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Leases
 9 Months Ended
Oct. 01, 2022
Leases [Abstract]  
Leases Leases
We 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 one to 15 years, some of which include one or more options to extend the leases for five 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 sheets. 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.
The following table presents our assets and liabilities related to our leases as of October 1, 2022 and January 1, 2022:
Lease assets and liabilitiesOctober 1, 2022January 1, 2022
(In thousands)
AssetsClassification
Operating lease right-of-use assetsOperating lease right-of-use assets$50,311 $49,568 
Finance lease right-of-use assets (1)
Property and equipment, net136,203 143,851 
Total lease right-of-use assets$186,514 $193,419 
Liabilities
Current portion
Operating lease liabilitiesOperating lease liabilities - short term$7,028 $5,145 
Finance lease liabilitiesFinance lease liabilities - short term8,732 7,864 
Non-current portion
Operating lease liabilitiesOperating lease liabilities - long term43,492 44,526 
Finance lease liabilitiesFinance lease liabilities - long term264,004 266,853 
Total lease liabilities$323,256 $324,388 
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $87.4 million and $73.7 million as of October 1, 2022 and January 1, 2022, respectively.
The components of lease expense were as follows:
Three Months EndedNine Months Ended
Components of lease expenseOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Operating lease cost:$2,529 $2,959 $7,625 $8,942 
Finance lease cost:
   Amortization of right-of-use assets$5,098 $4,012 $13,698 $12,209 
   Interest on lease liabilities6,104 6,244 18,384 18,659 
Total finance lease costs$11,202 $10,256 $32,082 $30,868 
Cash flow information related to leases was as follows:
Three Months EndedNine Months Ended
Cash flow informationOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
   Operating cash flows from operating leases$2,562 $2,822 $7,713 $8,193 
   Operating cash flows from finance leases6,104 6,244 18,384 18,659 
   Financing cash flows from finance leases$2,496 $3,026 $7,229 $7,697 
Non-cash supplemental cash flow information related to leases was as follows:
Three Months EndedNine Months Ended
Non-cash informationOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Right-of-use assets obtained in exchange for lease obligations
Operating leases$3,604 $217 $4,731 $5,508 
Finance leases$3,279 $— $5,995 $10,549 
Supplemental balance sheet information related to leases was as follows:
Balance sheet informationOctober 1, 2022January 1, 2022
(In thousands)
Finance leases
   Property and equipment$223,642 $217,592 
   Accumulated depreciation(87,439)(73,741)
Property and equipment, net$136,203 $143,851 
Weighted Average Remaining Lease Term (in years)
   Operating leases10.0910.75
   Finance leases14.2515.06
Weighted Average Discount Rate
   Operating leases8.85 %9.01 %
   Finance leases8.94 %10.00 %
The major categories of our finance lease liabilities as of October 1, 2022 and January 1, 2022 are as follows:
CategoryOctober 1, 2022January 1, 2022
(In thousands)
Equipment and vehicles$28,842 $30,710 
Real estate243,894 244,007 
Total finance leases$272,736 $274,717 
As of October 1, 2022, maturities of lease liabilities were as follows:
Fiscal yearOperating leasesFinance leases
(In thousands)
2022$3,214 $6,558 
202311,039 32,943 
202410,310 32,329 
20259,323 28,709 
20266,114 32,189 
Thereafter38,745 351,962 
Total lease payments$78,745 $484,690 
Less: imputed interest(28,225)(211,954)
Total$50,520 $272,736 

On January 1, 2022, maturities of lease liabilities were as follows:

