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Leases | 9 Months Ended
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Oct. 02, 2021
Leases [Abstract] |
Leases | LeasesWe have operating and finance leases for certain of our distribution facilities, office space, land, mobile fleet, and equipment. Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at our election for specified periods of time. 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. Our leases generally provide for fixed annual rentals. Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or 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. Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification. 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. 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. We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class. Finance Lease Liabilities Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate. As noted in the table below, a majority of our finance leases, formally known as capital leases, relate to real estate. During the first and second quarters of fiscal 2021, we recorded finance leases of $10.2 million and $0.3 million, respectively, related to new tractors put into service as part of our mobile fleet. These leases were entered into for a period of four years each. Additionally, during the second quarter of fiscal 2021, we recorded operating leases totaling $5.0 million related to warehouse facilities in Milwaukee, WI, and Statesville, NC. Each lease was entered into for an initial period of ten years, and has two five-year renewal options. The following table presents our assets and liabilities related to our leases as of October 2, 2021 and January 2, 2021:
Lease assets and liabilities |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Assets | Classification |  |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets |  | $ | 51,178 |  |  | $ | 51,142 |
Finance lease right-of-use assets (1) | Property and equipment, net |  | 148,426 |  |  | 148,561 |
Total lease right-of-use assets |  |  | $ | 199,604 |  |  | $ | 199,703 |
Liabilities |  |  |  |  |
Current portion |  |  |  |  |
Operating lease liabilities | Operating lease liabilities - short term |  | $ | 4,881 |  |  | $ | 6,076 |
Finance lease liabilities | Finance lease liabilities - short term |  | 5,606 |  |  | 5,675 |
Non-current portion |  |  |  |  |
Operating lease liabilities | Operating lease liabilities - long term |  | 46,412 |  |  | 44,965 |
Finance lease liabilities | Finance lease liabilities - long term |  | 271,314 |  |  | 267,443 |
Total lease liabilities |  |  | $ | 328,213 |  |  | $ | 324,159 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $70.8 million and $58.6 million as of October 2, 2021 and January 2, 2021, respectively. The components of lease expense were as follows:
|  | Three Months Ended |  | Nine Months Ended
Components of lease expense |  | October 2, 2021 |  | September 26, 2020 |  | October 2, 2021 |  | September 26, 2020
|  | (In thousands) |  | (In thousands)
Operating lease cost: |  | $ | 2,959 |  |  | $ | 3,108 |  |  | $ | 8,942 |  |  | $ | 9,206 |
Finance lease cost: |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  | $ | 4,012 |  |  | $ | 4,648 |  |  | $ | 12,209 |  |  | $ | 11,526 |
Interest on lease liabilities |  | 6,244 |  |  | 4,949 |  |  | 18,659 |  |  | 17,670 |
Total finance lease costs |  | $ | 10,256 |  |  | $ | 9,597 |  |  | $ | 30,868 |  |  | $ | 29,196 |
Supplemental cash flow information related to leases was as follows:
|  | Three Months Ended |  | Nine Months Ended
Cash flow information |  | October 2, 2021 |  | September 26, 2020 |  | October 2, 2021 |  | September 26, 2020
|  | (In thousands) |  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 2,822 |  |  | $ | 3,029 |  |  | $ | 8,193 |  |  | $ | 8,662 |
Operating cash flows from finance leases |  | 6,244 |  |  | 4,949 |  |  | 18,659 |  |  | 17,670 |
Financing cash flows from finance leases |  | $ | 3,026 |  |  | $ | 2,893 |  |  | $ | 7,697 |  |  | $ | 7,327 |
Right-of-use assets obtained in exchange for lease obligations |  |  |  |  |  |  |  |
Operating leases |  | $ | 217 |  |  | $ | 3,640 |  |  | $ | 5,508 |  |  | $ | 3,668 |
Finance leases |  | $ | — |  |  | $ | 3,145 |  |  | $ | 10,549 |  |  | $ | 3,145 |
Supplemental balance sheet information related to leases was as follows:
