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Note 6 - Leases

3 Months Ended

Jul. 27, 2019

6. LEASES

The Company leases two manufacturing facilities, warehouse and office space ("real estate"), and machinery and other equipment, including delivery vehicles, under non-cancelable operating lease agreements. The leases expire at various dates through 2027.

In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-02, "Leases" (the "lease standard"). The lease standard requires lessees to recognize a right-to-use asset and a lease liability for virtually all leases (other than leases meeting the definition of a short-term lease). The new guidance is effective for fiscal years after December 15, 2018 and interim periods beginning the following fiscal year. The Company adopted the new lease standard as of April 28,2019 using the modified retrospective method and has elected to adopt the available practical expedients as accounting policy on initial adoption of the lease standard.

Upon adoption of the lease standard on April 28, 2019, the Company recorded a right-of-use asset for operating leases and lease liabilities of $55.5 million. The adoption of the lease standard did not change previously reported consolidated statements of income, did not result in cumulative effect adjustment to retained earnings in the period of adoption and did not impact cash flows.

The Company has used the following policies and assumptions in evaluating its population of leases:

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Determining a lease - The Company assesses contracts at inception to determine whether an arrangement is or includes a lease, which conveys the Company's right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use assets and associated liabilities are recognized at the commencement date and initially measured based on the present value of the lease payments over the defined lease term.

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Allocating lease and non-lease components - The Company has elected the practical expedient to not separate lease and non-lease components for certain classes of underlying assets. The Company has certain equipment and vehicle lease agreements which generally have the lease and associated non-lease components accounted for as a single lease component. The Company has real estate lease agreements with lease and non-lease components, which are generally accounted for separately where applicable.

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Discount rate - The Company calculates the discount rate based on the Company's incremental borrowing rate using the contractual lease term.

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Lease term - The Company does not recognize leases with a contractual term of less than 12 months on the balance sheet. Lease expense for these short- term leases is expensed on a straight-line basis over the lease term.

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Rent increases or escalation clauses - Certain leases contain scheduled rent increases or escalation clauses. The Company assesses each contract individually and applies the appropriate variable payments based on the terms of the individual agreement.

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Renewal options and / or purchase options - Certain leases include renewal options to extend the lease term and / or purchase options to purchase the leased asset. The Company assesses these options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of the Company's leases do not include renewal periods or purchase options in the measurement of the right-of-use asset and the associated lease liability.

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Option to terminate - Certain leases include the option to terminate the lease prior to its scheduled expiration. This allows a contractually bound party to terminate its obligation under the lease contract, typically in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract.

The Company's weighted average remaining lease term was 4.2 years and weighted average discount rate was 3.38% as of July 27, 2019. The following is a summary of future minimum lease payments for all non-cancelable operating leases as of July 27, 2019:

	(In thousands)
Remainder of Fiscal 2020	$	10,397
Fiscal 2021		21,717
Fiscal 2022		9,894
Fiscal 2023		7,741
Fiscal 2024		4,752
Thereafter		1,703
Total minimum lease payments including interest		56,204
Less: Amounts representing interest		(3,775	)
Present value of minimum lease payments		52,429
Less: Current portion of lease liabilities		(8,874	)
Non-current portion of lease liabilities	$	43,555

Lease expense for the three months ended July 27, 2019 was $3.4 million for operating leases and $.3 million for short-term leases. The impact on cash flows from operating leases was $3.7 million for the three months ended July 27, 2019.

Our minimum lease payments under non-cancelable operating leases as of April 27, 2019 were as follows:

	(In thousands)
Fiscal 2020	$	16,105
Fiscal 2021		12,084
Fiscal 2022		9,894
Fiscal 2023		7,741
Fiscal 2024		4,510
Thereafter		1,703
Total minimum lease payments including interest	$	52,037