Lessee ROU Assets and Lease Liabilities Lessee ROU Assets and Lease Liabilities

9 Months Ended

Sep. 28, 2019

9. Lessee ROU Assets and Lease Liabilities

The Company adopted ASC 842, the lease accounting standard, effective as of December 30, 2018. Among other things, the Company’s adoption of ASC 842 resulted in: (a) the recognition of lessee ROU assets for the right to use assets subject to operating leases; and (b) the recognition of lessee lease liabilities for its obligation to make operating lease payments. See “Recently Adopted Accounting Pronouncements” under Note 2 to these condensed consolidated financial statements for additional information related to the Company’s adoption of ASC 842.

The Company leases certain facilities in North and South America, Europe, the Middle East and Asia-Pacific regions under operating lease agreements expiring at various dates through June 2028. In addition, the Company leases equipment in the U.S. and Europe that are classified as operating leases and expire at various dates through September 2023. The majority of these leases are non-cancellable and generally do not contain any material residual value guarantees or material restrictive covenants. The Company recognizes lease costs under these agreements using a straight-line method based on total lease payments. Certain facility leases contain predetermined price escalations and in some cases renewal options, the longest of which is for 5 years.

The Company generally estimates the applicable discount rate used to determine the net present value of lease payments based on available information at the lease commencement date. As of September 28, 2019, the weighted average discount rate used by the Company for all operating leases was approximately 3.7%.

For the period ended September 28, 2019, the balance sheet classifications for amounts related to the Company’s operating leases for which it is the lessee are as follows:



	Balance sheet classification	September 28, 2019
Lessee ROU assets	Other non-current assets	$	19,892

Lessee current lease liabilities	Other current liabilities	4,680
Lessee non-current lease liabilities	Other non-current liabilities	16,451
Total operating lease liabilities		$	21,131

The weighted average remaining lease term for the Company’s operating leases was 8.0 years as of September 28, 2019.

As of September 28, 2019, estimated future operating lease payments for each of the following fiscal years were as follows (in thousands):



Fiscal year	Amount
2019 (balance of year)	$	1,332
2020	5,180
2021	3,139
2022	2,053
2023	1,836
Thereafter⁽¹⁾	11,106
Total	24,646
Imputed interest	(3,515		)
Present value	$	21,131

______________

⁽¹⁾ Includes optional renewal period for certain leases.

As of December 29, 2018, the estimated future minimum lease payments, including interest, under operating leases for each of the following fiscal years ending on or about December 31 were as follows (in thousands):



Fiscal year	Amount
2019	$	6,926
2020	4,422
2021	2,384
2022	1,701
2023	1,568
Thereafter⁽¹⁾	9,921
Total	$	26,922

______________

⁽¹⁾ Includes optional renewal period for certain leases.

Lease costs for the three and nine months ended September 28, 2019 were as follows (in thousands):



	September 28, 2019
	Three Months Ended			Nine Months Ended
Operating lease costs	$	1,717		$	5,170
Short-term lease costs	—			12
Sublease income	(52		)	(156		)
Total lease cost	$	1,665		$	5,026

For the three and nine months ended September 29, 2018, rental expense related to operating leases was $1.7 million and $5.2 million, respectively.