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LEASES | 12 Months Ended
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Oct. 31, 2021
LEASES [Abstract] |
LEASES | NOTE 9 - LEASES We adopted ASU 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842 “Leases” (“Topic 842”), on November 1, 2019. The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded, as of November 1, 2019, ROU leased assets of $6.5 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $6.5 million. The impact of our adoption of Topic 842 on our current and deferred income taxes was immaterial. The guidance allows a number of elections and practical expedients, of which we elected the following:
| - | Election not to recognize short-term leases on the balance sheet.
| - | Practical expedient to not separate lease and non-lease components in a contract.
| - | Practical expedient “package” for transitioning to the new guidance:
| - | Not reassessing whether any expired or existing contracts are, or contain, leases.
| - | Not reassessing lease classification for any existing or expired leases.
| - | Not reassessing initial direct costs for any existing leases.
Our involvement in lease arrangements has typically been as a lessee. We determine if an agreement is or contains a lease on the earlier of the date of the agreement or the date on which we commit to entering the agreement. Our evaluation considers whether the agreement includes an identified asset and whether it affords us the right to control the asset. Our having the right to control the identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use. We recognize leases on our consolidated balance sheet when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use. As allowed under Topic 842, we have elected not to apply the recognition requirements to leases that, at their commencement dates, have lease terms of twelve months or less and do not include options to purchase their underlying assets that we are reasonably certain to exercise. The present value of lease payments over the term of the lease provides the basis for the initial measurement of ROU assets and their related lease liabilities. We measure finance lease liabilities using the rates implicit in the leases; operating lease liabilities are measured using our incremental borrowing rate, for collateralized loans, at the commencement date. Variable lease payments, other than those that are dependent on an index or on a rate, are not included in the measurement of ROU assets and their related lease liabilities. Lease terms include extension periods if the lease agreement includes an option to extend the lease that we are reasonably certain to exercise. As allowed under Topic 842, we have elected, for all classes of assets, the practical expedient to not separate lease components of a contract from non-lease components of a contract. In February 2021, under an MLA which we entered into effective October 2020, we entered into a five-year $7.2 million finance lease for a high-end inspection tool. Monthly payments on the lease, which commenced in February 2021, are $0.1 million per month. Upon the payment of the fiftieth monthly payment and prior to payment of the fifty-first monthly payment, we may exercise an early buyout option to purchase the tool for $2.4 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, the lease shall continue to renew on a month-to-month basis at the same rental; at our option, after the original term or any renewal periods, we may return the tool, elect to extend the lease, or purchase the tool at its fair market value. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.08%. In December 2020, under an MLA which we entered into effective July 2019, we entered into a five-year $35.5 million finance lease for a high-end lithography tool. Monthly payments on the lease, which commenced in January 2021, increased from $0.04 million during the first three months to $0.6 million for the following nine months, to be followed by forty-eight monthly payments of $0.5 million. As of the due date of the forty-eighth monthly payment, we may exercise an early buyout option to purchase the tool for $14.1 million. If we do not exercise the early buyout option, then at the end of the five-year lease term, at our option, we may return the tool, elect to extend the lease term for a period and a lease payment to be agreed with lessor at the time, or purchase the tool for its then-fair market value as determined by the lessor. Since we are reasonably certain that we will exercise the early buyout option, our lease liability reflects such exercise and we have classified the lease as a finance lease. The interest rate implicit in the lease is 1.58%. The lease agreement incorporates the covenants included in our Corporate Credit Agreement, which are detailed in Note 7, and includes a cross-default provision for any agreement or instrument with an outstanding, committed balance greater than $5.0 million in which we are the indebted party. The following table provides information on operating and finance leases included in our consolidated balance sheets.
Classification |  | October 31, 2021 |  |  | October 31, 2020 |
ROU Assets – Operating Leases |  |  |  |  |  |
Other assets |  | $ | 5,581 |  |  | $ | 7,706 |
ROU Assets – Finance Leases |  |  |  |  |  |  |  |
Property, plant and equipment, net |  | $ | 40,827 |  |  | $ | - |
Lease Liabilities – Operating Leases |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 2,273 |  |  | $ | 2,175 |
Other liabilities |  |  | 3,246 |  |  |  | 5,008 |
|  | $ | 5,519 |  |  | $ | 7,183 |
Lease Liabilities – Finance Leases |  |  |  |  |  |  |  |
Current portion of long-term debt |  | $ | 7,289 |  |  | $ | - |
Long-term debt |  |  | 31,083 |  |  |  | - |
|  | $ | 38,372 |  |  | $ | - |
The following table presents future lease payments under noncancelable operating and finance leases as of October 31, 2021. Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.
Fiscal Year |  | Operating Leases |  |  | Finance Leases |
2022 |  | $ | 2,351 |  |  | $ | 7,856 |
2023 |  |  | 1,374 |  |  |  | 6,938 |
2024 |  |  | 819 |  |  |  | 6,938 |
2025 |  |  | 646 |  |  |  | 18,012 |
2026 |  |  | 398 |  |  |  | - |
Thereafter |  |  | 157 |  |  |  | - |
Total lease payments |  |  | 5,745 |  |  |  | 39,744 |
Imputed interest |  |  | 226 |  |  |  | 1,372 |
Lease liabilities |  | $ | 5,519 |  |  | $ | 38,372 |
The following table presents lease costs for 2021 and 2020. Rent expense, as calculated under guidance in effect prior to our adoption of Topic 842, was $3.0 million in 2019.
|  | Year Ended |
|  | October 31, 2021 |  |  | October 31, 2020 |
Operating lease costs |  | $ | 2,904 |  |  | $ | 3,076 |
Short-term lease costs |  | $ | 232 |  |  | $ | 359 |
Variable lease costs |  | $ | 498 |  |  | $ | 378 |
Interest on lease liabilities |  | $ | 510 |  |  | $ | - |
Amortization of ROU assets |  | $ | 1,867 |  |  | $ | - |
The following table presents statistical information related to our operating and finance leases. The information presented is as of the balance sheet dates.
|  | October 31, 2021 |  |  | October 31, 2020 |
Classification |  | Weighted-average remaining lease term (in years) |  |  | Weighted-average discount rate |  |  | Weighted-average remaining lease term (in years) |  |  | Weighted-average discount rate |
Operating leases |  |  | 3.5 |  |  |  | 2.4 | % |  |  | 4.1 |  |  |  | 2.37 | %
Finance leases |  |  | 3.3 |  |  |  | 1.5 | % |  |  | - |  |  |  | - |
The following table presents the effects of leases on our 2021 and 2020 consolidated statements of cash flows, and provides leases-related non-cash information for those years.
|  | Year Ended |
|  | October 31, 2021 |  |  | October 31, 2020 |
Operating cash flows used for operating leases |  | $ | 2,442 |  |  | $ | 3,584 |
Operating cash flows used for finance leases |  | $ | 464 |  |  | $ | - |
Financing cash flows used for finance leases |  | $ | 4,323 |  |  | $ | - |
ROU assets obtained in exchange for operating lease obligations |  | $ | 457 |  |  | $ | 2,681 |
ROU assets obtained in exchange for finance lease obligations |  | $ | 42,672 |  |  | $ | - |

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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