Note 6 - Leases

12 Months Ended

Dec. 02, 2023

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note 6: Leases

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:

	December 2, 2023		December 3, 2022
Operating lease cost	$	13,883	$	12,026
Finance lease cost:
Amortization of assets		2,045		1,535
Interest on lease liabilities		1,077		261
Variable lease cost		8,554		6,481
Total net lease cost	$	25,559	$	20,303

Supplemental balance sheet information related to leases is as follows:

	Location on
	Balance Sheet	December 2, 2023		December 3, 2022
Operating leases:
Operating lease right-of-use assets	Other assets	$	47,433	$	32,440
Current operating lease liabilities	Other accrued expenses		11,277		9,794
Noncurrent operating lease liabilities	Other liabilities		36,879		23,421
Total operating lease liabilities		$	48,156	$	33,215
Finance leases:
Equipment right-of-use assets	Property, plant and equipment	$	11,681	$	11,150
Building right-of-use asset	Property, plant and equipment	$	14,230	$	-
Current obligations of finance leases	Other accrued expenses	$	16,184	$	1,541
Finance leases, net of current obligations	Other liabilities		6,534		7,507
Total finance lease liabilities		$	22,718	$	9,048

As of December 2, 2023, the weighted average remaining lease term is 9.4 years and the weighted average discount rate is 4.2% for the company's operating lease agreements. The weighted average remaining lease term is 4.0 years and the weighted average discount rate is 5.9% for the company's finance lease agreements.

Supplemental information related to leases is as follows:

	December 2, 2023		December 3, 2022
Cash paid amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	11,745	$	15,209
Operating cash flows from finance leases		1,077		261
Financing cash flows from finance leases		268		607
Non-cash investing and financing activities -
additions to right-of-use assets obtained from:
New operating lease liabilities	$	26,687	$	15,442
New finance lease liabilities		15,015		1,258

Maturities of lease liabilities are as follows:

	December 2, 2023
Fiscal Year	Finance Leases			Operating Leases
2024	$	16,535		$	12,993
2025		1,618			9,452
2026		1,441			7,085
2027		1,151			5,126
2028		684			3,505
2029 and beyond		2,376			18,869
Total		23,805			57,031
Less: amounts representing interest		(1,087	)		(8,875	)
Present value of future minimum payments		22,718			48,156
Less: current obligations		(16,184	)		(11,277	)
Noncurrent lease liabilities	$	6,534		$	36,879