Note I - Leases

6 Months Ended

Jun. 28, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE I – LEASES

The Company accounts for leases under ASC Topic 842, Leases, which was adopted on January 1, 2019.  The Company’s leasing activities include roles as both lessee and lessor.  As lessee, the Company’s primary leasing activities include buildings and structures to support its manufacturing operations at one location in its Defense segment, and warehouse space and equipment to support its distribution center operations in its Housewares/Small Appliances segment.  As lessor, the Company’s primary leasing activity is comprised of manufacturing and office space located adjacent to its corporate offices.  All of the Company’s leases are classified as operating leases.

The Company’s leases as lessee in its Defense segment provide for variable lease payments that are based on changes in the Consumer Price Index.  As lessor, the Company’s primary lease also provides for variable lease payments that are based on changes in the Consumer Price Index, as well as on increases in costs of insurance, real estate taxes, and utilities related to the leased space. Generally, all of the Company’s lease contracts provide for options to extend and terminate them.  The majority of lease terms of the Company’s lease contracts reflect extension options, while none reflect termination options.

The Company has determined that the rates implicit in its leases are not readily determinable and therefore, estimates its incremental borrowing rates utilizing quotes from financial institutions for real estate and equipment, as applicable, over periods of time similar to the terms of its leases. The Company has entered into various short-term (12 months or less) leases as lessee and has elected a non-recognition accounting policy, as permitted by ASC Topic 842.

	3 Months Ending		3 Months Ending		6 Months Ending		6 Months Ending
Summary of Lease Cost (in thousands)	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Operating lease cost	$	183	$	168	$	361	$	336
Short-term and variable lease cost		108		57		206		80
Total lease cost	$	291	$	225	$	567	$	416

Operating cash used for operating leases was $291,000 and $567,000 for the three and six months ended June 28, 2020, respectively.  The weighted-average remaining lease term was 7.0 years, and the weighted-average discount rate was 5.6% as of June 28, 2020.

Maturities of operating lease liabilities are as follows:

Years ending December 31:	(In thousands)
2020 (remaining six months)	$	359
2021		716
2022		719
2023		574
2024		468
Thereafter		1,386
Total lease payments	$	4,222
Less: future interest expense		756
Lease liabilities	$	3,466

Lease income from operating lease payments was $463,000 and $444,000 for the quarters ended June 28, 2020 and June 30, 2019, respectively.  Undiscounted cash flows provided by lease payments are expected as follows:

Years ending December 31:	(In thousands)
2020 (remaining six months)	$	926
2021		1,839
2022		1,832
2023		1,832
2024		1,832
Thereafter		14,656
Total lease payments	$	22,917

The Company considers risk associated with the residual value of its leased real property to be low, given the nature of the long-term lease agreement, the Company’s ability to control the maintenance of the property, and the creditworthiness of the lessee.  The residual value risk is further mitigated by the long-lived nature of the property, and the propensity of such assets to hold their value or, in some cases, appreciate in value.