Lessee ROU Assets and Lease Liabilities

12 Months Ended

Jan. 02, 2021

11. Lessee ROU Assets and Lease Liabilities

Effective December 30, 2018, the Company adopted ASC 842. See “Recently Adopted Accounting Pronouncements” in Note 2 to these consolidated financial statements for additional information.

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 February 2031. In addition, the Company leases equipment in the U.S. and Europe that are classified as operating leases and expire at various dates through April 2024. The majority of these leases are non-cancellable and generally do not contain any material restrictive covenants, material residual value guarantees or other material guarantees. 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 five 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 January 2, 2021, the weighted average discount rate used by the Company for all operating leases was approximately 2.5%.

The balance sheet classifications for amounts related to the Company’s operating leases for which it is the lessee are as follows (in thousands):


	Balance sheet classification	January 2, 2021		December 28, 2019
Lessee ROU assets, net	Other non-current assets	$	32,324	$	19,137

Lessee current lease liabilities	Other current liabilities	5,975		4,653
Lessee non-current lease liabilities	Other non-current liabilities	28,373		15,834
Total operating lease liabilities		$	34,348	$	20,487

For the years ended January 2, 2021 and December 28, 2019, accumulated amortization for lessee ROU assets was $9.2 million and $4.7 million, respectively. The weighted average remaining lease term for the Company’s operating leases was 7.1 years as of January 2, 2021.

As of January 2, 2021, estimated future operating lease payments for each of the following fiscal years were as follows (in thousands):


Fiscal year	Amount
2021	$	6,610
2022	6,048
2023	5,762
2024	4,540
2025	3,576
Thereafter(1)	11,055
Total	37,591
Imputed interest	(3,243)
Present value(2)	$	34,348

______________

(1) Includes optional renewal period for certain leases.

(2) During fiscal 2020, the Company entered into lease agreements for two properties which have not commenced as of January 2, 2021. The future obligations for such leases are $3.1 million in the aggregate and are not included in the estimated future operating lease payments.

Lease costs consist of the following (in thousands):


	January 2, 2021		December 28, 2019


Operating lease costs	$	6,945	$	6,790
Short-term lease costs	1		12
Sublease income	—		(232)
Total lease cost	$	6,946	$	6,570

For the year ended December 29, 2018, rental expense related to operating leases was $6.9 million.