Leases

12 Months Ended

Dec. 29, 2019

Leases [Abstract]

Leases, Finance

Leases

Lease Accounting Policy

Our updated policy for lease accounting, which we adopted for leases entered into beginning December 31, 2018, is as follows:

We determine if a contract is a lease at inception or upon acquisition and reevaluate each time a lease contract is amended or otherwise modified. A lease will be classified as an operating lease if it does not meet any of the criteria for a finance lease. Those criteria include the transfer of ownership of the underlying asset by the end of the lease term; an option to purchase the underlying asset that we would be reasonably certain to exercise; the lease term is for the major part of the remaining economic life of the underlying asset; the present value of the sum of the lease payments and any residual value guaranteed by us that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset or if the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

The assets and liabilities relating to operating leases are included in operating lease right-of-use assets, accrued expenses, and long-term operating lease liabilities in our consolidated balance sheets. The assets and liabilities relating to finance leases are included in property, plant and equipment, net and other liabilities in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the respective lease commencement date based on the present value of lease payments over the expected lease term. Since our leases do not specify implicit discount rates, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any initial direct costs and is adjusted for lease incentives and prepaid or accrued rent. The lease term begins on the date when the lessor makes the underlying asset available for use to us, and our expected lease terms include options to extend the lease when it is reasonably certain that we will exercise those options. Lease payments are recognized in the consolidated statements of comprehensive income on a straight-line basis over the expected lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, with the related lease expense recognized on a straight-line basis over the lease term. Lease and non-lease components of a contract are combined into a single lease component for accounting purposes.

Our operating leases include leases for real estate (including manufacturing sites, warehouses and offices) and machinery and equipment and our finance leases include leases for real estate. We have no material subleases. Certain of our operating leases contain provisions for renewal ranging from one to four options of one to ten years each.

The following table summarizes the components of lease expense recorded in the consolidated statements of comprehensive income for the periods indicated:

(In thousands)	Year Ended
	December 29, 2019		December 30, 2018		December 31, 2017
Operating lease expense	$	39,025	$	32,306	$	28,844
Finance lease expense
Amortization of leased assets	649		—		—
Interest on lease liabilities	1,063		—		—
Total lease expense	$	40,737	$	32,306	$	28,844

The following table includes a detail of lease assets and liabilities included in the consolidated balance sheet as of the period indicated:

(In thousands)	December 29, 2019
Operating lease right-of-use assets	$	121,367
Finance lease right-of-use assets (1)	25,677
Total lease assets, net	$	147,044
Current portion of operating lease liabilities	20,980
Long-term operating lease liabilities	110,497
Long-term finance lease liabilities	$	26,861
Total lease liabilities	$	158,338

____________

(1) Net of accumulated amortization of $0.6 million.    

The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases as of the period indicated:

	December 29, 2019
Weighted-average remaining lease term (years)
Operating leases	11.4
Finance leases	29.7
Weighted-average discount rate (1)
Operating leases	4.6	%
Finance leases	5.4	%

____________

(1) Based on the Company's incremental borrowing rate at lease commencement.

As of December 29, 2019, the future minimum lease payments under non-cancelable leases are as follows:

(In thousands)
Fiscal year:	Operating Leases			Finance Leases
2020	$	27,197		$	1,393
2021	20,058			1,326
2022	17,276			1,365
2023	14,212			1,287
2024	13,515			1,445
Thereafter	87,088			52,981
Total minimum lease payments	179,346			59,797
Less imputed interest	(47,869		)	(32,936		)
Present value of future lease payments	$	131,477		$	26,861

As of December 29, 2019, we have additional undiscounted commitments for operating leases, primarily for administrative offices, that have not yet commenced of $18.8 million. These operating leases will commence during fiscal year 2020 with lease terms of 5 to 10 years.

Leases, Operating

Leases

Lease Accounting Policy

Our updated policy for lease accounting, which we adopted for leases entered into beginning December 31, 2018, is as follows:

We determine if a contract is a lease at inception or upon acquisition and reevaluate each time a lease contract is amended or otherwise modified. A lease will be classified as an operating lease if it does not meet any of the criteria for a finance lease. Those criteria include the transfer of ownership of the underlying asset by the end of the lease term; an option to purchase the underlying asset that we would be reasonably certain to exercise; the lease term is for the major part of the remaining economic life of the underlying asset; the present value of the sum of the lease payments and any residual value guaranteed by us that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset or if the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

The assets and liabilities relating to operating leases are included in operating lease right-of-use assets, accrued expenses, and long-term operating lease liabilities in our consolidated balance sheets. The assets and liabilities relating to finance leases are included in property, plant and equipment, net and other liabilities in our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the respective lease commencement date based on the present value of lease payments over the expected lease term. Since our leases do not specify implicit discount rates, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any initial direct costs and is adjusted for lease incentives and prepaid or accrued rent. The lease term begins on the date when the lessor makes the underlying asset available for use to us, and our expected lease terms include options to extend the lease when it is reasonably certain that we will exercise those options. Lease payments are recognized in the consolidated statements of comprehensive income on a straight-line basis over the expected lease term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, with the related lease expense recognized on a straight-line basis over the lease term. Lease and non-lease components of a contract are combined into a single lease component for accounting purposes.

Our operating leases include leases for real estate (including manufacturing sites, warehouses and offices) and machinery and equipment and our finance leases include leases for real estate. We have no material subleases. Certain of our operating leases contain provisions for renewal ranging from one to four options of one to ten years each.

The following table summarizes the components of lease expense recorded in the consolidated statements of comprehensive income for the periods indicated:

(In thousands)	Year Ended
	December 29, 2019		December 30, 2018		December 31, 2017
Operating lease expense	$	39,025	$	32,306	$	28,844
Finance lease expense
Amortization of leased assets	649		—		—
Interest on lease liabilities	1,063		—		—
Total lease expense	$	40,737	$	32,306	$	28,844

The following table includes a detail of lease assets and liabilities included in the consolidated balance sheet as of the period indicated:

(In thousands)	December 29, 2019
Operating lease right-of-use assets	$	121,367
Finance lease right-of-use assets (1)	25,677
Total lease assets, net	$	147,044
Current portion of operating lease liabilities	20,980
Long-term operating lease liabilities	110,497
Long-term finance lease liabilities	$	26,861
Total lease liabilities	$	158,338

____________

(1) Net of accumulated amortization of $0.6 million.    

The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases as of the period indicated:

	December 29, 2019
Weighted-average remaining lease term (years)
Operating leases	11.4
Finance leases	29.7
Weighted-average discount rate (1)
Operating leases	4.6	%
Finance leases	5.4	%

____________

(1) Based on the Company's incremental borrowing rate at lease commencement.

As of December 29, 2019, the future minimum lease payments under non-cancelable leases are as follows:

(In thousands)
Fiscal year:	Operating Leases			Finance Leases
2020	$	27,197		$	1,393
2021	20,058			1,326
2022	17,276			1,365
2023	14,212			1,287
2024	13,515			1,445
Thereafter	87,088			52,981
Total minimum lease payments	179,346			59,797
Less imputed interest	(47,869		)	(32,936		)
Present value of future lease payments	$	131,477		$	26,861

As of December 29, 2019, we have additional undiscounted commitments for operating leases, primarily for administrative offices, that have not yet commenced of $18.8 million. These operating leases will commence during fiscal year 2020 with lease terms of 5 to 10 years.