Leases

9 Months Ended

Sep. 28, 2019

8. Leases

The Company leases certain manufacturing plants, warehouses, offices, machinery and equipment, and farmland. The Company subleases farmland to third-party growers. At the lease commencement date, the Company classifies a lease as a finance lease if it has the right to obtain substantially all of the economic benefits from the right-of-use assets, otherwise the lease is classified as an operating lease. The Company's leases have remaining noncancelable lease terms of less than one year to approximately 15 years, and typically require fixed monthly rental payments that may be adjusted annually to give effect to inflation. Real estate leases typically include options to extend the leases for up to 10 years. Machinery and equipment operating leases typically include purchase options for the fair market value of the underlying asset at the end of the lease term. Certain other leases for machinery and equipment include nominal purchase options at the end of the lease term that are reasonably certain of being exercised.

In the third quarter of 2019, the Company completed the expansion of its Allentown, Pennsylvania, plant-based beverage facility, including the addition of new aseptic processing and packaging equipment under a seven-year finance lease. At the lease commencement date, the Company recognized $14.5 million of right-of-use assets in property, plant and equipment, and a corresponding lease liability in long-term debt. The right-of-use assets are being amortized on a straight-line basis over the term of the lease.

The following tables present supplemental information related to leases recognized in the consolidated financial statements:

		Quarter ended		Three quarters ended
		September 28, 2019		September 28, 2019
		$		$
Lease Costs
Operating lease cost		4,774		14,725
Finance lease cost
	Depreciation of right-of-use assets	606		1,197
	Interest on lease liabilities	35		103
Sublease income		(130	)	(364	)
Net lease cost		5,285		15,661

		September 28, 2019
		$
Balance Sheet Classification
Operating leases
	Operating lease right-of-use assets	71,672

	Current portion of operating lease liabilities	17,709
	Operating lease liabilities	54,663
	Total operating lease liabilities	72,372

Finance leases
	Property, plant and equipment, gross	24,330
	Accumulated depreciation	(5,658	)
	Property, plant and equipment, net	18,672

	Current portion of long-term debt	2,900
	Long-term debt	13,930
	Total finance lease liabilities	16,830

		Quarter ended	Three quarters ended
		September 28, 2019	September 28, 2019
		$	$
Cash Flow Information
Cash paid for amounts included in measurement of lease liabilities
	Operating cash flows from operating leases	4,801	15,041
	Operating cash flows from finance leases	35	103
	Financing cash flows from finance leases	525	1,308

Right-of-use assets obtained in exchange for lease liabilities
	Operating leases	2,149	2,796
	Finance leases	14,549	14,549

		September 28, 2019
Other Information
Weighted-average remaining lease term (years)
	Operating leases	5.9
	Finance leases	6.1

Weighted-average discount rate⁽¹⁾
	Operating leases	9.0%
	Finance leases	4.4%

(1) In determining the present value of lease payments, the Company uses the implicit rate in the lease when that rate is readily determinable, which is the case for most of the Company's machinery and equipment leases. In all other cases, including real estate leases, the Company uses its incremental borrowing rate. The Company applied the incremental borrowing rate as at December 30, 2018 (the first day of fiscal 2019) to leases that commenced prior to that date. Discount rates are determined on a lease-by-lease basis.

	Operating leases		Finance leases
	$		$
Maturities of Lease Liabilities
Remainder of 2019	4,532		588
2020	18,048		3,168
2021	15,129		3,168
2022	13,203		3,168
2023	8,925		2,572
Thereafter	48,057		6,744
Total lease payments	107,894		19,408
Less: imputed interest	(35,522	)	(2,578	)
Total lease liabilities	72,372		16,830

As at September 28, 2019, the Company did not have any material commitments for right-of-use assets for which the leases had not commenced.