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LEASES | 12 Months Ended
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Dec. 31, 2022
Leases [Abstract] |
LEASES | LEASES We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of December 31, 2022, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet. Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facilities. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term. The following table presents the assets and liabilities related to operating and finance leases (in thousands):
| Balance Sheet Location |  | December 31, 2022 |  | January 1, 2022
Assets: |  |  |  |  |
Operating lease assets | Operating lease right-of-use assets |  | $ | 55,406 |  |  | $ | 54,971 |
Finance lease assets | Property, plant and equipment |  | 7,533 |  |  | 9,380 |
Total lease assets |  |  | $ | 62,939 |  |  | $ | 64,351 |
Liabilities: |  |  |  |  |
Current |  |  |  |  |
Operating lease liabilities | Operating lease liabilities |  | $ | 12,076 |  |  | $ | 10,167 |
Finance lease liabilities | Current maturities of long-term debt |  | 2,111 |  |  | 2,060 |
Non-current |  |  |  |  |
Operating lease liabilities | Operating lease liabilities, non-current |  | 55,649 |  |  | 55,940 |
Finance lease liabilities | Long-term debt, net of current portion |  | 5,198 |  |  | 7,299 |
Total lease liabilities |  |  | $ | 75,034 |  |  | $ | 75,466 |
The following table presents the components of lease costs (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Operating lease costs | $ | 12,943 |  |  | $ | 12,312 |  |  | $ | 9,599 |
Finance lease cost - amortization of right-of-use assets | 1,860 |  |  | 1,046 |  |  | 211 |
Finance lease cost - interest on lease liabilities | 182 |  |  | 139 |  |  | 64 |
Short-term lease cost | 67 |  |  | 366 |  |  | 185 |
Variable lease cost | 4,645 |  |  | 3,822 |  |  | 3,349 |
Sublease income | (743) |  |  | (743) |  |  | (757) |
Total lease cost | $ | 18,954 |  |  | $ | 16,942 |  |  | $ | 12,651 |
The following table presents lease terms and discount rates:
| December 31, 2022 |  | January 1, 2022
Weighted average remaining lease term: |  |  |
Operating leases | 5.90 years |  | 6.06 years
Finance leases | 4.73 years |  | 4.35 years
Weighted average discount rate: |  |  |
Operating leases | 4.76 | % |  | 4.75 | %
Finance leases | 2.20 | % |  | 2.24 | %
Minimum lease payments have not been reduced by minimum sublease rentals of $1.5 million due in the future under non-cancelable subleases. We received $0.7 million, $0.7 million, and $0.8 million in sublease income for 2022, 2021, and 2020, respectively. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of December 31, 2022 (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2023 | $ | 14,938 |  |  | $ | 2,245 |  |  | $ | 17,183 |
2024 | 14,948 |  |  | 2,325 |  |  | 17,273 |
2025 | 15,218 |  |  | 2,162 |  |  | 17,380 |
2026 | 11,413 |  |  | 831 |  |  | 12,244 |
2027 | 6,892 |  |  | — |  |  | 6,892 |
Thereafter | 14,361 |  |  | — |  |  | 14,361 |
Total lease payments | 77,770 |  |  | 7,563 |  |  | 85,333 |
Less: Effect of discounting to net present value | 10,045 |  |  | 254 |  |  | 10,299 |
Present value of lease liabilities | $ | 67,725 |  |  | $ | 7,309 |  |  | $ | 75,034 |
The following table presents supplemental cash flow information related to our leases (in thousands):
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Cash paid for amounts included in measurement of liabilities: |  |  |  |  |
Operating cash flows used in operating leases | $ | 13,387 |  |  | $ | 13,146 |  |  | $ | 11,097 |
Operating cash flows used in finance leases | 182 |  |  | 139 |  |  | 64 |
Financing cash flows used in finance leases | 2,063 |  |  | 1,108 |  |  | 185 |
Right-of-use assets obtained in exchange for new lease liabilities: |  |  |  |  |
Operating leases | 12,083 |  |  | 30,234 |  |  | 2,831 |
Finance leases | 17 |  |  | 9,517 |  |  | — |
To support the continued growth of our business, we entered into a service agreement with a third-party logistics provider to operate a new distribution facility in Memphis, Tennessee with approximately 970,000 square feet. The service agreement commenced at the end of the second quarter of 2021. The initial term of the agreement is 5 years. We began distributing from this facility in the third quarter of 2021, and we exited our distribution facility in Dallas, Texas in the fourth quarter of 2021.
