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Lease Commitments | 3 Months Ended
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Mar. 30, 2024
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 typically five years. The Company’s 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 assesses 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 Company’s consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the Company’s 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 our 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 March 30, 2024 and December 30, 2023, the remaining unrecognized deferred gains related to these transactions were $69.6 million and $70.5 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During the first quarters of fiscal 2024 and 2023, the Company recognized $1.0 million of these deferred gains in each quarter. The following table presents the assets and liabilities related to the Company’s leases as of March 30, 2024 and December 30, 2023:
Lease assets and liabilities | March 30, 2024 |  | December 30, 2023
|  | (In thousands)
Assets | Classification |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 34,869 |  |  | $ | 37,227 |
Finance lease right-of-use assets (1) | Property and equipment, net | 141,570 |  |  | 138,357 |
Total lease right-of-use assets |  | $ | 176,439 |  |  | $ | 175,584 |
Liabilities |  |  |  |
Current portion: |  |  |  |
Operating lease liabilities | Operating lease liabilities - current | $ | 5,824 |  |  | $ | 6,284 |
Finance lease liabilities | Finance lease liabilities - current | 12,157 |  |  | 11,178 |
Non-current portion: |  |  |  |
Operating lease liabilities | Operating lease liabilities - noncurrent | 30,248 |  |  | 32,519 |
Finance lease liabilities | Finance lease liabilities - noncurrent | 279,910 |  |  | 274,248 |
Total lease liabilities |  | $ | 328,139 |  |  | $ | 324,229 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $102.4 million and $102.9 million as of March 30, 2024 and December 30, 2023, respectively. The components of lease expense were as follows:
| Three Months Ended
Components of lease expense | March 30, 2024 |  | April 1, 2023
| (In thousands)
Operating lease cost: |  |  |
Operating lease cost | $ | 2,446 |  |  | $ | 2,918 |
Sublease income | (861) |  |  | (578) |
Total operating lease costs | $ | 1,585 |  |  | $ | 2,340 |
Finance lease cost: |  |  |
Amortization of right-of-use assets | $ | 4,736 |  |  | $ | 2,089 |
Interest on lease liabilities | 6,291 |  |  | 6,044 |
Total finance lease costs | $ | 11,027 |  |  | $ | 8,133 |
Supplemental cash flow information related to leases was as follows:
| Three Months Ended
Cash flow information | March 30, 2024 |  | April 1, 2023
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 2,509 |  |  | $ | 3,458 |
Operating cash flows from finance leases | $ | 6,291 |  |  | $ | 6,044 |
Financing cash flows from finance leases | $ | 3,072 |  |  | $ | 2,133 |
Non-cash supplemental cash flow information related to leases was as follows:
| Three Months Ended
Non-cash information | March 30, 2024 |  | April 1, 2023
| (In thousands)
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | — |  |  | $ | — |
Finance leases | $ | 8,177 |  |  | $ | — |
Supplemental balance sheet information related to leases was as follows:
Balance sheet information | March 30, 2024 |  | December 30, 2023
| ($ in thousands)
Finance leases |  |  |
Property and equipment | $ | 243,920 |  | $ | 241,276
Accumulated depreciation | (102,350) |  | (102,919)
Property and equipment, net | $ | 141,570 |  | $ | 138,357
Weighted Average Remaining Lease Term (in years) |  |  |
Operating leases | 8.97 |  | 8.88
Finance leases | 18.35 |  | 19.94
Weighted Average Discount Rate |  |  |
Operating leases | 8.79 | % |  | 8.74 | %
Finance leases | 8.85 | % |  | 8.84 | %
The major categories of the Company’s finance lease liabilities as of March 30, 2024 and December 30, 2023 are as follows:
Category | March 30, 2024 |  | December 30, 2023
| (In thousands)
Equipment and vehicles | $ | 48,445 |  |  | $ | 42,252 |
Real estate | 243,622 |  |  | 243,174 |
Total finance leases | $ | 292,067 |  |  | $ | 285,426 |
Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of March 30, 2024. 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 unaudited condensed consolidated balance sheet, including options to extend lease terms that are reasonably certain of being exercised.
