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Lease Commitments | 12 Months Ended
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Dec. 30, 2023
Leases [Abstract] |
Lease Commitments | Lease Commitments The Company has operating and finance leases for certain of its distribution facilities, office space, land, mobile fleet, and equipment. Many of these leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at the Company’s election for specified periods of time. The majority of these 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. These leases generally provide for fixed annual rentals. Certain 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 vehicle lease cost is considered variable. Some leases require the Company to pay taxes, insurance, and maintenance expenses associated with the leased assets. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines 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 consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the consolidated balance sheets. When a lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company has also made the accounting policy election to not separate lease components from non-lease components related to its mobile fleet asset class. The Company’s finance lease liabilities consist of leases related to equipment and vehicles, and real estate. A majority of the Company’s finance leases relate to real estate. During fiscal 2017 and fiscal 2018, the Company entered into real estate financing transactions on certain of its warehouse facilities. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, the Company entered into long-term leases on the properties having renewal options. The Company accounted for these transactions in accordance with the ASC 840, Leases, which was the lease accounting standard in effect for the Company at the inception of these arrangements. The Company recorded these transactions as finance lease liabilities on its consolidated balance sheet. Gains on these sale-leaseback transactions were deferred and are being recognized into the Company’s earnings. As of December 30, 2023 and December 31, 2022, the remaining unrecognized deferred gains related to these transactions were $70.5 million and $74.3 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During fiscal 2023, 2022 and 2021, the Company recognized $3.9 million, $3.9 million, $3.9 million, respectively, of these deferred gains. The following table presents the assets and liabilities related to the Company’s finance and operating leases as of December 30, 2023 and December 31, 2022:
Lease assets and liabilities | December 30, 2023 |  | December 31, 2022
|  | (In thousands)
Assets | Classification |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 37,227 |  |  | $ | 45,717 |
Finance lease right-of-use assets (1) (2) | Property and equipment, net | 138,357 |  |  | 132,748 |
Total lease right-of-use assets |  | $ | 175,584 |  |  | $ | 178,465 |
Liabilities |  |  |  |
Current portion |  |  |  |
Operating lease liabilities | Operating lease liabilities - short term | $ | 6,284 |  |  | $ | 7,432 |
Finance lease liabilities | Finance lease liabilities - short term | 11,178 |  |  | 7,089 |
Non-current portion |  |  |  |
Operating lease liabilities | Operating lease liabilities - long term | 32,519 |  |  | 40,011 |
Finance lease liabilities | Finance lease liabilities - long term | 274,248 |  |  | 265,986 |
Total lease liabilities |  | $ | 324,229 |  |  | $ | 320,518 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $102.9 million and $90.1 million as of December 30, 2023 and December 31, 2022, respectively. (2) During fiscal 2023, 2022 and 2021, the Company added fleet assets under finance leases of $19.9 million, $9.1 million and $10.5 million, respectively. These additions did not involve cash outlays and therefore are not included in “Property and equipment investments” within cash flows from investing activities on the Company’s consolidated statements of cash flows. The components of lease expense were as follows:
Components of lease expense | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Operating lease cost: |  |  |  |  |
Operating lease cost | $ | 11,485 |  |  | $ | 11,963 |  |  | $ | 11,626 |
Sublease income | (3,334) |  |  | (2,704) |  |  | (2,555) |
Total operating lease costs | $ | 8,151 |  |  | $ | 9,259 |  |  | $ | 9,071 |
Finance lease cost: |  |  |  |  |
Amortization of right-of-use assets | $ | 16,493 |  |  | $ | 16,350 |  |  | $ | 15,183 |
Interest on lease liabilities | 24,380 |  |  | 24,469 |  |  | 24,847 |
Total finance lease costs | $ | 40,873 |  |  | $ | 40,819 |  |  | $ | 40,030 |
Cash flow information related to leases was as follows:
Cash flow information | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |
Operating cash flows from operating leases | $ | 11,671 |  |  | $ | 11,614 |  |  | $ | 10,782 |
Operating cash flows from finance leases | 24,380 |  |  | 24,469 |  |  | 24,847 |
