LEASES

9 Months Ended

Oct. 01, 2022

LEASES

LEASES

9. LEASES

On January 1, 2022, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the related amendments (collectively “ASC 842”). The optional transition method of adoption was used, in which the cumulative effect of initially applying the new standard to existing leases was $0.3 million to record the operating lease right-of-use assets and the related liabilities as of January 1, 2022. Under this method of adoption, the comparative information has not been revised and continues to be reported under the previously applicable lease accounting guidance (ASC 840).

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 has 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 vehicles, manufacturing facilities, office space, land, and equipment under operating 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 Company does not have material finance leases.

The components of lease expense for the fiscal quarter and three fiscal quarters ended October 1, 2022 were as follows (in thousands):

	Fiscal Quarter Ended		Three Fiscal Quarters Ended
	October 1, 2022		October 1, 2022
Operating lease expense	$	2,295	$	6,799
Short-term lease expense		58		90
Variable lease expense		141		445
Total lease expense	$	2,494	$	7,334

The table below presents supplemental information related to leases as of October 1, 2022:

	October 1, 2022
Weighted-average remaining lease term (years)
Operating leases		6.8
Weighted-average discount rate
Operating leases		4.9	%

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):

	Three Fiscal Quarters Ended
	October 1, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,249

The following table summarizes maturities of operating lease liabilities as of October 1, 2022 (in thousands):

	Operating Leases
Remainder of fiscal 2022	$	2,124
2023		8,162
2024		7,917
2025		7,259
2026		5,788
Thereafter		16,136
Total lease payments		47,386
Less: Interest		(7,354)
Present value of lease liability	$	40,032