XML 32 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Leases
12 Months Ended
May 31, 2020
Leases [Abstract]  
Leases Leases
Operating Leases
The Company has entered into various non-cancellable operating lease agreements for manufacturing and distribution facilities, vehicles, equipment and office space. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Landec leases land, facilities, and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2040. Certain of these leases have renewal options.
Finance Leases
On September 3, 2015, Lifecore leased an 80,950 square foot building in Chaska, MN, two miles from its current facility. The initial term of the lease is seven years with two five-year renewal options. The lease contains a buyout option at any time after year seven with the purchase price equal to the mortgage balance on the lessor’s loan secured by the building. Gross assets recorded under finance leases, included in Property and equipment, net, were $3.8 million as of both May 31, 2020 and May 26, 2019. Accumulated amortization associated with finance leases was $0.5 million and $0.4 million as of May 31, 2020 and May 26, 2019, respectively. The monthly lease payment was initially $34,000 and increases by 2.4% per year. Lifecore and the lessor made capital improvements prior to occupancy and thus the lease did not become effective until January 1, 2016. Lifecore is currently using the building for warehousing and final packaging.
The components of lease cost were as follows:
Year Ended
(In thousands, except term and discount rate)May 31, 2020
Finance lease cost:
Amortization of leased assets$116  
Interest on lease liabilities358  
Operating lease cost6,343  
Variable lease cost and other1,951  
Total lease cost$8,768  
Weighted-average remaining lease term:
Operating leases11.06
Finance leases2.60
Weighted-average discount rate:
Operating leases5.24%
Finance leases10.00%

The Company’s leases have original lease periods ending between 2021 and 2040. The Company’s maturity analysis of operating and finance lease liabilities as of May 31, 2020 are as follows:

(in thousands)Operating LeasesFinance LeasesTotal
Fiscal year 2021$5,615  $455  $6,070  
Fiscal year 20224,5004664,966
Fiscal year 20233,8093,4977,306
Fiscal year 20243,13793,146
Fiscal year 20252,50122,503
Thereafter17,72117,721
Total lease payments37,2834,42941,712
Less: interest(10,043)(868)(10,911)
Present value of lease liabilities27,2403,56130,801
Less: current obligation of lease liabilities(4,298)(125)(4,423)
Total long-term lease liabilities$22,942  $3,436  $26,378  

The future minimum annual lease payments required under the Company’s existing operating lease agreements as of May 26, 2019 prior to the adoption of ASC 842 were as follows:
(in thousands)Operating Leases
Fiscal year 2020$5,056  
Fiscal year 20214,044  
Fiscal year 20223,589  
Fiscal year 20233,350  
Fiscal year 20243,047  
Thereafter9,335  
Total$28,421  

Rent expense for operating leases, including month to month arrangements was $7.3 million and $6.1 million for the fiscal years 2019 and 2018, respectively, and is recorded in Selling, general, and administrative expenses.
The future minimum annual lease payments required under the Company’s existing capital lease agreements as of May 26, 2019, prior to the adoption of ASC 842 were as follows:

(in thousands)Capital Leases
Fiscal year 2020$486  
Fiscal year 2021489  
Fiscal year 2022460  
Fiscal year 20233,490  
Fiscal year 2024—  
Thereafter—  
Total minimum lease payment4,925  
Less: amounts representing interest and taxes(1,291) 
Total3,634  
Less: current portion included in other accrued liabilities(102) 
Long-term capital lease obligation$3,532  

Supplemental cash flow information related to leases are as follows:
Year Ended
(in thousands)May 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $7,853
Operating cash flows from finance leases 328
Financing cash flows from finance leases 118
Lease liabilities arising from obtaining right-of-use assets:
Operating leases $3,752
Leases Leases
Operating Leases
The Company has entered into various non-cancellable operating lease agreements for manufacturing and distribution facilities, vehicles, equipment and office space. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Landec leases land, facilities, and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year 2040. Certain of these leases have renewal options.
Finance Leases
On September 3, 2015, Lifecore leased an 80,950 square foot building in Chaska, MN, two miles from its current facility. The initial term of the lease is seven years with two five-year renewal options. The lease contains a buyout option at any time after year seven with the purchase price equal to the mortgage balance on the lessor’s loan secured by the building. Gross assets recorded under finance leases, included in Property and equipment, net, were $3.8 million as of both May 31, 2020 and May 26, 2019. Accumulated amortization associated with finance leases was $0.5 million and $0.4 million as of May 31, 2020 and May 26, 2019, respectively. The monthly lease payment was initially $34,000 and increases by 2.4% per year. Lifecore and the lessor made capital improvements prior to occupancy and thus the lease did not become effective until January 1, 2016. Lifecore is currently using the building for warehousing and final packaging.
The components of lease cost were as follows:
Year Ended
(In thousands, except term and discount rate)May 31, 2020
Finance lease cost:
Amortization of leased assets$116  
Interest on lease liabilities358  
Operating lease cost6,343  
Variable lease cost and other1,951  
Total lease cost$8,768  
Weighted-average remaining lease term:
Operating leases11.06
Finance leases2.60
Weighted-average discount rate:
Operating leases5.24%
Finance leases10.00%

The Company’s leases have original lease periods ending between 2021 and 2040. The Company’s maturity analysis of operating and finance lease liabilities as of May 31, 2020 are as follows:

(in thousands)Operating LeasesFinance LeasesTotal
Fiscal year 2021$5,615  $455  $6,070  
Fiscal year 20224,5004664,966
Fiscal year 20233,8093,4977,306
Fiscal year 20243,13793,146
Fiscal year 20252,50122,503
Thereafter17,72117,721
Total lease payments37,2834,42941,712
Less: interest(10,043)(868)(10,911)
Present value of lease liabilities27,2403,56130,801
Less: current obligation of lease liabilities(4,298)(125)(4,423)
Total long-term lease liabilities$22,942  $3,436  $26,378  

The future minimum annual lease payments required under the Company’s existing operating lease agreements as of May 26, 2019 prior to the adoption of ASC 842 were as follows:
(in thousands)Operating Leases
Fiscal year 2020$5,056  
Fiscal year 20214,044  
Fiscal year 20223,589  
Fiscal year 20233,350  
Fiscal year 20243,047  
Thereafter9,335  
Total$28,421  

Rent expense for operating leases, including month to month arrangements was $7.3 million and $6.1 million for the fiscal years 2019 and 2018, respectively, and is recorded in Selling, general, and administrative expenses.
The future minimum annual lease payments required under the Company’s existing capital lease agreements as of May 26, 2019, prior to the adoption of ASC 842 were as follows:

(in thousands)Capital Leases
Fiscal year 2020$486  
Fiscal year 2021489  
Fiscal year 2022460  
Fiscal year 20233,490  
Fiscal year 2024—  
Thereafter—  
Total minimum lease payment4,925  
Less: amounts representing interest and taxes(1,291) 
Total3,634  
Less: current portion included in other accrued liabilities(102) 
Long-term capital lease obligation$3,532  

Supplemental cash flow information related to leases are as follows:
Year Ended
(in thousands)May 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $7,853
Operating cash flows from finance leases 328
Financing cash flows from finance leases 118
Lease liabilities arising from obtaining right-of-use assets:
Operating leases $3,752