Fiscal year | Operating leases |  | Finance leases
| (In thousands)
2024 | $ | 7,257 |  |  | $ | 28,661 |
2025 | 8,768 |  |  | 33,374 |
2026 | 5,344 |  |  | 36,810 |
2027 | 4,044 |  |  | 31,223 |
2028 | 3,914 |  |  | 31,316 |
Thereafter | 24,976 |  |  | 500,233 |
Total lease payments | $ | 54,303 |  |  | $ | 661,617 |
Less: imputed interest | (18,231) |  |  | (369,550) |
Total | $ | 36,072 |  |  | $ | 292,067 |
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 typically five years. The Company’s 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 assesses 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 Company’s consolidated balance sheets. Finance lease ROU assets are included in property and equipment and the finance lease obligations are presented separately in the Company’s 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 our 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 March 30, 2024 and December 30, 2023, the remaining unrecognized deferred gains related to these transactions were $69.6 million and $70.5 million, respectively, and these deferred gains are being recognized in earning on a straight-line basis. During the first quarters of fiscal 2024 and 2023, the Company recognized $1.0 million of these deferred gains in each quarter. The following table presents the assets and liabilities related to the Company’s leases as of March 30, 2024 and December 30, 2023:
Lease assets and liabilities | March 30, 2024 |  | December 30, 2023
|  | (In thousands)
Assets | Classification |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | 34,869 |  |  | $ | 37,227 |
Finance lease right-of-use assets (1) | Property and equipment, net | 141,570 |  |  | 138,357 |
Total lease right-of-use assets |  | $ | 176,439 |  |  | $ | 175,584 |
Liabilities |  |  |  |
Current portion: |  |  |  |
Operating lease liabilities | Operating lease liabilities - current | $ | 5,824 |  |  | $ | 6,284 |
Finance lease liabilities | Finance lease liabilities - current | 12,157 |  |  | 11,178 |
Non-current portion: |  |  |  |
Operating lease liabilities | Operating lease liabilities - noncurrent | 30,248 |  |  | 32,519 |
Finance lease liabilities | Finance lease liabilities - noncurrent | 279,910 |  |  | 274,248 |
Total lease liabilities |  | $ | 328,139 |  |  | $ | 324,229 |
(1) Finance lease right-of-use assets are presented net of accumulated amortization of $102.4 million and $102.9 million as of March 30, 2024 and December 30, 2023, respectively. The components of lease expense were as follows:
| Three Months Ended
Components of lease expense | March 30, 2024 |  | April 1, 2023
| (In thousands)
Operating lease cost: |  |  |
Operating lease cost | $ | 2,446 |  |  | $ | 2,918 |
Sublease income | (861) |  |  | (578) |
Total operating lease costs | $ | 1,585 |  |  | $ | 2,340 |
Finance lease cost: |  |  |
Amortization of right-of-use assets | $ | 4,736 |  |  | $ | 2,089 |
Interest on lease liabilities | 6,291 |  |  | 6,044 |
Total finance lease costs | $ | 11,027 |  |  | $ | 8,133 |
Supplemental cash flow information related to leases was as follows:
| Three Months Ended
Cash flow information | March 30, 2024 |  | April 1, 2023
| (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 2,509 |  |  | $ | 3,458 |
Operating cash flows from finance leases | $ | 6,291 |  |  | $ | 6,044 |
Financing cash flows from finance leases | $ | 3,072 |  |  | $ | 2,133 |
Non-cash supplemental cash flow information related to leases was as follows:
| Three Months Ended
Non-cash information | March 30, 2024 |  | April 1, 2023
| (In thousands)
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Operating leases | $ | — |  |  | $ | — |
Finance leases | $ | 8,177 |  |  | $ | — |
Supplemental balance sheet information related to leases was as follows:
Balance sheet information | March 30, 2024 |  | December 30, 2023
| ($ in thousands)
Finance leases |  |  |
Property and equipment | $ | 243,920 |  | $ | 241,276
Accumulated depreciation | (102,350) |  | (102,919)
Property and equipment, net | $ | 141,570 |  | $ | 138,357
Weighted Average Remaining Lease Term (in years) |  |  |
Operating leases | 8.97 |  | 8.88
Finance leases | 18.35 |  | 19.94
Weighted Average Discount Rate |  |  |
Operating leases | 8.79 | % |  | 8.74 | %
Finance leases | 8.85 | % |  | 8.84 | %
The major categories of the Company’s finance lease liabilities as of March 30, 2024 and December 30, 2023 are as follows:
Category | March 30, 2024 |  | December 30, 2023
| (In thousands)
Equipment and vehicles | $ | 48,445 |  |  | $ | 42,252 |
Real estate | 243,622 |  |  | 243,174 |
Total finance leases | $ | 292,067 |  |  | $ | 285,426 |
Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of March 30, 2024. 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 unaudited condensed consolidated balance sheet, including options to extend lease terms that are reasonably certain of being exercised.
Fiscal year | Operating leases |  | Finance leases
| (In thousands)
2024 | $ | 7,257 |  |  | $ | 28,661 |
2025 | 8,768 |  |  | 33,374 |
2026 | 5,344 |  |  | 36,810 |
2027 | 4,044 |  |  | 31,223 |
2028 | 3,914 |  |  | 31,316 |
Thereafter | 24,976 |  |  | 500,233 |
Total lease payments | $ | 54,303 |  |  | $ | 661,617 |
Less: imputed interest | (18,231) |  |  | (369,550) |
Total | $ | 36,072 |  |  | $ | 292,067 |

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