Lease Commitments

6 Months Ended

Jul. 02, 2023

(5)

Lease Commitments

The Company has operating and finance leases for the Company’s retail store facilities, distribution center, corporate offices, IT systems 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.

The components of lease expense were as follows:


	13 Weeks Ended				26 Weeks Ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
	(In thousands)
Lease expense:
Operating lease expense	$	21,076	$	20,749	$	42,114	$	41,310
Variable lease expense		4,665		4,881		9,477		9,504
Operating lease expense		25,741		25,630		51,591		50,814

Amortization of right-of-use assets		949		900		1,899		1,802
Interest on lease liabilities		78		67		158		141
Finance lease expense		1,027		967		2,057		1,943
Total lease expense	$	26,768	$	26,597	$	53,648	$	52,757

Other information related to leases was as follows:


	26 Weeks Ended
	July 2, 2023			July 3, 2022
	(In thousands)
Operating cash flows from operating leases	$	43,518		$	43,300
Financing cash flows from finance leases		2,007			1,899
Operating cash flows from finance leases		165			147
Cash paid for amounts included in the measurement of lease liabilities	$	45,690		$	45,346

Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,152		$	957
Right-of-use assets obtained in exchange for new operating lease liabilities	$	29,681		$	58,624
Weighted-average remaining lease term—finance leases	3.7 years			3.7 years
Weighted-average remaining lease term—operating leases	4.9 years			5.1 years
Weighted-average discount rate—finance leases		4.2	%		3.1	%
Weighted-average discount rate—operating leases		5.2	%		4.9	%

Maturities of finance and operating lease liabilities as of July 2, 2023 were as follows:


Fiscal Year Ending:	Finance Leases			Operating Leases
	(In thousands)
2023 (remaining six months)	$	2,693		$	39,572
2024		2,697			80,527
2025		2,184			64,505
2026		1,686			49,067
2027		683			31,488
Thereafter		267			51,887
Undiscounted cash flows	$	10,210		$	317,046
Reconciliation of lease liabilities:
Weighted-average remaining lease term	3.7 years			4.9 years
Weighted-average discount rate		4.2	%		5.2	%
Present values	$	9,411		$	278,940
Lease liabilities - current		2,777			67,742
Lease liabilities - long-term		6,634			211,198
Lease liabilities - total	$	9,411		$	278,940
Difference between undiscounted and discounted cash flows	$	799		$	38,106