Leases

12 Months Ended

Dec. 29, 2018

LEASES

COVID-19 Pandemic

In response to the large volume of anticipated lease concessions to be granted related to the effects of the COVID-19 pandemic, and the resulting expected cost and complexity of applying the lease modification requirements in ASC 842, the FASB issued Staff Q&A-Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, in April 2020 as interpretive guidance to provide clarity in response to the crisis. The FASB staff indicated that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how they would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Consequently, for such lease concessions, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can then elect to apply or not to apply the lease modification guidance in ASC 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that will result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.

The Company has made this election and, consequently, for such lease concessions, did not reassess each existing contract to determine whether enforceable rights and obligations for concessions existed and elected not to apply the lease modification guidance in ASC 842 to those contracts. The Company has accounted for the concessions as if no changes to the lease contract were made and has subsequently increased accounts payable and has continued to recognize expense during the deferral period.

Balance sheet information related to right-of-use assets and liabilities is as follows:


	Balance Sheet Location	December 26, 2020		December 28, 2019
Operating Leases:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	22,074	$	24,835

Current portion of operating lease liabilities	Current portion of operating lease liabilities	3,323		3,172
Noncurrent portion of operating lease liabilities	Operating lease liabilities	19,404		22,123
Total operating lease liabilities		$	22,727	$	25,295

Finance Leases:
Finance lease right-of-use assets (1)	Property, plant, and equipment, net	$	14,332	$	15,152

Current portion of finance lease liabilities (1)	Current portion of long-term debt	2,771		4,011
Noncurrent portion of finance lease liabilities (1)	Long-term debt	14,167		15,472
		$	16,938	$	19,483

(1) Includes leases classified as failed sale-leaseback transactions.

Lease cost recognized in the consolidated financial statements is summarized as follows:


	December 26, 2020		December 28, 2019
Operating lease cost	$	5,078	$	3,528

Finance lease cost:
Amortization of lease assets (1)	3,160		3,000
Interest on lease liabilities (1)	1,702		1,378
Total finance lease costs (1)	$	4,862	$	4,378

(1) Includes leases classified as failed sale-leaseback transactions.

Other supplemental information related to leases is summarized as follows:


	December 26, 2020		December 28, 2019
Weighted average remaining lease term (in years):
Operating leases	7.73		8.42
Finance leases (1)	12.57		12.03

Weighted average discount rate:
Operating leases	6.91	%	6.98	%
Finance leases (1)	9.42	%	6.72	%

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	4,874		3,518
Operating cash flows from finance leases (1)	1,702		1,378
Financing cash flows from finance leases (1)	4,756		4,166

(1) Includes leases classified as failed sale-leaseback transactions.

The following table summarizes the Company's undiscounted future minimum lease payments under non-cancellable contractual obligations for operating and financing liabilities as of December 26, 2020:


Fiscal Year	Operating Leases	Finance Leases
2021	4,783	4,259
2022	4,198	2,782
2023	3,251	3,409
2024	2,940	1,045
2025	2,969	1,053
Thereafter	11,561	14,988
Total future minimum lease payments (undiscounted)	29,702	27,536
Less: Present value discount	(6,975)	(10,598)
Total lease liability	22,727	16,938

On October 22, 2019, the Company sold its Susan Street facility in Santa Ana, California to CenterPoint Properties Trust. The sale price was $37,195. The gain on the sale transaction was $25,121. The transaction was accounted for as a successful sale-leaseback.

Concurrent with the sale of the Susan Street facility, the Company (by a wholly-owned subsidiary) entered into an operating lease to lease back the property for a term of 10 years with two 5 year renewal options. The initial annual rental is $2,083 increasing at 2% per year for the term of the lease. The lease requires the landlord to make certain required capital improvements, at no further rental increase or charge to the Company. The Company is responsible for normal maintenance of the building and facilities. The Company concurrently executed a lease guaranty, pursuant to which it guaranteed the prompt payment when due of all rent payments to be made under the lease agreement.

Commitments for minimum rentals under non-cancelable leases, including any applicable rent escalation clauses, were as follows under Topic 840 for 2018:


	Capital Leases		Operating Leases
2019	$	4,590	$	3,002
2020	4,205		2,533
2021	3,333		2,121
2022	989		1,667
2023	244		882
Thereafter	—		3,155
Total commitments	13,361		13,360
Less amounts representing interest	(1,265)		—
Total	$	12,096	$	13,360

Rental expense was approximately $4,453 during 2018.