Lessee ROU Assets and Lease Liabilities

6 Months Ended

Jun. 29, 2024

11. Lessee ROU Assets and Lease Liabilities

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 January 2032. In addition, the Company leases equipment in the U.S. and Europe pursuant to leases that are classified as operating leases and expire at various dates through November 2028. 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 June 29, 2024, the weighted-average discount rate used by the Company for all operating leases was approximately 4.6%.

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


(in millions)	Balance sheet classification	June 29, 2024		December 30, 2023
Lessee ROU assets	Other non-current assets	$	76.1	$	59.1

Lessee current lease liabilities	Other current liabilities	20.1		18.2
Lessee non-current lease liabilities	Other non-current liabilities	61.7		45.8
Total operating lease liabilities		$	81.8	$	64.0

As of June 29, 2024 and December 30, 2023, accumulated amortization for lessee ROU assets was $52.5 million and $48.9 million, respectively. The weighted-average remaining lease term for the Company’s operating leases was 5.4 years as of June 29, 2024.

As of June 29, 2024, estimated future operating lease payments for each of the following fiscal years were as follows:


Fiscal year	Amount (in millions)
2024 (balance of year)	$	11.6
2025	21.6
2026	17.0
2027	12.4
2028	11.7
Thereafter(1)	19.6
Total	93.9
Imputed interest	(12.1)
Present value	$	81.8

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(1) Includes optional renewal period for certain leases.

During the three months ended June 29, 2024 and July 1, 2023, operating lease costs were approximately $6.3 million and $5.2 million, respectively. During the six months ended June 29, 2024 and July 1, 2023, operating lease costs were approximately $11.9 million and $10.3 million, respectively.

During the three months ended March 30, 2024, as part of the Company’s on-going rationalization of its operational footprint of the non-healthcare business, one operating lease was identified as under-utilized and considered temporarily idled due to the inability to sublease the property timely while having three years remaining on the lease term. The ROU asset had a net carrying value of approximately $5.8 million and the undiscounted future expected cash flows total $1.5 million. The recoverability test failed due to the undiscounted cash flows being less than the carrying value of the ROU asset. As a result, the Company recorded an impairment charge of approximately $3.9 million during the three months ended March 30, 2024, which was recorded in selling, general, and administrative expenses in the condensed consolidated statement of operations.