Leases

9 Months Ended

Sep. 27, 2020

Leases [Abstract]

Leases

Leases

The Company routinely enters into leasing arrangements for real estate (including manufacturing facilities, office space, warehouses, and packaging centers), transportation equipment (automobiles, forklifts, and trailers), and office equipment (copiers and postage machines). The assessment of the certainty associated with the exercise of various lease renewal, termination, and purchase options included in the Company's lease contracts is at the Company's sole discretion. Most real estate leases, in particular, include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years. The Company's leases do not have any significant residual value guarantees or restrictive covenants.

As the implicit rate in the Company's leases is not readily determinable, the Company calculates its lease liabilities using discount rates based upon the Company’s incremental secured borrowing rate, which contemplates and reflects a particular geographical region’s interest rate for the leases active within that region of the Company’s global operations. The Company further utilizes a portfolio approach by assigning a “short” rate to contracts with lease terms of 10 years or less and a “long” rate for contracts greater than 10 years.

The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at September 27, 2020 and December 31, 2019:

Classification	Balance Sheet Location	September 27, 2020		December 31, 2019
Lease Assets
Operating lease assets	Right of Use Asset - Operating Leases	$	306,077	$	298,393
Finance lease assets	Other Assets	45,931		34,858
Lease assets held for sale	Assets held for sale	24,148		—
Total lease assets		$	376,156	$	333,251
Lease Liabilities
Current operating lease liabilities	Accrued expenses and other	$	50,130	$	54,048
Current finance lease liabilities	Notes payable and current portion of debt	4,196		10,803
Lease liabilities held for sale	Liabilities held for sale	24,136		—
Total current lease liabilities		$	78,462	$	64,851
Noncurrent operating lease liabilities	Noncurrent Operating Lease Liabilities	$	268,790	$	253,992
Noncurrent finance lease liabilities	Long-term Debt, Net of Current Portion	39,850		22,274
Total noncurrent lease liabilities		$	308,640	$	276,266
Total lease liabilities		$	387,102	$	341,117

Certain of the Company’s leases include variable costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, and also non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that

are indexed to a change in rate or index. Because the right of use asset recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated in the right of use asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.

The following table sets forth the components of the Company's total lease cost for the three- and nine-month periods ended September 27, 2020 and September 29, 2019:

		Three Months Ended				Nine Months Ended
Lease Cost		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Operating lease cost	(a)	$	18,192	$	15,502	$	46,903	$	46,818
Finance lease cost:
Amortization of lease asset	(a) (b)	1,061		2,036		5,999		6,158
Interest on lease liabilities	(c)	258		214		721		735
Variable lease cost	(a) (d)	7,455		10,657		29,316		27,626
Total lease cost		$	26,966	$	28,409	$	82,939	$	81,337

(a) Production-related and administrative amounts are included in cost of sales and selling, general and administrative expenses, respectively.

(b) Included in depreciation and amortization.

(c) Included in interest expense.

(d) Also includes short term lease costs, which are deemed immaterial.

The following table sets forth certain lease-related information for the nine months ended September 27, 2020 and September 29, 2019:

	Nine months ended September 27, 2020		Nine Months Ended September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	43,858	$	46,374
Operating cash flows used by finance leases	$	721	$	735
Financing cash flows used by finance leases	$	6,440	$	7,593
Leased assets obtained in exchange for new operating lease liabilities	$	84,578	$	18,053
Leased assets obtained in exchange for new finance lease liabilities	$	19,122	$	1,186

Leases

Leases

The Company routinely enters into leasing arrangements for real estate (including manufacturing facilities, office space, warehouses, and packaging centers), transportation equipment (automobiles, forklifts, and trailers), and office equipment (copiers and postage machines). The assessment of the certainty associated with the exercise of various lease renewal, termination, and purchase options included in the Company's lease contracts is at the Company's sole discretion. Most real estate leases, in particular, include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years. The Company's leases do not have any significant residual value guarantees or restrictive covenants.

As the implicit rate in the Company's leases is not readily determinable, the Company calculates its lease liabilities using discount rates based upon the Company’s incremental secured borrowing rate, which contemplates and reflects a particular geographical region’s interest rate for the leases active within that region of the Company’s global operations. The Company further utilizes a portfolio approach by assigning a “short” rate to contracts with lease terms of 10 years or less and a “long” rate for contracts greater than 10 years.

The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at September 27, 2020 and December 31, 2019:

Classification	Balance Sheet Location	September 27, 2020		December 31, 2019
Lease Assets
Operating lease assets	Right of Use Asset - Operating Leases	$	306,077	$	298,393
Finance lease assets	Other Assets	45,931		34,858
Lease assets held for sale	Assets held for sale	24,148		—
Total lease assets		$	376,156	$	333,251
Lease Liabilities
Current operating lease liabilities	Accrued expenses and other	$	50,130	$	54,048
Current finance lease liabilities	Notes payable and current portion of debt	4,196		10,803
Lease liabilities held for sale	Liabilities held for sale	24,136		—
Total current lease liabilities		$	78,462	$	64,851
Noncurrent operating lease liabilities	Noncurrent Operating Lease Liabilities	$	268,790	$	253,992
Noncurrent finance lease liabilities	Long-term Debt, Net of Current Portion	39,850		22,274
Total noncurrent lease liabilities		$	308,640	$	276,266
Total lease liabilities		$	387,102	$	341,117

Certain of the Company’s leases include variable costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, and also non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that

are indexed to a change in rate or index. Because the right of use asset recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated in the right of use asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.

The following table sets forth the components of the Company's total lease cost for the three- and nine-month periods ended September 27, 2020 and September 29, 2019:

		Three Months Ended				Nine Months Ended
Lease Cost		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Operating lease cost	(a)	$	18,192	$	15,502	$	46,903	$	46,818
Finance lease cost:
Amortization of lease asset	(a) (b)	1,061		2,036		5,999		6,158
Interest on lease liabilities	(c)	258		214		721		735
Variable lease cost	(a) (d)	7,455		10,657		29,316		27,626
Total lease cost		$	26,966	$	28,409	$	82,939	$	81,337

(a) Production-related and administrative amounts are included in cost of sales and selling, general and administrative expenses, respectively.

(b) Included in depreciation and amortization.

(c) Included in interest expense.

(d) Also includes short term lease costs, which are deemed immaterial.

The following table sets forth certain lease-related information for the nine months ended September 27, 2020 and September 29, 2019:

	Nine months ended September 27, 2020		Nine Months Ended September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	43,858	$	46,374
Operating cash flows used by finance leases	$	721	$	735
Financing cash flows used by finance leases	$	6,440	$	7,593
Leased assets obtained in exchange for new operating lease liabilities	$	84,578	$	18,053
Leased assets obtained in exchange for new finance lease liabilities	$	19,122	$	1,186