LEASES

9 Months Ended

Jul. 02, 2021

LEASES

LEASES

NOTE 12—LEASES

Operating Leases

IEC has a lease portfolio that consists of operating leases for equipment, and has remaining terms from less than one year to up to approximately three years, with contractual terms expiring from 2022 to 2024. None of these leases contain residual value guarantees, substantial restrictions, or covenants.

Supplemental balance sheet information related to the Company’s operating leases were as follows:

	July 2,		September 30,
Operating Leases	2021		2020
Weighted average remaining lease term for operating leases (in years)	3.0		3.8
Weighted average discount rate for operating leases	5.47	%	5.47	%

Finance Leases

IEC’s lease portfolio also consists of finance leases for equipment and real estate, and has remaining terms of four years up to approximately fourteen years, with contractual terms expiring in 2024 through 2035.

Supplemental balance sheet information related to the Company’s finance leases were as follows:

	July 2,			September 30,
Finance Leases	2021			2020
Finance lease right-of-use assets, net of accumulated amortization (included in PP&E) (in thousands)	$	31,319		$	6,329
Weighted average remaining lease term for finance leases (in years)		12.1			11.3
Weighted average discount rate for finance leases		3.52	%		4.83	%

In November 2020 the Company commenced a lease for the Property located in Newark, New York, which includes a new state-of-the art manufacturing facility and administrative offices. The lease for the property has an initial term of 15 years with one renewal option of 10 years, resulting in a ROU asset of $19.1 million. The Company entered into a finance lease under our Master Lease for certain equipment and leasehold improvements to be located at the property resulting in a ROU asset of $6.5 million during the nine months ended July 2, 2021. The equipment and leasehold improvements are included in property, plant and equipment on the condensed consolidated balance sheets. The Master Lease is described in Note 6—Credit Facilities.

Lease Expense

The components of lease expense, recorded in cost of sales, selling and administrative expenses and interest expense in the condensed consolidated statements of operations, during the three and nine months ended July 2, 2021 and June 26, 2020 were as follows:

		Three Months Ended				Nine Months Ended
		July 2,		June 26,		July 2,		June 26,
Lease Expense	Classification	2021		2020		2021		2020
(in thousands)
Operating lease expense
Fixed payment operating lease expense (1)	Cost of sales	$	31	$	62	$	161	$	155
Fixed payment operating lease expense	Selling and administrative expenses		6		1		25		31
Finance lease expense
Depreciation of ROU assets	Cost of sales		557		131		1,383		404
Depreciation of ROU assets	Selling and administrative expenses		33		—		89		—
Interest	Interest expense		250		87		718		261
Total lease expense		$	877	$	281	$	2,376	$	851

⁽¹⁾     Includes short-term leases which are not material.

Supplemental Cash Flow Information

Supplemental cash flow information related to the Company’s leases during the three and nine months ended July 2, 2021 and June 26, 2020 were as follows:

	Nine Months Ended
	July 2,		June 26,
Supplemental Cash Flow	2021		2020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Cash paid for operating lease ROU assets	$	55	$	65
Interest paid on finance leases		718		261
Lease liabilities arising from obtaining ROU assets:
Operating leases		—		33
Finance leases	$	19,142	$	—

Contractual Lease Payments

A summary of operating lease payments for the next five years follows:

	Contractual
	Lease
Operating Lease Payment Schedule	Payments
(in thousands)
Twelve months ending fiscal third quarter
2022	$	73
2023		71
2024		71
2025		1
2026 and thereafter		—
Total operating lease payments		216
Less: amounts representing interest		(17)
Total operating lease obligation	$	199

A summary of finance lease payments for the next five years follows:

	Contractual
	Lease
Finance Lease Payment Schedule	Payments
(in thousands)
Twelve months ending fiscal third quarter
2022	$	3,162
2023		3,260
2024		3,273
2025		3,351
2026 and thereafter		26,389
Total finance lease payments		39,435
Less: amounts representing interest		(7,665)
Total finance lease obligation	$	31,770