Lease Commitments

12 Months Ended

Dec. 26, 2020

Under ASC 842, a contract contains a lease if there is an identified asset and the Company has the right to control the asset. The Company determines whether a contract contains a lease at contract inception. The Company leases office and production space under various non-cancellable 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 has elected to use the available practical expedient to account for the lease and non-lease components of its leases as a single component. As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

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 Consolidated Balance Sheets. 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 December 26, 2020 and December 28, 2019:


Leases (in thousands)	Consolidated Balance Sheet Classification	December 26, 2020		December 28, 2019
Assets
Operating ROU assets	Right of use assets, net	$	17,615	$	21,918
Liabilities
Current operating lease liabilities	Accrued liabilities	$	6,811	$	7,259
Non-current operating lease liabilities	Non-current operating lease liabilities	12,950		17,166
Total lease liabilities		$	19,761	$	24,425

The following table represents the lease costs for 2020 and 2019:


Leases cost (in thousands)	Consolidated Statements of Net Income Classification	Fiscal Year Ended December 26, 2020		Fiscal Year Ended December 28, 2019
Short-term lease expenses	Cost of sales, SG&A expenses	$	512	$	562
Variable lease expenses	Cost of sales, SG&A expenses	1,307		916
Operating lease rent expenses	Cost of sales, SG&A expenses	8,591		8,664
Total operating lease costs	Cost of sales, SG&A expenses	$	10,410	$	10,142

The Company leases certain office and warehouse space as well as certain machinery and equipment under non-cancellable operating leases. Rent expense under these leases was $10.4 million, $10.1 million, and $9.6 million in 2020, 2019, and 2018, respectively.


Maturity of Lease Liabilities as of December 26, 2020 (in thousands)	Operating leases
2021	$	7,660
2022	6,162
2023	3,952
2024	3,350
2025	262
2026 and thereafter	302
Total lease payments	$	21,688

Present value of lease liabilities	$	19,761


Operating Lease Term and Discount Rate	Fiscal Year Ended December 26, 2020		Fiscal Year Ended December 28, 2019
Weighted-average remaining lease term (years)	3.41		4.05
Weighted-average discount rate	5.06	%	5.11	%


Cash Flow Information related to Leases (in thousands)	Fiscal Year Ended December 26, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow payments for operating leases	$	(8,929)
Leased assets obtained in exchange for operating lease liabilities	2,862