17.

Leases

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

02,

Leases (Topic

842

)

, which requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than

months and requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. The accounting applied by a lessor is largely unchanged from that applied under the prior standard. After the issuance of Topic

842,

the FASB clarified the guidance through several ASUS; hereinafter the collection of lease guidance is referred to as “ASC

842”.

December 30, 2018,

the Company adopted ASC

842

using the modified retrospective method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning

December 30, 2018

are presented under ASC

842,

while prior period amounts were

not

adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC

840,

Leases

. The standard had a material impact on the Company’s Consolidated Condensed Balance Sheet but did

not

have a significant impact on the Company’s consolidated net earnings and cash flows. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. For leases that commenced before the effective date of ASC

842,

the Company elected the permitted practical expedients to

not

reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. Consequently, financial information will

not

be updated, and the disclosures required under the new standard will

not

be provided for dates before

December 30, 2018.

As a result of the cumulative impact of adopting ASC

842,

the Company recorded operating lease ROU assets of

$3.9

million and operating lease liabilities of

$4.1

million as of

December 30, 2018,

primarily related to real estate and office equipment leases, based on the present value of the future lease payments on the date of adoption.

The Company determines if an arrangement is a lease at inception. For leases where the Company is the lessee, ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do

not

provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments

The ROU asset also consists of any lease incentives received. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. The Company has lease agreements which require payments for lease and non-lease components. The Company has elected to account for these as a single lease component with the exception of its real estate leases.

The components of lease expense were as follows:

	Twenty-Six Week Period Ended June 29, 2019

Operating lease cost	$	989


Amortization of ROU assets	$	146
Interest on lease liabilities		3
Total finance lease cost	$	149

Supplemental Cash Flow information related to leases was as follows:

	Twenty-Six Week Period Ended June 29, 2019

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	940
Operating cash flows from finance leases		3
Financing cash flows from finance leases		144

Right of use assets obtained in exchange for lease obligations
Operating leases		6,983
Finance leases		-

Supplemental Balance Sheet information related to leases was as follows:

Operating leases
Operating lease right of use assets	$	6,101

Other current liabilities	$	(2,093	)
Operating lease liabilities		(4,267	)
Total operating lease liabilities	$	(6,360	)

Finance leases
Property and equipment - (ROU assets)	$	874
Accumulated depreciation		(315	)
Property and equipment, net	$	559

Other current liabilities	$	(291	)
Other long term liabilities		(270	)
Total finance lease liabilities	$	(561	)

Weighted average remaining lease term
Operating leases (years)		2.15
Finance leases (years)		1.95

Weighted average discount rate
Operating leases		4.04	%
Finance leases		.90	%

Maturities of lease liabilities are as follows:

Fiscal Year Ending	Operating Leases			Finance Leases
2019	$	1,195		$	148
2020		1,994			287
2021		1,445			132
2022		1,148			-
2023		877			-
Thereafter		186			-

Total lease payments		6,845			567
Less: imputed interest		(485	)		(6	)
Total	$	6,360		$	561