synthetic credit rating model that compares its credit quality to other rated companies based on certain financial metrics and ratios. The reference rate will be based on the yield curve of companies with similar credit quality based on the metrics and adjusted for currency in regions where we have significant operations.

All leases with an initial term of 12 months or less that do not include an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Consolidated Balance Sheets. Short-term lease expenses are recognized on a straight-line basis over the lease term.

The following table presents the classification of ROU assets and lease liabilities as of December 28, 2019:



Leases (in thousands)	Consolidated Balance Sheet Classification	December 28, 2019
Assets
Operating ROU assets	Right of use lease assets, net	$	21,918
Liabilities
Current operating lease liabilities	Accrued liabilities	$	7,259
Non-current operating lease liabilities	Non-current operating lease liabilities	17,166
Total lease liabilities		$	24,425

The following table represents the lease costs for 2019:



Leases cost (in thousands)	Consolidated Statements of Net Income Classification	Fiscal Year Ended December 28, 2019
Short-term lease expenses	Cost of sales, SG&A expenses	$	562
Variable lease expenses	Cost of sales, SG&A expenses	916
Operating lease rent expenses	Cost of sales, SG&A expenses	8,664
Total operating lease costs	Cost of sales, SG&A expenses	$	10,142

The Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable operating leases. Rent expense under these leases was $10.1 million, $9.6 million, and $11.6 million in 2019, 2018, and 2017, respectively.



Maturity of Lease Liabilities as of December 28, 2019 (in thousands)	Operating leases
2020	$8,207
2021	6,383
2022	5,297
2023	3,518
2024	3,165
2025 and thereafter	458
Total lease payments	$27,028

Present value of lease liabilities	24,425



Operating Lease Term and Discount Rate	Fiscal Year Ended December 28, 2019
Weighted-average remaining lease term (years)	4.05
Weighted-average discount rate	5.11	%



Other Information (in thousands)	Fiscal Year Ended December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow payments for operating leases	$	(8,936	)
Leased assets obtained in exchange for operating lease liabilities	3,962

Under ASC 840, future minimum payments for all non-cancellable operating leases with initial terms of one year or more at December 29, 2018 are as follows:



(in thousands)	Fiscal Year Ended December 29, 2018
2019	9,133
2020	7,590
2021	5,574
2022	4,590
2023	2,946
2024 and thereafter	2,774
Total	$32,607