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Leases

9 Months Ended

Sep. 26, 2020

11. Leases

Lessee

The Company determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. The Company leases certain distribution center locations, vehicles, forklifts, computer equipment, and its corporate headquarters with expiration dates through 2032. Certain lease arrangements include escalating rent payments and options to extend the lease term. Expected lease terms include these options to extend or terminate the lease when it is reasonably certain the Company will exercise the option. The Company's leasing arrangements do not contain material residual value guarantees nor material restrictive covenants.

The components of operating and finance lease cost for the thirteen and thirty-nine weeks ended September 26, 2020 and thirteen and thirty-nine weeks ended September 28, 2019 were as follows:


	Thirteen Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 26, 2020		Thirteen Weeks Ended September 28, 2019		Thirty-nine Weeks Ended September 28, 2019
Operating lease cost	$	4,989	$	14,283	$	5,101	$	14,399
Short term lease costs	633		1,682		668		2,644
Variable lease costs	104		775		720		1,795
Finance lease cost:
Amortization of right of use assets	206		608		190		425
Interest on lease liabilities	34		106		35		78

Rent expense totaled $5,726 and $6,489 in the thirteen weeks ended September 26, 2020 and thirteen weeks ended September 28, 2019, respectively. Rent expense totaled $16,740 and $18,838 in the thirty-nine weeks ended September 26, 2020 and thirty-nine weeks ended September 28, 2019, respectively. Rent expense includes operating lease cost as well as expense for non-lease components such as common area maintenance, real estate taxes, real estate insurance, variable costs related to our leased vehicles and also short-term rental expenses.

The implicit rate is not determinable in most of the Company’s leases, as such management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The weighted average remaining lease terms and discount rates for all of our operating and finance leases were as follows as of September 26, 2020 and December 28, 2019:


	September 26, 2020						December 28, 2019
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Weighted average remaining lease term	7.36		2.81		7.88		3.46
Weighted average discount rate	8.24	%	6.84	%	7.81	%	6.49	%

Supplemental balance sheet information related to the Company's finance leases was as follows as of September 26, 2020 and December 28, 2019:


	September 26, 2020		December 28, 2019
Finance lease assets, net, included in property plant and equipment	$	1,902	$	2,101

Current portion of long-term debt	814		749
Long-term debt, less current portion	1,221		1,526
Total principal payable on finance leases	2,035		2,275

Supplemental cash flow information related to the Company's operating leases was as follows for the thirty-nine weeks ended September 26, 2020 and thirty-nine weeks ended September 28, 2019:


	Thirty-nine Weeks Ended September 26, 2020		Thirty-nine Weeks Ended September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflow from operating leases	$	13,821	$	13,872
Operating cash outflow from finance leases	106		66
Financing cash outflow from finance leases	624		484

Maturities of our lease liabilities for all operating and finance leases are as follows as of September 26, 2020:


	Operating Leases		Finance Leases
Less than one year	$	18,428	$	932
1 to 2 years	15,845		692
2 to 3 years	13,846		414
3 to 4 years	13,019		211
4 to 5 years	12,080		—
After 5 years	37,814		—
Total future minimum rental commitments	111,032		2,249
Less - amounts representing interest	(28,323)		(214)
Present value of lease liabilities	$	82,709	$	2,035

As of December 28, 2019, maturities of our lease liabilities for all operating and finance leases were expected to be as follows:


	Operating Leases		Finance Leases
Less than one year	$	17,525	$	873
1 to 2 years	15,956		712
2 to 3 years	13,925		456
3 to 4 years	12,045		383
4 to 5 years	11,716		127
After 5 years	43,591		—
Total future minimum rental commitments	114,758		2,551
Less - amounts representing interest	(30,072)		(276)
Present value of lease liabilities	84,686		2,275

Lessor

The Company has certain arrangements for key duplication equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

Operating Leases