Lease Commitments

6 Months Ended

Jun. 29, 2019

The Company leases office and production space under various non-cancelable operating leases that expire no later than 2025. Certain real estate leases include one or more options to renew. The exercise of lease renewal options is at the Company's sole discretion. Options to extend the lease are included in the lease term when it is reasonably certain the Company will exercise the option. The Company also has production equipment, office equipment and vehicles under operating leases. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option that is reasonably certain of exercise. Certain leases include rental payments adjusted periodically for inflation. The lease agreements do not contain any material residual value guarantee or material restrictive covenants.

The Company does not have a published credit rating because it has no publicly traded debt; therefore, the Company is generating its incremental borrowing rate (IBR), using a synthetic credit rating model that compares its credit quality to other rated companies based on certain financial metrics and ratios. The reference rate will be based on the yield curve of companies with similar credit quality based on the metrics and adjusted for currency in regions where we have significant operations.

All leases with an initial term of 12 months or less that do not include an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Condensed Consolidated Balance Sheet. Short-term lease expenses are recognized on a straight-line basis over the lease term.

The following table presents the classification of ROU assets and lease liabilities as of June 29, 2019:



Leases (in thousands)	Condensed Consolidated Balance Sheet Classification	June 29, 2019
Assets
Operating ROU assets	Right of use lease assets, net	$	23,280
Liabilities
Current operating lease liabilities	Accrued liabilities	$	7,349
Non-current operating lease liabilities	Non-current operating lease liabilities	18,643
Total lease liabilities		$	25,992

The following table represents the lease costs for the three and six months ended June 29, 2019:



Leases cost (in thousands)	Condensed Consolidated Statements of Net Income Classification	Three Months Ended June 29, 2019		Six Months Ended June 29, 2019
Short-term lease expenses	Cost of sales, SG&A expenses	$	148	$	301
Variable lease expenses	Cost of sales, SG&A expenses	187		381
Operating lease rent expenses	Cost of sales, SG&A expenses	2,215		4,408
Total operating lease costs	Cost of sales, SG&A expenses	$	2,550	$	5,090



Maturity of Lease Liabilities as of June 29, 2019 (in thousands)	Operating leases
2019 (excluding the six months ended June 29, 2019)	$	4,476
2020	7,594
2021	5,861
2022	4,829
2023	3,190
2024 and thereafter	3,147
Total lease payments	$	29,097

Present value of lease liabilities	$	25,992



Operating Lease Term and Discount Rate	June 29, 2019
Weighted-average remaining lease term (years)	4.26
Weighted-average discount rate	5.17	%



Other Information (in thousands)	Six Months Ended June 29, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow payments for operating leases	$	(4,463	)
Leased assets obtained in exchange for operating lease liabilities	1,510