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Note 11 - Leases

9 Months Ended

Sep. 28, 2024

11.

Leases

We lease certain of our facilities, equipment and vehicles under non-cancelable operating and finance leases. Leases with initial terms of 12 months or less are not recorded on the condensed consolidated balance sheet, but we recognize those lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term. Lease and non-lease components are included in the calculation of the ROU asset and lease liabilities.

Our leases have remaining lease terms of 1 year to 33 years, some of which include one or more options to extend the lease for up to 25 years. Our lease terms include renewal terms when we are reasonably certain that we will exercise the renewal options. We sublease certain leased assets to third parties, mainly as a result of unused space in our facilities.

Supplemental balance sheet information related to leases was as follows:

(in thousands)	Classification	September 28, 2024			December 30, 2023
Assets
Operating lease assets	Operating lease right-of-use assets⁽¹⁾	$	14,067		$	16,778
Finance lease assets	Property, plant and equipment, net ⁽¹⁾		9,721			247
Total lease assets		$	23,788		$	17,025
Liabilities
Current
Operating	Other accrued liabilities⁽¹⁾	$	4,976		$	5,122
Finance	Other accrued liabilities⁽¹⁾		9,127			11
Noncurrent
Operating	Long-term lease liabilities		10,423			13,160
Finance	Long-term lease liabilities		6			15
Total lease liabilities		$	24,532		$	18,308

Weighted-average remaining lease term (years)
Operating leases			5.3			5.5
Finance leases			0.3			1.7

Weighted-average discount rate
Operating leases			6.4	%		6.4	%
Finance leases			2.8	%		4.0	%

(1)

Finance lease assets are recorded net of accumulated amortization of $0.4 million and $0.3 million as of September 28, 2024, and December 30, 2023, respectively. During the first quarter of fiscal 2024, we executed an agreement to purchase our leased facility in Malaysia for MYR 41.8 million, with the expectation that the title would transfer during 2024. We treated this transaction as a lease modification, and changed the classification to a finance lease, reducing our operating lease assets and liabilities by $0.4 million and increasing our finance lease assets and current lease liabilities by $8.8 million and $7.9 million, respectively. Due to a seller-imposed delay in the completion of purchase of this facility to 2025, which occurred during the third quarter of fiscal 2024, the finance lease was modified resulting in the asset increasing to $9.5 million. At September 28, 2024, the finance lease liability increased $1.2 million to $9.1 million, as a result of fluctuations in foreign currency exchange rates.

The components of lease expense were as follows:

	Three Months Ended					Nine Months Ended
(in thousands)	September 28, 2024		September 30, 2023			September 28, 2024			September 30, 2023
Operating leases	$	1,529	$	1,642		$	4,710		$	5,001
Variable lease expense		577		561			1,724			1,683
Short-term operating leases		1		6			3			19
Finance leases
Amortization of leased assets		27		12			70			66
Interest on lease liabilities		67		-			200			1
Sublease income		-		(7	)		(4	)		(25	)
Net lease cost	$	2,201	$	2,214		$	6,703		$	6,745

Future minimum lease payments on September 28, 2024, are as follows:

	Operating			Finance
(in thousands)	leases			leases			Total
2024	$	1,424		$	77		$	1,501
2025		5,771			9,133			14,904
2026		2,995			3			2,998
2027		1,648			-			1,648
2028		1,271			-			1,271
Thereafter		5,514			-			5,514
Total lease payments		18,623			9,213			27,836
Less: Interest		(3,224	)		(80	)		(3,304	)
Present value of lease liabilities	$	15,399		$	9,133		$	24,532

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
(in thousands)	September 28, 2024		September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,851	$	5,005
Operating cash flows from finance leases	$	195	$	1
Financing cash flows from finance leases	$	18	$	48
Leased assets obtained in exchange for new finance lease liabilities	$	9,543	$	-
Leased assets obtained in exchange for new operating lease liabilities	$	1,623	$	664
Financing lease assets acquired in MCT acquisition	$	-	$	19
Operating lease assets acquired in MCT acquisition	$	-	$	130