Fiscal yearOperating leasesFinance leases
(In thousands)
2022$9,376 $32,495 
20239,134 32,115 
20248,329 31,521 
20258,329 27,994 
20266,050 31,439 
Thereafter40,711 348,149 
Total lease payments$81,929 $503,713 
Less: imputed interest(32,258)(228,996)
Total$49,671 $274,717 
Leases Leases
We 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 one to 15 years, some of which include one or more options to extend the leases for five 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 sheets. 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.
The following table presents our assets and liabilities related to our leases as of October 1, 2022 and January 1, 2022:
Lease assets and liabilitiesOctober 1, 2022January 1, 2022
(In thousands)
AssetsClassification
Operating lease right-of-use assetsOperating lease right-of-use assets$50,311 $49,568 
Finance lease right-of-use assets (1)
Property and equipment, net136,203 143,851 
Total lease right-of-use assets$186,514 $193,419 
Liabilities
Current portion
Operating lease liabilitiesOperating lease liabilities - short term$7,028 $5,145 
Finance lease liabilitiesFinance lease liabilities - short term8,732 7,864 
Non-current portion
Operating lease liabilitiesOperating lease liabilities - long term43,492 44,526 
Finance lease liabilitiesFinance lease liabilities - long term264,004 266,853 
Total lease liabilities$323,256 $324,388 
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $87.4 million and $73.7 million as of October 1, 2022 and January 1, 2022, respectively.
The components of lease expense were as follows:
Three Months EndedNine Months Ended
Components of lease expenseOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Operating lease cost:$2,529 $2,959 $7,625 $8,942 
Finance lease cost:
   Amortization of right-of-use assets$5,098 $4,012 $13,698 $12,209 
   Interest on lease liabilities6,104 6,244 18,384 18,659 
Total finance lease costs$11,202 $10,256 $32,082 $30,868 
Cash flow information related to leases was as follows:
Three Months EndedNine Months Ended
Cash flow informationOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
   Operating cash flows from operating leases$2,562 $2,822 $7,713 $8,193 
   Operating cash flows from finance leases6,104 6,244 18,384 18,659 
   Financing cash flows from finance leases$2,496 $3,026 $7,229 $7,697 
Non-cash supplemental cash flow information related to leases was as follows:
Three Months EndedNine Months Ended
Non-cash informationOctober 1, 2022October 2, 2021October 1, 2022October 2, 2021
(In thousands)(In thousands)
Right-of-use assets obtained in exchange for lease obligations
Operating leases$3,604 $217 $4,731 $5,508 
Finance leases$3,279 $— $5,995 $10,549 
Supplemental balance sheet information related to leases was as follows:
Balance sheet informationOctober 1, 2022January 1, 2022
(In thousands)
Finance leases
   Property and equipment$223,642 $217,592 
   Accumulated depreciation(87,439)(73,741)
Property and equipment, net$136,203 $143,851 
Weighted Average Remaining Lease Term (in years)
   Operating leases10.0910.75
   Finance leases14.2515.06
Weighted Average Discount Rate
   Operating leases8.85 %9.01 %
   Finance leases8.94 %10.00 %
The major categories of our finance lease liabilities as of October 1, 2022 and January 1, 2022 are as follows:
CategoryOctober 1, 2022January 1, 2022
(In thousands)
Equipment and vehicles$28,842 $30,710 
Real estate243,894 244,007 
Total finance leases$272,736 $274,717 
As of October 1, 2022, maturities of lease liabilities were as follows:
Fiscal yearOperating leasesFinance leases
(In thousands)
2022$3,214 $6,558 
202311,039 32,943 
202410,310 32,329 
20259,323 28,709 
20266,114 32,189 
Thereafter38,745 351,962 
Total lease payments$78,745 $484,690 
Less: imputed interest(28,225)(211,954)
Total$50,520 $272,736 

On January 1, 2022, maturities of lease liabilities were as follows:

Fiscal yearOperating leasesFinance leases
(In thousands)
2022$9,376 $32,495 
20239,134 32,115 
20248,329 31,521 
20258,329 27,994 
20266,050 31,439 
Thereafter40,711 348,149 
Total lease payments$81,929 $503,713 
Less: imputed interest(32,258)(228,996)
Total$49,671 $274,717