XML 195 R14.htm IDEA: XBRL DOCUMENT

Leases

3 Months Ended

Mar. 28, 2020

We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification. Our operating and finance lease portfolio generally 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 right-of use (“ROU”) assets and liabilities are presented separately on the condensed consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the condensed consolidated balance sheet. We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class.

When a lease does not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

A portion of our real estate lease cost is generally subject to annual changes in the Consumer Price Index (“CPI”). The known changes to lease payments are included in the lease liability at lease commencement. Unknown changes related to 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:



	Three Months Ended March 28, 2020		Three Months Ended March 30, 2019
	Three Months Ended March 28, 2020		Three Months Ended March 30, 2019
	(In thousands)
Operating lease cost:	$	3,120	$	3,144
Finance lease cost:
Amortization of right-of-use assets	$	3,042	$	2,896
Interest on lease liabilities	4,425		3,248
Total finance lease costs	$	7,467	$	6,144

Supplemental cash flow information related to leases was as follows:



	Three Months Ended March 28, 2020		Three Months Ended March 30, 2019
	Three Months Ended March 28, 2020		Three Months Ended March 30, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,774	$	2,903
Operating cash flows from finance leases	4,425		3,248
Financing cash flows from finance leases	2,222		2,187
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	—	$	—
Finance leases	—		787

Supplemental balance sheet information related to leases was as follows:



	March 28, 2020			December 28, 2019
	(In thousands)
Finance leases
Property and equipment	$	155,927		$	156,770
Accumulated depreciation	(26,032		)	(23,364		)
Property and equipment, net	$	129,895		$	133,406
Weighted Average Remaining Lease Term (in years)
Operating leases	11.67			11.71
Finance leases	17.86			17.90
Weighted Average Discount Rate
Operating leases	9.37		%	9.34		%
Finance leases	10.48		%	10.33		%

The major categories of our finance lease liabilities as of March 28, 2020 are as follows:



	March 28, 2020		December 28, 2019
	(In thousands)
Equipment and vehicles	$	30,808	$	32,471
Real estate	120,543		120,525
Total finance leases	$	151,351	$	152,996

As of March 28, 2020, maturities of lease liabilities were as follows:



	Operating leases			Finance leases
	(In thousands)
2020	$	11,479		$	15,927
2021	9,234			19,178
2022	7,922			18,350
2023	7,073			17,887
2024	6,753			17,324
Thereafter	48,887			284,409
Total lease payments	$	91,348		$	373,075
Less: imputed interest	(38,761		)	(221,724		)
Total	$	52,587		$	151,351

On December 28, 2019, our total operating lease commitments were as follows:



	(In thousands)
2020	$	12,735
2021	10,092
2022	8,247
2023	7,899
2024	7,287
Thereafter	56,081
Total	$	102,341

Real Estate Transactions

On December 31, 2019, we completed four real estate financing transactions on warehouse facilities in Madison, TN; Kansas City, MO; Richmond, VA; and Bridgeton, MO for aggregate net proceeds of $27.2 million. On January 31, 2020, we completed nine real estate financing transactions on warehouse facilities in Charlotte, NC; Memphis, TN; Independence, KY: San Antonio, TX; Portland, ME; Denville, NJ; Yaphank, NY; Pensacola, FL; and Tallmadge, OH for aggregate net proceeds of $34.1 million. On February 28, 2020, we completed one real estate financing transaction on a warehouse facility in Elkhart, IN for net proceeds of $7.5 million. These fourteen real estate financing transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, we entered into long-term leases on the properties for initial terms from fifteen to eighteen years with multiple five-year renewal options.

We determined that these transactions did not qualify as sales in accordance with the FASB’s Accounting Standards Codification (“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 gross proceeds are recorded as a financing obligation in our consolidated balance sheets in other current liabilities and in noncurrent liabilities as real estate financing obligations. The assets related to these transactions remain on our books and we continue to depreciate them. Gross proceeds of these transactions were $78.3 million.

On March 28, 2020, our future minimum payments related to the financing obligations under our real estate financing transactions entered into during 2019 and 2020 were as follows:



	(In thousands)
2020	$	7,305
2021	9,922
2022	10,130
2023	10,343
2024	10,559
Thereafter	124,454

Leases