Leases

6 Months Ended

Jun. 28, 2020

The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use (ROU) assets related to the Company's leases are recorded in Lease assets and lease liabilities are recorded in Accrued liabilities and Lease liabilities on the Consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset over the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The ROU asset also

includes prepaid lease payments and initial direct costs and is reduced for lease incentives paid by the lessor. The discount rate used to determine the present value is generally the Company's incremental borrowing rate because the implicit rate in the lease is not readily determinable. The lease term used to calculate the ROU asset and lease liabilities includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.

In accordance with ASC Topic 842, Leases (ASC Topic 842), the Company elected the short-term lease practical expedient that allows entities to recognize lease payments on a straight-line basis over the lease term for leases with a term of 12 months or less. The Company has also elected the practical expedient under ASC Topic 842 allowing entities to not separate non-lease components from lease components, but instead account for such components as a single lease component for all leases except leases involving assets operated by a third-party.

The Company has operating lease arrangements for sales and administrative offices, manufacturing and distribution facilities, product testing facilities, equipment and vehicles. The Company’s leases have remaining lease terms ranging from 1 to 12 years, some of which include options to extend the lease term for periods generally not greater than 5 years and some of which include options to terminate the leases within 1 year. Certain leases also include options to purchase the leased asset. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense for the three months ended June 28, 2020 and June 30, 2019 was $6.5 million and $6.4 million, respectively, and $13.8 million and $12.7 million for the six months ended June 28, 2020 and June 30, 2019, respectively. This includes variable lease costs related to leases involving assets operated by a third party of approximately $1.3 million and $2.0 million for the three months ended June 28, 2020 and June 30, 2019, respectively, and $3.2 million and $3.2 million for the six months ended June 28, 2020 and June 30, 2019, respectively. Other variable and short-term lease costs were not material.

Balance sheet information related to the Company's leases was as follows (in thousands):


	June 28, 2020		December 31, 2019		June 30, 2019
Lease assets	$	53,031	$	61,618	$	54,913

Accrued liabilities	$	18,154	$	19,013	$	18,133
Lease liabilities	36,394		44,447		38,365
	$	54,548	$	63,460	$	56,498

Future maturities of the Company's operating lease liabilities as of June 28, 2020 were as follows (in thousands):


	Operating Leases
2020	$	10,146
2021	18,388
2022	13,410
2023	6,543
2024	4,556
Thereafter	4,825
Future lease payments	57,868
Present value discount	(3,320)
Lease liabilities	$	54,548

Other lease information surrounding the Company's operating leases was as follows (dollars in thousands):


	Three months ended						Six months ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Cash outflows for amounts included in the measurement of lease liabilities	$	5,242	$	4,510	$	10,619	$	9,871
Right-of-use assets obtained in exchange for lease obligations	$	1,096	$	3,964	$	1,653	$	4,262


	June 28, 2020		December 31, 2019		June 30, 2019
Weighted-average remaining lease term (in years)	4.03		4.68		4.44
Weighted-average discount rate	3.3	%	2.1	%	3.2	%