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Note 6 - Leases

12 Months Ended

Nov. 27, 2021

Lessee, Operating and Finance Leases [Text Block]

Note 6: Leases

We adopted ASU No. 2016-02 and related standards (collectively, “ASC 842”), which replaced previous lease accounting guidance, during the first quarter ended February 29, 2020 using the modified retrospective method of adoption. As a result of electing this transition method, prior periods have not been restated. The adoption of ASC 842 resulted in the recording of right-of-use assets and associated lease liabilities of approximately $28,254 each as of the first day of the quarter ended February 29, 2020. ASC 842 did not have a material impact on our Consolidated Statement of Income. We elected the package of practical expedients permitted under the transition guidance within ASC 842, which includes not reassessing lease classification of existing leases. We did not elect the hindsight practical expedient.

As a lessee, the company leases office, manufacturing and warehouse space, and equipment. Certain lease agreements include rental payments adjusted annually based on changes in an inflation index. Our leases do not contain material residual value guarantees or material restrictive covenants. Lease expense is recognized on a straight-line basis over the lease term. We determine if an arrangement is a lease upon 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 right to control the use of an asset includes the right to obtain substantially all of the economic benefits of the underlying asset and the right to direct how and for what purpose the asset is used.

Operating lease and finance lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used to calculate present value is the company’s incremental borrowing rate. We determine the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region.

Certain leases include one or more options to renew, with terms that can extend the lease term up to five years. We include options to renew the lease as part of the right-of-use lease asset and liability when it is reasonably certain we will exercise the option. In addition, certain leases contain termination options with an associated penalty. In general, the company is not reasonably certain to exercise such options.

For the measurement and classification of lease agreements, we group lease and non-lease components into a single lease component for all underlying asset classes. Variable lease payments primarily include payments for non-lease components, such as maintenance costs, payments for leased assets used beyond their non-cancelable lease term as adjusted for contractual options to terminate or renew, and payments for non-components such as sales tax. Certain leases contain immaterial variable lease payments based on usage.

The components of lease expense are as follows:

	*November 27, 2021*		*November 28, 2020*
Operating lease cost	$	11,958	$	12,581
Finance lease cost:
Amortization of assets¹		673
Interest on lease liabilities¹		110
Variable lease cost		5,990		4,024
Total net lease cost	$	18,731	$	16,605

¹ In 2020, finance leases were not material for disclosure.

Supplemental balance sheet information related to leases is as follows:

	*Location on*
	*Balance Sheet*	*November 27, 2021*		*November 28, 2020*
Operating leases:
Operating lease right-of-use assets	Other assets	$	32,744	$	28,445
Current operating lease liabilities	Other accrued expenses		8,921		8,706
Noncurrent operating lease liabilities	Other liabilities		24,061		19,498
Total operating lease liabilities		$	32,982	$	28,204

Finance leases:
Equipment right-of-use assets¹	Property, plant and equipment	$	9,455

Current obligations of finance leases¹	Other accrued expenses	$	1,109
Finance leases, net of current obligations¹	Other liabilities		7,548
Total finance lease liabilities		$	8,657

¹ In 2020, finance leases were not material for disclosure.

As of November 27, 2021, the weighted average remaining lease term is 7.2 years and the weighted average discount rate is 3.3% for the company's operating lease agreements. The weighted average remaining lease term is 10.1 years and the weighted average discount rate is 2.9% for the company's finance lease agreements.

Supplemental information related to leases is as follows:

	*November 27, 2021*		*November 28, 2020*
Cash paid amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15,251	$	13,216
Operating cash flows from finance leases¹		110
Financing cash flows from finance leases¹		546

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	20,030	$	13,166
Finance leases¹		7,630

¹ In 2020, finance leases were not material for disclosure.

Maturities of lease liabilities are as follows:

	*November 27, 2021*
Fiscal Year	*Finance Leases*			*Operating Leases*
2022	$	1,352		$	9,292
2023		1,254			7,500
2024		1,174			5,313
2025		1,171			4,009
2026		1,165			2,360
2027 and beyond		3,841			7,888
Total		9,957			36,362
Less: amounts representing interest		(1,300	)		(3,380	)
Present value of future minimum payments		8,657			32,982
Less: current obligations		(1,109	)		(8,921	)
Noncurrent lease liabilities	$	7,548		$	24,061

Rent expense for all operating leases, which includes minimum lease payments and other charges such as common area maintenance fees, was $19,618 in 2019.