Leases

3 Months Ended

Mar. 29, 2019

10. Leases

The Company leases certain equipment and facilities. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Many of these leases include both lease (e.g., fixed payments including rent) and non-lease components (e.g., common-area maintenance or other property management costs). The Company accounts for lease and non-lease components separately. Leases with an initial term of 12 months or less are not recognized on the balance sheet.

Most leases held by the Company expire between 2019 and 2031. In the U.K., where longer lease terms are more common, the Company has a land lease that extends through 2078. Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years, and some include options to terminate the leases within one year. The exercise of lease renewal or termination option is at the Company’s sole discretion; therefore, the majority of renewals to extend the lease terms are not included in the Company’s right-of-use assets and operating lease liabilities as they are not reasonably certain of being exercised. The Company regularly evaluates the renewal options and includes the renewal periods in the lease term when they are reasonably certain of being exercised. The depreciable life of assets and leasehold improvements is limited to the expected lease terms.

Most leases held by the Company do not provide an implicit rate. The Company uses its incremental borrowing rate for the same jurisdiction and term as the associated lease based on the information available at the lease commencement date to determine the present value of the lease payments. The Company used the incremental borrowing rate as of January 1, 2019 for operating leases that commenced prior to that date. The Company has a centrally managed treasury function; therefore, the Company applies a portfolio approach for determining the incremental borrowing rate based on the applicable lease terms and the current economic environment.

The following table summarizes the components of lease costs (in thousands):

	Three Months Ended
	March 29,
	2019
Operating lease cost	$	1,823
Finance lease cost
Amortization of right-of-use assets		178
Interest on lease liabilities		105
Variable lease cost		138
Total lease cost	$	2,244

The following table provides the details of balance sheet information related to leases (in thousands, except lease term and discount rate):

	March 29,
	2019
Operating leases
Operating lease right-of-use assets	$	35,374

Current portion of operating lease liabilities	$	5,198
Operating lease liabilities		31,808
Total operating lease liabilities	$	37,006

Finance leases
Property, plant and equipment, gross	$	13,523
Accumulated depreciation		(7,086	)
Property, plant and equipment, net	$	6,437

Accrued expenses and other current liabilities	$	599
Other liabilities		6,925
Total finance lease liabilities	$	7,524

Weighted-average remaining lease term (in years)
Operating leases		9.83
Finance leases		10.04
Weighted-average discount rate
Operating leases		5.95	%
Finance leases		5.47	%

The following table provides the details of cash flow information related to leases (in thousands):

	Three Months Ended
	March 29,
	2019
Cash paid for amounts included in lease liabilities
Operating cash flows from finance leases	$	105
Operating cash flows from operating leases	$	1,944
Financing cash flows from finance leases	$	140
Right-of-use assets obtained in exchange for new operating lease liabilities	$	839

Future minimum lease payments under operating and finance leases expiring subsequent to March 29, 2019, including operating leases associated with facilities that have been vacated as a result of the Company’s restructuring actions, are summarized as follows (in thousands):

Year Ending December 31,	Operating Lease			Finance Lease
2019 (remainder of year)	$	5,289		$	742
2020		5,712			979
2021		5,512			907
2022		4,938			907
2023		4,360			930
Thereafter		25,976			5,395
Total minimum lease payments	$	51,787		$	9,860
Less: Interest		(14,781	)		(2,336	)
Present value of lease liabilities	$	37,006		$	7,524

Future minimum lease payments under operating and capital leases expiring subsequent to December 31, 2018 under Accounting Standard Codification (“ASC”) Topic 840, Leases (“ASC 840”), including operating leases associated with facilities that have been vacated as a result of the Company’s restructuring actions, are summarized as follows (in thousands):

Year Ending December 31,	Operating Lease ⁽¹⁾		Capital Lease
2019	$	7,797	$	990
2020		6,263		980
2021		5,757		907
2022		5,264		907
2023		4,719		930
Thereafter		26,149		5,394
Total minimum lease payments	$	55,949	$	10,108

(1)

Future minimum lease payments as of December 31, 2018 included common-area maintenance and other property management costs and tax obligations.