LEASES | LEASES We determine if an arrangement is or contains a lease at contract inception and determine its classification as an operating or finance lease at lease commencement. We lease certain retail locations, office space, distribution facilities, manufacturing space, and machinery and equipment. While the substantial majority of these leases are operating leases, certain machinery and equipment agreements are finance leases. As of December 31, 2022, the initial lease terms of the various leases range from one to 20 years. ROU lease assets and liabilities associated with leases with an initial term of twelve months or less are not recorded on the balance sheet. Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. We use our collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our operating leases also typically require payment of real estate taxes, common area maintenance and insurance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components, with the exception of our distribution facilities. Operating lease assets include prepaid lease payments and initial direct costs and are reduced by lease incentives. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. We recognize the related rent expense on a straight-line basis from the commencement date to the end of the lease term. The following table presents the assets and liabilities related to operating and finance leases (in thousands):
| Balance Sheet Location |  | December 31, 2022 |  | January 1, 2022
Assets: |  |  |  |  |
Operating lease assets | Operating lease right-of-use assets |  | $ | 55,406 |  |  | $ | 54,971 |
Finance lease assets | Property, plant and equipment |  | 7,533 |  |  | 9,380 |
Total lease assets |  |  | $ | 62,939 |  |  | $ | 64,351 |
Liabilities: |  |  |  |  |
Current |  |  |  |  |
Operating lease liabilities | Operating lease liabilities |  | $ | 12,076 |  |  | $ | 10,167 |
Finance lease liabilities | Current maturities of long-term debt |  | 2,111 |  |  | 2,060 |
Non-current |  |  |  |  |
Operating lease liabilities | Operating lease liabilities, non-current |  | 55,649 |  |  | 55,940 |
Finance lease liabilities | Long-term debt, net of current portion |  | 5,198 |  |  | 7,299 |
Total lease liabilities |  |  | $ | 75,034 |  |  | $ | 75,466 |
The following table presents the components of lease costs (in thousands):
| Fiscal Year Ended
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Operating lease costs | $ | 12,943 |  |  | $ | 12,312 |  |  | $ | 9,599 |
Finance lease cost - amortization of right-of-use assets | 1,860 |  |  | 1,046 |  |  | 211 |
Finance lease cost - interest on lease liabilities | 182 |  |  | 139 |  |  | 64 |
Short-term lease cost | 67 |  |  | 366 |  |  | 185 |
Variable lease cost | 4,645 |  |  | 3,822 |  |  | 3,349 |
Sublease income | (743) |  |  | (743) |  |  | (757) |
Total lease cost | $ | 18,954 |  |  | $ | 16,942 |  |  | $ | 12,651 |
The following table presents lease terms and discount rates:
| December 31, 2022 |  | January 1, 2022
Weighted average remaining lease term: |  |  |
Operating leases | 5.90 years |  | 6.06 years
Finance leases | 4.73 years |  | 4.35 years
Weighted average discount rate: |  |  |
Operating leases | 4.76 | % |  | 4.75 | %
Finance leases | 2.20 | % |  | 2.24 | %
Minimum lease payments have not been reduced by minimum sublease rentals of $1.5 million due in the future under non-cancelable subleases. We received $0.7 million, $0.7 million, and $0.8 million in sublease income for 2022, 2021, and 2020, respectively. The following table presents the minimum lease payment obligations of operating and finance lease liabilities (leases with terms in excess of one year) for the next five years and thereafter as of December 31, 2022 (in thousands):
| Operating Leases |  | Finance Leases |  | Total
2023 | $ | 14,938 |  |  | $ | 2,245 |  |  | $ | 17,183 |
2024 | 14,948 |  |  | 2,325 |  |  | 17,273 |
2025 | 15,218 |  |  | 2,162 |  |  | 17,380 |
2026 | 11,413 |  |  | 831 |  |  | 12,244 |
2027 | 6,892 |  |  | — |  |  | 6,892 |
Thereafter | 14,361 |  |  | — |  |  | 14,361 |
Total lease payments | 77,770 |  |  | 7,563 |  |  | 85,333 |
Less: Effect of discounting to net present value | 10,045 |  |  | 254 |  |  | 10,299 |
Present value of lease liabilities | $ | 67,725 |  |  | $ | 7,309 |  |  | $ | 75,034 |
The following table presents supplemental cash flow information related to our leases (in thousands):
| December 31, 2022 |  | January 1, 2022 |  | January 2, 2021
Cash paid for amounts included in measurement of liabilities: |  |  |  |  |
Operating cash flows used in operating leases | $ | 13,387 |  |  | $ | 13,146 |  |  | $ | 11,097 |
Operating cash flows used in finance leases | 182 |  |  | 139 |  |  | 64 |
Financing cash flows used in finance leases | 2,063 |  |  | 1,108 |  |  | 185 |
Right-of-use assets obtained in exchange for new lease liabilities: |  |  |  |  |
Operating leases | 12,083 |  |  | 30,234 |  |  | 2,831 |
Finance leases | 17 |  |  | 9,517 |  |  | — |
To support the continued growth of our business, we entered into a service agreement with a third-party logistics provider to operate a new distribution facility in Memphis, Tennessee with approximately 970,000 square feet. The service agreement commenced at the end of the second quarter of 2021. The initial term of the agreement is 5 years. We began distributing from this facility in the third quarter of 2021, and we exited our distribution facility in Dallas, Texas in the fourth quarter of 2021.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=77888251 + Details
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