Balance sheet information |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Finance leases |  |  |  |
Property and equipment |  | $ | 219,192 |  |  | $ | 207,147 |
Accumulated depreciation |  | (70,766) |  |  | (58,586) |
Property and equipment, net |  | $ | 148,426 |  |  | $ | 148,561 |
Weighted Average Remaining Lease Term (in years) |  |  |  |
Operating leases |  | 10.86 |  | 11.14
Finance leases |  | 16.05 |  | 16.08
Weighted Average Discount Rate |  |  |  |
Operating leases |  | 9.00 | % |  | 9.28 | %
Finance leases |  | 9.94 | % |  | 9.87 | %
The major categories of our finance lease liabilities as of October 2, 2021 and January 2, 2021 are as follows:
Category |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Equipment and vehicles |  | $ | 33,717 |  |  | $ | 29,434 |
Real estate |  | 243,203 |  |  | 243,684 |
Total finance leases |  | $ | 276,920 |  |  | $ | 273,118 |
As of October 2, 2021, maturities of lease liabilities were as follows:
Fiscal year |  | Operating leases |  | Finance leases
|  | (In thousands)
2021 |  | $ | 10,134 |  |  | $ | 8,238 |
2022 |  | 9,402 |  |  | 32,495 |
2023 |  | 7,943 |  |  | 32,191 |
2024 |  | 8,207 |  |  | 31,575 |
2025 |  | 7,322 |  |  | 27,850 |
Thereafter |  | 42,310 |  |  | 379,747 |
Total lease payments |  | $ | 85,318 |  |  | $ | 512,096 |
Less: imputed interest |  | (34,025) |  |  | (235,176) |
Total |  | $ | 51,293 |  |  | $ | 276,920 |
On January 2, 2021, maturities of lease liabilities were as follows:
Fiscal year |  | Operating leases |  | Finance leases
|  | (In thousands)
2021 |  | $ | 11,215 |  |  | $ | 30,159 |
2022 |  | 9,161 |  |  | 29,453 |
2023 |  | 8,400 |  |  | 29,189 |
2024 |  | 7,283 |  |  | 28,649 |
2025 |  | 7,392 |  |  | 28,102 |
Thereafter |  | 44,092 |  |  | 380,511 |
Total lease payments |  | $ | 87,543 |  |  | $ | 526,063 |
Less: imputed interest |  | (36,502) |  |  | (252,945) |
Total |  | $ | 51,041 |  |  | $ | 273,118 |
Leases | LeasesWe have operating and finance leases for certain of our distribution facilities, office space, land, mobile fleet, and equipment. Many of our leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at our election for specified periods of time. 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. Our leases generally provide for fixed annual rentals. Certain of our leases include provisions for escalating rent based on, among other things, contractually defined increases and/or 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. Some of our leases require us to pay taxes, insurance, and maintenance expenses associated with the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We determine if an arrangement is a lease at inception and assess lease classification as either operating or finance at lease inception or modification. 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. 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. We have also made the accounting policy election to not separate lease components from non-lease components related to our mobile fleet asset class. Finance Lease Liabilities Our finance lease liabilities consist of leases related to equipment and vehicles, and real estate. As noted in the table below, a majority of our finance leases, formally known as capital leases, relate to real estate. During the first and second quarters of fiscal 2021, we recorded finance leases of $10.2 million and $0.3 million, respectively, related to new tractors put into service as part of our mobile fleet. These leases were entered into for a period of four years each. Additionally, during the second quarter of fiscal 2021, we recorded operating leases totaling $5.0 million related to warehouse facilities in Milwaukee, WI, and Statesville, NC. Each lease was entered into for an initial period of ten years, and has two five-year renewal options. The following table presents our assets and liabilities related to our leases as of October 2, 2021 and January 2, 2021:
Lease assets and liabilities |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Assets | Classification |  |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets |  | $ | 51,178 |  |  | $ | 51,142 |
Finance lease right-of-use assets (1) | Property and equipment, net |  | 148,426 |  |  | 148,561 |
Total lease right-of-use assets |  |  | $ | 199,604 |  |  | $ | 199,703 |
Liabilities |  |  |  |  |