Financing cash flows from finance leases | $ | 9,208 |  |  | $ | 10,907 |  |  | $ | 11,175 |
Non-cash supplemental cash flow information related to leases was as follows:
Non-cash information | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Right-of-use assets obtained in exchange for lease obligations |  |  |  |  |
Operating leases (1) | $ | 1,883 |  |  | $ | 7,968 |  |  | $ | 5,663 |
Finance leases | 19,861 |  |  | 9,092 |  |  | 10,549 |
(1) Includes operating lease right-of-use assets obtained in acquisition for fiscal year ended December 31, 2022. See Note 2, Business Combination, for further information. Supplemental balance sheet information for right-of-use assets related to leases was as follows:
Balance sheet information | December 30, 2023 |  | December 31, 2022
| ($ amounts in thousands)
Finance leases |  |  |
Property and equipment | $ | 241,276 |  |  | $ | 222,839 |
Accumulated depreciation | (102,919) |  |  | (90,091) |
Property and equipment, net | $ | 138,357 |  |  | $ | 132,748 |
Weighted Average Remaining Lease Term (in years) |  |  |
Operating leases | 8.88 |  | 9.21
Finance leases | 19.94 |  | 13.97
Weighted Average Discount Rate |  |  |
Operating leases | 8.74 | % |  | 8.54 | %
Finance leases | 8.84 | % |  | 8.87 | %
The major categories of the Company’s finance lease liabilities as of December 30, 2023 and December 31, 2022 are as follows:
Category | December 30, 2023 |  | December 31, 2022
| (In thousands)
Equipment and vehicles | $ | 42,252 |  |  | $ | 29,300 |
Real estate | 243,174 |  |  | 243,775 |
Total finance leases | $ | 285,426 |  |  | $ | 273,075 |
Under the short-term lease exception provided within ASC 842, the Company does not record a lease liability or right-of-use asset for any lease that has a lease term of 12 months or less at commencement. Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of December 30, 2023. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance and operating lease liabilities included in the consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.
| Operating leases |  | Finance leases
| (In thousands)
2024 | $ | 9,949 |  |  | $ | 36,077 |
2025 | 8,950 |  |  | 33,229 |
2026 | 5,527 |  |  | 36,794 |
2027 | 4,227 |  |  | 31,211 |
2028 | 4,005 |  |  | 29,521 |
Thereafter | 24,975 |  |  | 501,292 |
Total lease payments | $ | 57,633 |  |  | $ | 668,124 |
Less: imputed interest | (18,830) |  |  | (382,698) |
Total | $ | 38,803 |  |  | $ | 285,426 |
Lease Commitments | Lease Commitments The Company has operating and finance leases for certain of its distribution facilities, office space, land, mobile fleet, and equipment. Many of these leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at the Company’s election for specified periods of time. The majority of these 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. These leases generally provide for fixed annual rentals. Certain 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 vehicle lease cost is considered variable. Some leases require the Company to pay taxes, insurance, and maintenance expenses associated with the leased assets. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company determines 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 consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the consolidated balance sheets. When a lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company has also made the accounting policy election to not separate lease components from non-lease components related to its mobile fleet asset class. The Company’s finance lease liabilities consist of leases related to equipment and vehicles, and real estate. A majority of the Company’s finance leases relate to real estate. During fiscal 2017 and fiscal 2018, the Company entered into real estate financing transactions on certain of its warehouse facilities. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, the Company entered into long-term leases on the properties having renewal options. The Company accounted for these transactions in accordance with the ASC 840, Leases, which was the lease accounting standard in effect for the Company at the inception of these arrangements. The Company recorded these transactions as finance lease liabilities on its consolidated balance sheet. Gains on these sale-leaseback transactions were deferred and are being recognized into the Company’s earnings. As of December 30, 2023 and December 31, 2022, the remaining unrecognized deferred gains related to these transactions were $70.5 million and $74.3 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During fiscal 2023, 2022 and 2021, the Company recognized $3.9 million, $3.9 million, $3.9 million, respectively, of these deferred gains. The following table presents the assets and liabilities related to the Company’s finance and operating leases as of December 30, 2023 and December 31, 2022:
Lease assets and liabilities | December 30, 2023 |  | December 31, 2022
|  | (In thousands)
