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Leases

6 Months Ended

Jun. 29, 2024

8. LEASES

For leases with initial terms greater than 12 months, the Company considers these right-of-use assets and records the related asset and obligation at the present value of lease payments over the term. For leases with initial terms equal to or less than 12 months, the Company does not consider them as right-of-use assets and instead considers them short-term lease costs that are recognized on a straight-line basis over the lease term. The Company’s leases may include escalation clauses, renewal options, and/or termination options that are factored into the Company’s determination of lease term and lease payments when it is reasonably certain the option will be exercised. The Company elected to take the practical expedient and not separate lease and non-lease components of contracts. The Company estimates an incremental borrowing rate to discount the lease payments based on information available at lease commencement because the implicit rate of the lease is generally not known.

The Company leases manufacturing facilities, office space, land, and certain vehicles and equipment under operating leases. The Company also leases certain vehicles and equipment under finance leases. The Company determines if an arrangement is a lease at

inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The components of lease expense for the fiscal quarter and two fiscal quarters ended June 29, 2024 and July 1, 2023 were as follows (in thousands):


	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Operating lease expense	$	2,129	$	2,317	$	4,292	$	4,668
Finance lease amortization of assets		212		156		424		265
Finance lease interest on lease liabilities		80		68		164		120
Short-term lease expense		64		96		120		150
Variable lease expense		122		268		280		595
Total lease expense	$	2,607	$	2,905	$	5,280	$	5,798

Operating and finance lease right-of-use assets and lease-related liabilities as of June 29, 2024 and December 31, 2023 were as follows (in thousands):


	June 29, 2024		December 31, 2023		Classification

Lease right-of-use assets:
Operating leases	$	26,993	$	30,788	Operating lease right-of-use assets
Finance leases		3,675		3,912	Other assets
Total lease right-of-use assets	$	30,668	$	34,700

Lease-related liabilities
Current
Operating leases	$	6,631	$	7,133	Current operating lease liabilities
Finance leases		786		746	Accrued expenses and other current liabilities
Non-current
Operating leases		21,449		24,787	Non-current operating lease liabilities
Finance leases		3,053		3,285	Other long-term liabilities
Total lease liabilities	$	31,919	$	35,951

The table below presents supplemental information related to leases as of June 29, 2024 and December 31, 2023:


	June 29, 2024			December 31, 2023
Weighted-average remaining lease term (years)
Finance leases		4.8			5.2
Operating leases		5.4			5.7
Weighted-average discount rate
Finance leases		8.2	%		8.2	%
Operating leases		5.0	%		5.1	%

The table below presents supplemental information related to the cash flows for operating leases recorded on the condensed consolidated statements of cash flows (in thousands):


	Two Fiscal Quarters Ended
	June 29, 2024		July 1, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,578	$	3,781

The following table summarizes fiscal year maturities of operating lease liabilities as of June 29, 2024 (in thousands):


	Operating Leases		Finance Leases		Total
Remainder of fiscal year 2024	$	4,139	$	542	$	4,681
2025		7,339		1,030		8,369
2026		5,831		934		6,765
2027		4,109		858		4,967
2028		3,114		845		3,959
Thereafter		7,626		436		8,062
Total lease payments		32,158		4,645		36,803
Less: Interest		(4,078)		(806)		(4,884)
Present value of lease liability	$	28,080	$	3,839	$	31,919