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Note 14

3 Months Ended

Dec. 28, 2019

Note 14 – Leases

General Lease Description

We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating leases include leases for real estate for some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from 1 month to 13 years.

We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 1 year to 6 years.

Significant Assumptions and Judgments

Contract Contains a Lease

In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:

• Whether explicitly or implicitly identified assets have been deployed in the contract; and

• Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Allocation of Consideration

In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.

Options to Extend or Terminate Leases

We have leases which contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.

Discount Rate

The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We used the discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our incremental borrowing rate as provided by our lender which was based on cash collateral and credit risk specific to us, and our lease portfolio characteristics.

As of September 29, 2019, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.1%, respectively.

Practical Expedients and Accounting Policy Elections

We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.

Amounts Recognized in the Financial Statements

The components of lease expense were as follows:

Three Months Ended

December 28, 2019

(in thousands)

Operating lease cost in Cost of goods sold and Operating Expenses
$ 4,279

Finance lease cost:

Amortization of assets in Cost of goods sold and Operating Expenses
85

Interest on lease liabilities in Interest expense & other
8

Total finance lease cost
93

Short-term lease cost in Cost of goods sold and Operating Expenses
-

Total net lease cost
$ 4,372

Supplemental balance sheet information related to leases is as follows:

December 28, 2019

(in thousands)

Operating Leases

Operating lease right-of-use assets
$ 67,376

Current operating lease liabilities
$ 13,668

Noncurrent operating lease liabilities
56,465

Total operating lease liabilities
$ 70,133

Finance Leases

Finance lease right-of-use assets in Property, plant and equipment, net
$ 957

Current finance lease liabilities
$ 342

Noncurrent finance lease liabilities
628

Total finance lease liabilities
$ 970

Supplemental cash flow information related to leases is as follows:

Three Months Ended

December 28, 2019

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
$ 4,244

Operating cash flows from finance leases
$ 86

Financing cash flows from finance leases
$ 7

Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets
$ -

Supplemental noncash information on lease liabilities removed due to purchase of leased asset
$ -

As of December 28, 2019, the maturities of lease liabilities were as follows:

(in thousands)

Operating Leases

Finance Leases

Nine months ending June 30, 2020
$ 12,089 $ 273

2021
13,859 369

2022
11,577 168

2023
9,727 98

2024
7,406 98

Thereafter
24,754 26

Total minimum payments
$ 79,412 $ 1,032

Less amount representing interest
(9,279 ) (62 )

Present value of lease obligations
$ 70,133 $ 970

As of December 28, 2019, the weighted-average remaining term of our operating and finance leases was 7.3 years and 4.0 years, respectively.

As previously disclosed in our 2019 Annual Report on Form 10-K and under the previous lease accounting standard (Topic 840), as of September 28, 2019, future minimum lease payments under noncancelable leases with initial lease terms in excess of one year were as follows:

(in thousands)

Operating Leases

Capital Leases

2020
$ 14,814 $ 339

2021
12,686 349

2022
10,491 156

2023
8,971 91

2024
6,988 95

Thereafter
25,588 27

Total minimum payments
$ 79,538 $ 1,057