Assets | Classification |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 37,227 |  |  | $ | 45,717 |
Finance lease right-of-use assets (1) (2) | Property and equipment, net | 138,357 |  |  | 132,748 |
Total lease right-of-use assets |  | $ | 175,584 |  |  | $ | 178,465 |
Liabilities |  |  |  |
Current portion |  |  |  |
Operating lease liabilities | Operating lease liabilities - short term | $ | 6,284 |  |  | $ | 7,432 |
Finance lease liabilities | Finance lease liabilities - short term | 11,178 |  |  | 7,089 |
Non-current portion |  |  |  |
Operating lease liabilities | Operating lease liabilities - long term | 32,519 |  |  | 40,011 |
Finance lease liabilities | Finance lease liabilities - long term | 274,248 |  |  | 265,986 |
Total lease liabilities |  | $ | 324,229 |  |  | $ | 320,518 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $102.9 million and $90.1 million as of December 30, 2023 and December 31, 2022, respectively. (2) During fiscal 2023, 2022 and 2021, the Company added fleet assets under finance leases of $19.9 million, $9.1 million and $10.5 million, respectively. These additions did not involve cash outlays and therefore are not included in “Property and equipment investments” within cash flows from investing activities on the Company’s consolidated statements of cash flows. The components of lease expense were as follows:
Components of lease expense | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Operating lease cost: |  |  |  |  |
Operating lease cost | $ | 11,485 |  |  | $ | 11,963 |  |  | $ | 11,626 |
Sublease income | (3,334) |  |  | (2,704) |  |  | (2,555) |
Total operating lease costs | $ | 8,151 |  |  | $ | 9,259 |  |  | $ | 9,071 |
Finance lease cost: |  |  |  |  |
Amortization of right-of-use assets | $ | 16,493 |  |  | $ | 16,350 |  |  | $ | 15,183 |
Interest on lease liabilities | 24,380 |  |  | 24,469 |  |  | 24,847 |
Total finance lease costs | $ | 40,873 |  |  | $ | 40,819 |  |  | $ | 40,030 |
Cash flow information related to leases was as follows:
Cash flow information | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |
Operating cash flows from operating leases | $ | 11,671 |  |  | $ | 11,614 |  |  | $ | 10,782 |
Operating cash flows from finance leases | 24,380 |  |  | 24,469 |  |  | 24,847 |
Financing cash flows from finance leases | $ | 9,208 |  |  | $ | 10,907 |  |  | $ | 11,175 |
Non-cash supplemental cash flow information related to leases was as follows:
Non-cash information | Fiscal Year Ended December 30, 2023 |  | Fiscal Year Ended December 31, 2022 |  | Fiscal Year Ended January 1, 2022
| (In thousands)
Right-of-use assets obtained in exchange for lease obligations |  |  |  |  |
Operating leases (1) | $ | 1,883 |  |  | $ | 7,968 |  |  | $ | 5,663 |
Finance leases | 19,861 |  |  | 9,092 |  |  | 10,549 |
(1) Includes operating lease right-of-use assets obtained in acquisition for fiscal year ended December 31, 2022. See Note 2, Business Combination, for further information. Supplemental balance sheet information for right-of-use assets related to leases was as follows:
Balance sheet information | December 30, 2023 |  | December 31, 2022
| ($ amounts in thousands)
Finance leases |  |  |
Property and equipment | $ | 241,276 |  |  | $ | 222,839 |
Accumulated depreciation | (102,919) |  |  | (90,091) |
Property and equipment, net | $ | 138,357 |  |  | $ | 132,748 |
Weighted Average Remaining Lease Term (in years) |  |  |
Operating leases | 8.88 |  | 9.21
Finance leases | 19.94 |  | 13.97
Weighted Average Discount Rate |  |  |
Operating leases | 8.74 | % |  | 8.54 | %
Finance leases | 8.84 | % |  | 8.87 | %
The major categories of the Company’s finance lease liabilities as of December 30, 2023 and December 31, 2022 are as follows:
Category | December 30, 2023 |  | December 31, 2022
| (In thousands)
Equipment and vehicles | $ | 42,252 |  |  | $ | 29,300 |
Real estate | 243,174 |  |  | 243,775 |
Total finance leases | $ | 285,426 |  |  | $ | 273,075 |
Under the short-term lease exception provided within ASC 842, the Company does not record a lease liability or right-of-use asset for any lease that has a lease term of 12 months or less at commencement. Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of December 30, 2023. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance and operating lease liabilities included in the consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.
| Operating leases |  | Finance leases
| (In thousands)
2024 | $ | 9,949 |  |  | $ | 36,077 |
2025 | 8,950 |  |  | 33,229 |
2026 | 5,527 |  |  | 36,794 |
2027 | 4,227 |  |  | 31,211 |
2028 | 4,005 |  |  | 29,521 |
Thereafter | 24,975 |  |  | 501,292 |
Total lease payments | $ | 57,633 |  |  | $ | 668,124 |
Less: imputed interest | (18,830) |  |  | (382,698) |
Total | $ | 38,803 |  |  | $ | 285,426 |

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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 -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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