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Leases
9 Months Ended
Sep. 28, 2019
Leases [Abstract]  
Leases

5.

Leases

As discussed in Note 15, we adopted ASU No. 2016-02, Leases, on December 30, 2018, the beginning of our fiscal 2019, using the modified retrospective approach. We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and to obtain substantially all of the economic benefit from the use of the underlying asset. Some of our leases included both lease and non-lease components which are accounted for as a single lease component as we have elected the practical expedient. Some of our operating lease agreements include variable lease costs, primarily taxes, insurance, common area maintenance or increases in rental costs related to inflation. Substantially all of our equipment leases and some of our real estate leases have terms of less than one year and as such are accounted for as short-term leases as we have elected the practical expedient.

Operating leases are included in the right-of-use lease assets, other current liabilities and long-term lease liabilities on the Consolidated Balance Sheet. Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the preset values of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, our incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term. We had no financing leases as of September 28, 2019.

We have operating leases for distribution centers, sales offices and certain warehouse and office equipment. Our leases have remaining lease terms of 1 to 12 years, many of which include one or more renewal options. We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised.

As of September 28, 2019, there was no material variable lease costs or sublease income. Cash paid for operating leases was $4.3 million in the thirty-nine weeks ended September 28, 2019, which is classified in operating activities. The following table summarizes the lease expense for the thirteen and thirty-nine weeks ended September 28, 2019:

(in thousands)

 

Thirteen Weeks Ended September 28, 2019

 

 

 

 

Thirty-Nine Weeks Ended September 28, 2019

 

Operating lease expense

 

$

1,785

 

 

 

 

$

5,582

 

Short-term lease expense

 

 

947

 

 

 

 

 

3,288

 

Total lease expense

 

$

2,732

 

 

 

 

$

8,870

 

Supplemental balance sheet information related to our operating leases is as follows:

 

(in thousands)

 

September 28, 2019

 

Operating lease right-of-use assets

 

$

33,870

 

 

 

 

 

 

Other accrued liabilities

 

$

5,303

 

Long-term operating lease liabilities

 

 

31,413

 

Total operating lease liabilities

 

$

36,716

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

9.43

 

Weighted average discount rate

 

 

5.18

%

 

The following table summarizes the maturities of our lease liabilities for all operating leases as of September 28, 2019:

 

(in thousands)

 

September 28, 2019

 

2019 (Remainder of 2019)

 

$

1,754

 

2020

 

 

7,040

 

2021

 

 

5,284

 

2022

 

 

4,909

 

2023

 

 

3,394

 

2024 and thereafter

 

 

24,973

 

Total lease payments

 

 

47,354

 

Less: Imputed interest

 

 

(10,638

)

Present value of lease liabilities

 

$

36,716

 

 

For the year ended December 29, 2018, minimum rental payments under operating leases were recognized on a straight-line basis over the term of the lease including any periods of free rent. Rent expense for operating leases, including payments for short-term equipment and storage rentals, was $6.9 million in fiscal 2018. Minimum future rental payments required under operating leases in effect as of December 29, 2018 were as follows:

 

(in thousands)

 

December 29, 2018

 

2019

 

$

5,489

 

2020

 

 

5,416

 

2021

 

 

4,972

 

2022

 

 

4,599

 

2023

 

 

3,013

 

2024 and thereafter

 

 

24,297

 

Total rental payments

 

$

47,786