Leases

3 Months Ended

Mar. 28, 2020

Leases [Abstract]

Leases

Leases

We elected to utilize the following practical expedients that are permitted under ASC 842:

•As an accounting policy election by class of underlying asset, chose not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and

•As an accounting policy election chose not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).

We have operating and finance leases for manufacturing facilities, corporate offices, and various equipment. Our leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:

	(In thousands)
	Three Months Ended
	March 28, 2020		March 30, 2019
Operating leases expense	$	1,008	963
Finance leases expense:
Amortization of right-of-use assets	$	60	$	45
Interest on lease liabilities	10		9
Total finance lease expense	$	70	$	54

Short term lease expense for the three months ended March 28, 2020 was not material.

Supplemental cash flow information related to leases were as follows:

	(In thousands)
	Three Months Ended
	March 28, 2020		March 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,029	$	923
Operating cash flows from finance leases	$	10	$	9
Financing cash flows from finance leases	$	54	$	17
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	165	$	—
Finance leases	$	372	$	457

The weighted average remaining lease terms were as follows:

	(In years)
	Three Months Ended
	March 28, 2020	March 30, 2019
Operating leases	5	7
Finance leases	7	4

When a lease is identified, we recognize a right-of-use asset and a corresponding lease liability based on the present value of the lease payments over the lease term discounted using our incremental borrowing rate, unless an implicit rate is readily determinable. As the discount rate in our leases is usually not readily available, we use our own incremental borrowing rate as the discount rate. Our incremental borrowing rate is based on the interest rate on our term loan, which is a secured rate. The interest rate on our term loan is based on London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

The weighted average discount rates were as follows:

	Three Months Ended
	March 28, 2020		March 30, 2019
Operating leases	6.5	%	6.5	%
Finance leases	5.3	%	6.5	%

Maturity of operating and finance lease liabilities are as follows:

	(In thousands)
	Operating Leases		Finance Leases
2020 (Excluding the three months ended March 28, 2020)	$	3,173	$	223
2021	4,177		284
2022	3,786		147
2023	3,454		108
2024	3,032		82
Thereafter	7,071		207
Total lease payments	24,693		1,051
Less imputed interest	4,707		81
Total	$	19,986	$	970

Operating lease payments include $11.6 million related to options to extend lease terms that are reasonably certain of being exercised. As of March 28, 2020, there are no legally binding minimum lease payments for leases signed but not yet commenced.

Finance lease payments related to options to extend lease terms that are reasonably certain of being exercised are not significant. As of March 28, 2020, it excludes $1.0 million of legally binding minimum lease payments for leases signed but not yet commenced. These finance leases will commence during 2020 with a lease term of 10 years.

Leases

Leases

We elected to utilize the following practical expedients that are permitted under ASC 842:

•As an accounting policy election by class of underlying asset, chose not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and

•As an accounting policy election chose not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).

We have operating and finance leases for manufacturing facilities, corporate offices, and various equipment. Our leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:

	(In thousands)
	Three Months Ended
	March 28, 2020		March 30, 2019
Operating leases expense	$	1,008	963
Finance leases expense:
Amortization of right-of-use assets	$	60	$	45
Interest on lease liabilities	10		9
Total finance lease expense	$	70	$	54

Short term lease expense for the three months ended March 28, 2020 was not material.

Supplemental cash flow information related to leases were as follows:

	(In thousands)
	Three Months Ended
	March 28, 2020		March 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,029	$	923
Operating cash flows from finance leases	$	10	$	9
Financing cash flows from finance leases	$	54	$	17
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	165	$	—
Finance leases	$	372	$	457

The weighted average remaining lease terms were as follows:

	(In years)
	Three Months Ended
	March 28, 2020	March 30, 2019
Operating leases	5	7
Finance leases	7	4

When a lease is identified, we recognize a right-of-use asset and a corresponding lease liability based on the present value of the lease payments over the lease term discounted using our incremental borrowing rate, unless an implicit rate is readily determinable. As the discount rate in our leases is usually not readily available, we use our own incremental borrowing rate as the discount rate. Our incremental borrowing rate is based on the interest rate on our term loan, which is a secured rate. The interest rate on our term loan is based on London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

The weighted average discount rates were as follows:

	Three Months Ended
	March 28, 2020		March 30, 2019
Operating leases	6.5	%	6.5	%
Finance leases	5.3	%	6.5	%

Maturity of operating and finance lease liabilities are as follows:

	(In thousands)
	Operating Leases		Finance Leases
2020 (Excluding the three months ended March 28, 2020)	$	3,173	$	223
2021	4,177		284
2022	3,786		147
2023	3,454		108
2024	3,032		82
Thereafter	7,071		207
Total lease payments	24,693		1,051
Less imputed interest	4,707		81
Total	$	19,986	$	970

Operating lease payments include $11.6 million related to options to extend lease terms that are reasonably certain of being exercised. As of March 28, 2020, there are no legally binding minimum lease payments for leases signed but not yet commenced.

Finance lease payments related to options to extend lease terms that are reasonably certain of being exercised are not significant. As of March 28, 2020, it excludes $1.0 million of legally binding minimum lease payments for leases signed but not yet commenced. These finance leases will commence during 2020 with a lease term of 10 years.