Current portion |  |  |  |  |
Operating lease liabilities | Operating lease liabilities - short term |  | $ | 4,881 |  |  | $ | 6,076 |
Finance lease liabilities | Finance lease liabilities - short term |  | 5,606 |  |  | 5,675 |
Non-current portion |  |  |  |  |
Operating lease liabilities | Operating lease liabilities - long term |  | 46,412 |  |  | 44,965 |
Finance lease liabilities | Finance lease liabilities - long term |  | 271,314 |  |  | 267,443 |
Total lease liabilities |  |  | $ | 328,213 |  |  | $ | 324,159 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $70.8 million and $58.6 million as of October 2, 2021 and January 2, 2021, respectively. The components of lease expense were as follows:
|  | Three Months Ended |  | Nine Months Ended
Components of lease expense |  | October 2, 2021 |  | September 26, 2020 |  | October 2, 2021 |  | September 26, 2020
|  | (In thousands) |  | (In thousands)
Operating lease cost: |  | $ | 2,959 |  |  | $ | 3,108 |  |  | $ | 8,942 |  |  | $ | 9,206 |
Finance lease cost: |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  | $ | 4,012 |  |  | $ | 4,648 |  |  | $ | 12,209 |  |  | $ | 11,526 |
Interest on lease liabilities |  | 6,244 |  |  | 4,949 |  |  | 18,659 |  |  | 17,670 |
Total finance lease costs |  | $ | 10,256 |  |  | $ | 9,597 |  |  | $ | 30,868 |  |  | $ | 29,196 |
Supplemental cash flow information related to leases was as follows:
|  | Three Months Ended |  | Nine Months Ended
Cash flow information |  | October 2, 2021 |  | September 26, 2020 |  | October 2, 2021 |  | September 26, 2020
|  | (In thousands) |  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 2,822 |  |  | $ | 3,029 |  |  | $ | 8,193 |  |  | $ | 8,662 |
Operating cash flows from finance leases |  | 6,244 |  |  | 4,949 |  |  | 18,659 |  |  | 17,670 |
Financing cash flows from finance leases |  | $ | 3,026 |  |  | $ | 2,893 |  |  | $ | 7,697 |  |  | $ | 7,327 |
Right-of-use assets obtained in exchange for lease obligations |  |  |  |  |  |  |  |
Operating leases |  | $ | 217 |  |  | $ | 3,640 |  |  | $ | 5,508 |  |  | $ | 3,668 |
Finance leases |  | $ | — |  |  | $ | 3,145 |  |  | $ | 10,549 |  |  | $ | 3,145 |
Supplemental balance sheet information related to leases was as follows:
Balance sheet information |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Finance leases |  |  |  |
Property and equipment |  | $ | 219,192 |  |  | $ | 207,147 |
Accumulated depreciation |  | (70,766) |  |  | (58,586) |
Property and equipment, net |  | $ | 148,426 |  |  | $ | 148,561 |
Weighted Average Remaining Lease Term (in years) |  |  |  |
Operating leases |  | 10.86 |  | 11.14
Finance leases |  | 16.05 |  | 16.08
Weighted Average Discount Rate |  |  |  |
Operating leases |  | 9.00 | % |  | 9.28 | %
Finance leases |  | 9.94 | % |  | 9.87 | %
The major categories of our finance lease liabilities as of October 2, 2021 and January 2, 2021 are as follows:
Category |  | October 2, 2021 |  | January 2, 2021
|  | (In thousands)
Equipment and vehicles |  | $ | 33,717 |  |  | $ | 29,434 |
Real estate |  | 243,203 |  |  | 243,684 |
Total finance leases |  | $ | 276,920 |  |  | $ | 273,118 |
As of October 2, 2021, maturities of lease liabilities were as follows:
Fiscal year |  | Operating leases |  | Finance leases
|  | (In thousands)
2021 |  | $ | 10,134 |  |  | $ | 8,238 |
2022 |  | 9,402 |  |  | 32,495 |
2023 |  | 7,943 |  |  | 32,191 |
2024 |  | 8,207 |  |  | 31,575 |
2025 |  | 7,322 |  |  | 27,850 |
Thereafter |  | 42,310 |  |  | 379,747 |
Total lease payments |  | $ | 85,318 |  |  | $ | 512,096 |
Less: imputed interest |  | (34,025) |  |  | (235,176) |
Total |  | $ | 51,293 |  |  | $ | 276,920 |
On January 2, 2021, maturities of lease liabilities were as follows:
Fiscal year |  | Operating leases |  | Finance leases
|  | (In thousands)
2021 |  | $ | 11,215 |  |  | $ | 30,159 |
2022 |  | 9,161 |  |  | 29,453 |
2023 |  | 8,400 |  |  | 29,189 |
2024 |  | 7,283 |  |  | 28,649 |
2025 |  | 7,392 |  |  | 28,102 |
Thereafter |  | 44,092 |  |  | 380,511 |
Total lease payments |  | $ | 87,543 |  |  | $ | 526,063 |
Less: imputed interest |  | (36,502) |  |  | (252,945) |
Total |  | $ | 51,041 |  |  | $ | 273,118 |

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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 + Details
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