Lease Commitments

9 Months Ended

Sep. 28, 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 September 28, 2019:



Leases (in thousands)	Condensed Consolidated Balance Sheet Classification	September 28, 2019
Assets
Operating ROU assets	Right of use lease assets, net	$	21,598
Liabilities
Current operating lease liabilities	Accrued liabilities	$	6,926
Non-current operating lease liabilities	Non-current operating lease liabilities	17,237
Total lease liabilities		$	24,163

The following table represents the lease costs for the three and nine months ended ended September 28, 2019:



Leases cost (in thousands)	Condensed Consolidated Statements of Net Income Classification	Three Months Ended September 28, 2019		Nine Months Ended September 28, 2019
Short-term lease expenses	Cost of sales, SG&A expenses	$	86	$	387
Variable lease expenses	Cost of sales, SG&A expenses	239		621
Operating lease rent expenses	Cost of sales, SG&A expenses	2,131		6,539
Total operating lease costs	Cost of sales, SG&A expenses	$	2,456	$	7,547



Maturity of Lease Liabilities as of September 28, 2019 (in thousands)	Operating leases
2019 (excluding the nine months ended September 28, 2019)	$	2,155
2020	7,571
2021	5,878
2022	4,873
2023	3,252
2024 and thereafter	3,253
Total lease payments	$	26,982

Present value of lease liabilities	$	24,163



Operating Lease Term and Discount Rate	September 28, 2019
Weighted-average remaining lease term (years)	4.19
Weighted-average discount rate	5.18	%



Other Information (in thousands)	Nine Months Ended September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow payments for operating leases	$	(6,762	)
Leased assets obtained in exchange for operating lease liabilities	2,051