Lease Commitments

6 Months Ended

Jul. 04, 2021

(5)	Lease Commitments

The Company has operating and finance leases for the Company’s retail store facilities, distribution center, corporate offices, information technology hardware and distribution center delivery tractors and equipment, and accounts for these leases in accordance with ASC 842.

Certain of the leases for the Company’s retail store facilities provide for variable payments for property taxes, insurance, common area maintenance payments related to triple net leases, rental payments based on future sales volumes at the leased location, as well as certain equipment sales taxes, licenses, fees and repairs, which are not measurable at the inception of the lease, or rental payments that are adjusted periodically for inflation. The Company recognizes variable lease expense for these leases in the period incurred which, for contingent rent, begins in the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In accordance with ASC 842, the components of lease expense were as follows:

	13 Weeks Ended					26 Weeks Ended
	July 4, 2021		June 28, 2020			July 4, 2021			June 28, 2020
	(In thousands)
Lease expense:
Amortization of right-of-use assets	$	720	$	689		$	1,369		$	1,411
Interest on lease liabilities		62		78			121			167
Finance lease expense		782		767			1,490			1,578
Operating lease expense		20,384		20,318			40,720			40,604
Variable lease expense		4,711		1,465			9,203			5,981
Sublease income		—		(293	)		(78	)		(586	)
Total lease expense	$	25,877	$	22,257		$	51,335		$	47,577

In accordance with ASC 842, other information related to leases was as follows:

	26 Weeks Ended
	July 4, 2021			June 28, 2020
	(In thousands)
Operating cash flows from operating leases	$	43,168		$	37,354
Financing cash flows from finance leases		1,559			1,409
Operating cash flows from finance leases		134			167
Cash paid for amounts included in the measurement of lease liabilities	$	44,861		$	38,930

Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,652		$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	32,529		$	39,986
Weighted-average remaining lease term—finance leases	3.5 years			2.8 years
Weighted-average remaining lease term—operating leases	4.8 years			5.2 years
Weighted-average discount rate—finance leases		3.4	%		4.7	%
Weighted-average discount rate—operating leases		5.6	%		6.4	%

In accordance with ASC 842, maturities of finance and operating lease liabilities as of July 4, 2021 were as follows:

Year Ending:	Finance Leases			Operating Leases
	(In thousands)
2021 (remaining six months)	$	1,952		$	43,414
2022		2,640			81,263
2023		1,772			64,547
2024		900			55,741
2025		434			39,378
Thereafter		388			47,108
Undiscounted cash flows	$	8,086		$	331,451
Reconciliation of lease liabilities:
Weighted-average remaining lease term	3.5 years			4.8 years
Weighted-average discount rate		3.4	%		5.6	%
Present values	$	7,683		$	290,338
Lease liabilities - current		2,847			74,382
Lease liabilities - long-term		4,836			215,956
Lease liabilities - total	$	7,683		$	290,338
Difference between undiscounted and discounted cash flows	$	403		$	41,113