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Leases

6 Months Ended

Jun. 29, 2019

Leases [Abstract]

Leases

Leases

Effective December 30, 2018, we adopted ASU No. 2016-02, “Leases (Topic 842)” using the modified retrospective method, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard. This election allowed us to carry forward our historical lease classification. The adoption of this standard resulted in the recording of operating lease right-of-use (“ROU”) assets and corresponding operating lease liabilities of $57.5 million on the condensed consolidated balance sheet as of December 30, 2018, which amortizes over the lease term.

Our operating and finance (formerly capital) lease portfolio includes leases for real estate, certain logistics equipment and vehicles. The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years. Operating lease ROU assets and liabilities are presented separately on the condensed consolidated balance sheets. Finance lease assets are included in property and equipment and the finance lease obligations are presented separately in the condensed consolidated balance sheet.

A portion of our real estate lease cost is generally subject to annual changes in the Consumer Price Index (“CPI”). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our vehicle lease cost is considered variable.

The components of lease expense were as follows:

(In thousands)	Three Months Ended June 29, 2019				Six Months Ended June 29, 2019
				Operating lease cost				$	2,991			$	6,135
Finance lease cost:
Amortization of right-of-use assets	$	2,995			5,892
Interest on lease liabilities	4,049				7,297
Total finance lease costs	$	7,044			$	13,189

Supplemental cash flow information related to leases was as follows:

	(In thousands)	Three Months Ended June 29, 2019				Six Months Ended June 29, 2019
									Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows from operating leases	$	3,064			$	5,967
	Operating cash flows from finance leases	3,155				6,403
	Financing cash flows from finance leases	2,045				4,232
	Right-of-use assets obtained in exchange for lease obligations
	Operating leases	$	—			$	—
	Finance leases	3,462				4,250

Supplemental balance sheet information related to leases was as follows:

	(In thousands)	June 29, 2019
					Finance leases
	Property and equipment	$	156,050
	Accumulated depreciation	(19,835		)
	Property and equipment, net	$	136,215
	Weighted Average Remaining Lease Term (in years)
	Operating leases	12.17
	Finance leases	20.34
	Weighted Average Discount Rate
	Operating leases	9.41		%
	Finance leases	10.91		%

As of June 29, 2019, maturities of lease liabilities were as follows:

(In thousands)	Operating leases				Finance leases
2019	$	9,519			$	10,849
2020	8,790				20,814
2021	6,930				18,140
2022	6,243				17,153
2023	5,276				16,625
Thereafter	50,716				298,650
Total lease payments	$	87,474			$	382,231
Less: imputed interest	(32,112		)		(229,949		)
Total	$	55,362			$	152,282

At December 29, 2018, our total operating lease commitments were as follows:

	(In thousands)
2019	$	11,980
2020	9,928
2021	8,435
2022	8,066
2023	7,539
Thereafter	60,847
Total	$	106,795

Real Estate Transactions

During the three months ended June 29, 2019 we completed sale-leaseback transactions on two distribution centers. The aggregate gross proceeds for these real estate transactions were $45 million. We determined that the transactions did not qualify as sales in accordance with ASC Topic 842 and, for accounting purposes, the transactions were not accounted for as sale-leaseback transactions. When this occurs, the real estate transaction is accounted for as a financing transaction whereby the cash received is recorded as a financing obligation in our condensed consolidated balance sheets.

At June 29, 2019, our future minimum payments related to the financing obligations under these real estate transactions were as follows:

	(In thousands)
2019	$	1,833
2020	3,711
2021	3,794
2022	3,880
2023	3,997
Thereafter	47,187
Total	$	64,402

Leases

Leases

Effective December 30, 2018, we adopted ASU No. 2016-02, “Leases (Topic 842)” using the modified retrospective method, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. We have elected the package of practical expedients permitted under the transition guidance within the new standard. This election allowed us to carry forward our historical lease classification. The adoption of this standard resulted in the recording of operating lease right-of-use (“ROU”) assets and corresponding operating lease liabilities of $57.5 million on the condensed consolidated balance sheet as of December 30, 2018, which amortizes over the lease term.

Our operating and finance (formerly capital) lease portfolio includes leases for real estate, certain logistics equipment and vehicles. The majority of our leases have remaining lease terms of 1 year to 15 years, some of which include one or more options to extend the leases for 5 years. Operating lease ROU assets and liabilities are presented separately on the condensed consolidated balance sheets. Finance lease assets are included in property and equipment and the finance lease obligations are presented separately in the condensed consolidated balance sheet.

A portion of our real estate lease cost is generally subject to annual changes in the Consumer Price Index (“CPI”). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of our vehicle lease cost is considered variable.

The components of lease expense were as follows:

(In thousands)	Three Months Ended June 29, 2019				Six Months Ended June 29, 2019
				Operating lease cost				$	2,991			$	6,135
Finance lease cost:
Amortization of right-of-use assets	$	2,995			5,892
Interest on lease liabilities	4,049				7,297
Total finance lease costs	$	7,044			$	13,189

Supplemental cash flow information related to leases was as follows:

	(In thousands)	Three Months Ended June 29, 2019				Six Months Ended June 29, 2019
									Cash paid for amounts included in the measurement of lease liabilities
	Operating cash flows from operating leases	$	3,064			$	5,967
	Operating cash flows from finance leases	3,155				6,403
	Financing cash flows from finance leases	2,045				4,232
	Right-of-use assets obtained in exchange for lease obligations
	Operating leases	$	—			$	—
	Finance leases	3,462				4,250

Supplemental balance sheet information related to leases was as follows:

	(In thousands)	June 29, 2019
					Finance leases
	Property and equipment	$	156,050
	Accumulated depreciation	(19,835		)
	Property and equipment, net	$	136,215
	Weighted Average Remaining Lease Term (in years)
	Operating leases	12.17
	Finance leases	20.34
	Weighted Average Discount Rate
	Operating leases	9.41		%
	Finance leases	10.91		%

As of June 29, 2019, maturities of lease liabilities were as follows:

(In thousands)	Operating leases				Finance leases
2019	$	9,519			$	10,849
2020	8,790				20,814
2021	6,930				18,140
2022	6,243				17,153
2023	5,276				16,625
Thereafter	50,716				298,650
Total lease payments	$	87,474			$	382,231
Less: imputed interest	(32,112		)		(229,949		)
Total	$	55,362			$	152,282

At December 29, 2018, our total operating lease commitments were as follows:

	(In thousands)
2019	$	11,980
2020	9,928
2021	8,435
2022	8,066
2023	7,539
Thereafter	60,847
Total	$	106,795

Real Estate Transactions

During the three months ended June 29, 2019 we completed sale-leaseback transactions on two distribution centers. The aggregate gross proceeds for these real estate transactions were $45 million. We determined that the transactions did not qualify as sales in accordance with ASC Topic 842 and, for accounting purposes, the transactions were not accounted for as sale-leaseback transactions. When this occurs, the real estate transaction is accounted for as a financing transaction whereby the cash received is recorded as a financing obligation in our condensed consolidated balance sheets.

At June 29, 2019, our future minimum payments related to the financing obligations under these real estate transactions were as follows:

	(In thousands)
2019	$	1,833
2020	3,711
2021	3,794
2022	3,880
2023	3,997
Thereafter	47,187
Total	$	64,402

X

- References

No definition available.

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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 http://asc.fasb.org/subtopic&trid=77888251

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X

- 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 http://asc.fasb.org/subtopic&trid=77888251

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