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Note 16 - Lease Commitments

6 Months Ended

Jul. 02, 2023

16.

LEASE COMMITMENTS

On January 1, 2022, the Company adopted ASC Topic 842, Leases, using the modified retrospective optional transition method provided by ASU 2018-11, Leases (Topic 842). The effect of applying this guidance resulted in an increase in noncurrent assets for right-of-use assets of $33,887 and an increase in liabilities for associated lease obligations of $34,579, most of which were classified as noncurrent. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of retained earnings.

Under the transition option elected by the Company, ASC Topic 842 is applied only to the most current period and reporting for comparative periods presented in the financial statements continues to be in accordance with ASC Topic 840, Leases, including disclosures. Upon adoption, the Company elected the following practical expedients related to ASC 842:

	•	not reassess whether any expired or existing contracts are or contain leases, not reassess the lease classification for any expired or existing leases, and not reassess initial direct costs for any existing leases;
	•	to account for the lease and non-lease components as a single lease component for all of the Company's leases; and
	•	to apply accounting similar to ASC Topic 840 to leases that meet the definition of short-term leases.

The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms of one to 11 years, inclusive of renewal options that the Company is reasonably certain to exercise.

The following table summarizes operating lease assets and obligations, and provides information associated with the measurement of operating lease obligations.

	As of
	July 2, 2023			December 31, 2022
Assets:
Operating right of use assets	$	28,965		$	29,522
Liabilities:
Current operating lease liabilities - Accrued liabilities	$	5,112		$	5,112
Long-term operating lease liabilities		24,589			24,992
Total lease liabilities	$	29,701		$	30,104
Lease term and discount rate
Weighted average remaining lease term (in years)		7.6			7.9
Weighted average discount rate		5.91	%		5.77	%

The following summarizes the components of operating lease expense and provides supplemental cash flow information for operating leases:

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Components of lease expense:
Operating lease expense	$	1,707	$	1,482	$	3,293	$	3,901
Short-term lease expense		466		642		978		1,250
Variable lease expense		17		327		169		414
Total lease expense	$	2,190	$	2,451	$	4,440	$	5,565
Supplemental cash flow information related to leases:
Cash paid for amounts included in measurement of operating lease liabilities	$	1,720	$	1,821	$	3,471	$	3,581
Right-of-use assets obtained in exchange for new operating lease liabilities		2,354		13,491		2,354		13,769
Decapitalization of right-of-use assets upon lease termination or modification		154		12,178		154		12,178

The following table summarizes the maturities of the Company's operating lease liabilities as of July 2, 2023:

2023 (excluding the twenty-six weeks ended July 2, 2023)	$	3,434
2024		5,964
2025		4,433
2026		4,236
2027		4,182
Thereafter		15,035
Total lease payments		37,284
Less imputed interest		(7,583	)
Present value of lease liabilities	$	29,701