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LEASES | 9 Months Ended
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Jul. 31, 2022
LEASES [Abstract] |
LEASES | NOTE 7 - 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 an 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 ASC Topic 842 – “Leases” (“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 rates, for collateralized loans, at the commencement date. Variable lease payments, other than those that are dependent on an index or on a rate (at which they are measured on their commencement dates), 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 nonlease components of a contract. In February 2021, 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 terms; 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, 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, 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 5, 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 |  | July 31, 2022 |  |  | October 31, 2021 |
ROU Assets – Operating Leases |  |  |  |  |  |
Other assets |  | $ | 3,615 |  |  | $ | 5,581 |
ROU Assets – Finance Leases |  |  |  |  |  |  |  |
Property, plant and equipment, net |  | $ | 38,694 |  |  | $ | 40,827 |
Lease Liabilities – Operating Leases |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 1,547 |  |  | $ | 2,273 |
Other liabilities |  |  | 2,006 |  |  |  | 3,246 |
|  | $ | 3,553 |  |  | $ | 5,519 |
Lease Liabilities – Finance Leases |  |  |  |  |  |  |  |
Current portion of long-term debt |  | $ | 6,929 |  |  | $ | 7,289 |
Long-term debt |  |  | 26,207 |  |  |  | 31,083 |
|  | $ | 33,136 |  |  | $ | 38,372 |
The following table presents future lease payments under noncancelable operating and finance leases as of July 31, 2022. Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.
|  | Operating Leases |  |  | Finance Leases |
Remainder of fiscal year 2022 |  | $ | 537 |  |  | $ | 2,213 |
2023 |  |  | 1,282 |  |  |  | 6,938 |
2024 |  |  | 764 |  |  |  | 6,938 |
2025 |  |  | 600 |  |  |  | 18,013 |
2026 |  |  | 363 |  |  |  | - |
Thereafter |  |  | 139 |  |  |  | - |
Total lease payments |  |  | 3,685 |  |  |  | 34,102 |
Imputed interest |  |  | (132 | ) |  |  | (966 | )
Lease liabilities |  | $ | 3,553 |  |  | $ | 33,136 |
The following table presents lease costs for the three and nine-month periods ended July 31, 2022, and August 1, 2021.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | July 31, 2022 |  |  | August 1, 2021 |  |  | July 31, 2022 |  |  | August 1, 2021 |
Operating lease costs |  | $ | 543 |  |  | $ | 802 |  |  | $ | 1,701 |  |  | $ | 2,190 |
Short-term lease costs |  | $ | 101 |  |  | $ | 80 |  |  | $ | 364 |  |  | $ | 166 |
Variable lease costs |  | $ | 162 |  |  | $ | 54 |  |  | $ | 438 |  |  | $ | 355 |
Interest on finance lease liabilities |  | $ | 126 |  |  | $ | 160 |  |  | $ | 400 |  |  | $ | 361 |
Amortization of ROU assets |  | $ | 711 |  |  | $ | 711 |  |  | $ | 2,132 |  |  | $ | 1,156 |
The following table presents statistical information related to our operating and finance leases. The information presented is as of the balance sheet dates.
|  | July 31, 2022 |  |  | October 31, 2021 |
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 |  |  | 3.2 |  |  |  | 2.3 | % |  |  | 3.5 |  |  |  | 2.4 | %
Finance leases |  |  | 2.5 |  |  |  | 1.5 | % |  |  | 3.3 |  |  |  | 1.5 | %
The following table presents the effects of leases on our condensed consolidated statements of cash flows, and provides leases-related non-cash information for the periods presented.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | July 31, 2022 |  |  | August 1, 2021 |  |  | July 31, 2022 |  |  | August 1, 2021 |
Operating cash flows used for operating leases |  | $ | 538 |  |  | $ | 615 |  |  | $ | 1,688 |  |  | $ | 1,884 |
Operating cash flows used for finance leases |  | $ | 131 |  |  | $ | 168 |  |  | $ | 407 |  |  | $ | 344 |
Financing cash flows used for finance leases |  | $ | 1,604 |  |  | $ | 2,018 |  |  | $ | 5,236 |  |  | $ | 2,882 |
ROU assets obtained in exchange for operating lease obligations |  | $ | 27 |  |  | $ | 50 |  |  | $ | 59 |  |  | $ | 417 |
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 https://asc.fasb.org/subtopic&trid=77888251 + Details
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