Leases

12 Months Ended

Oct. 01, 2022

The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either finance or operating leases. Real estate leases generally include office, warehouse and manufacturing facilities and non-real estate leases generally include office equipment and vehicles. The Company determines if a contract is or contains a lease at inception. The Company’s leases have remaining lease terms of less than 1 year to 38 years. Renewal options that are deemed reasonably certain are included as part of the lease term for purposes of calculating the right-of-use (“ROU”) asset and lease liability. Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease. The Company elected the practical expedient to not separate lease and nonlease components, as such nonlease components are included in the calculation of the ROU asset and lease liability and included in the lease expense over the term of the lease. The Company uses a discount rate to calculate the ROU asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

Operating lease ROU assets and lease liabilities are recorded on the date the Company takes possession of the leased assets with expense recognized on a straight-line basis over the lease term. Leases with an estimated total term of 12 months or less are not recorded on the balance sheet and the lease expense is recognized on a straight-line basis over the lease term. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants.

The components of lease expense for fiscal years indicated were as follows (in thousands):


	2022		2021		2020
Finance lease expense:
Amortization of right-of-use assets	$	6,478	$	6,290	$	4,380
Interest on lease liabilities	4,927		4,888		4,956
Operating lease expense	11,278		11,034		11,707
Other lease expense	6,185		4,794		3,401
Total	$	28,868	$	27,006	$	24,444

Based on the nature of the ROU asset, amortization of finance right-of-use assets, operating lease expense and other lease expense are recorded within either cost of goods sold or selling and administrative expenses and interest on finance lease liabilities is recorded within interest expense on the Consolidated Statements of Comprehensive Income. Other lease expense includes lease expense for leases with an estimated total term of twelve months or less and variable lease expense related to variations in lease payments as a result of a change in factors or circumstances occurring after the lease possession date.

The following tables sets forth the amount of lease assets and lease liabilities included in the Company’s Consolidated Balance Sheets (in thousands):


	Financial Statement Line Item	2022		2021
ASSETS
Finance lease assets	Property, plant and equipment, net	$	40,063	$	38,657
Operating lease assets	Operating lease right-of-use assets	65,134		72,087
Total lease assets		$	105,197	$	110,744

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Finance lease liabilities	Current portion of long-term debt and finance lease obligations	$	5,087	$	4,616
Operating lease liabilities	Other accrued liabilities	7,948		9,877
Non-current
Finance lease liabilities	Long-term debt and finance lease obligations, net of current portion	39,257		36,919
Operating lease liabilities	Long-term operating lease liabilities	33,628		37,970
Total lease liabilities		$	85,920	$	89,382

Other information related to the Company’s leases was as follows:


	2022		2021
Weighted-average remaining lease term (in years)
Finance leases	11.1		11.6
Operating leases	17.6		17.4
Weighted-average discount rate
Finance leases	17.1	%	17.4	%
Operating leases	2.6	%	2.5	%


	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities (in thousands)
Operating cash flows used in finance leases	$	4,630	$	4,571	$	4,539
Operating cash flows used in operating leases	10,278		10,667		10,907
Finance cash flows used in finance leases	6,148		5,734		3,321
ROU assets obtained in exchange for lease liabilities (in thousands)
Operating leases	$	4,710	$	11,897	$	7,692
Finance leases	7,851		4,253		2,835

Future minimum lease payments required under finance and operating leases as of October 1, 2022, were as follows (in thousands):


	Operating leases		Finance leases
2023	$	9,502	$	10,246
2024	7,810		7,531
2025	6,209		6,967
2026	5,594		5,137
2027	4,461		5,216
Thereafter	14,526		84,389
Total minimum lease payments	48,102		119,486
Less: imputed interest	(6,526)		(75,142)
Present value of lease liabilities	$	41,576	$	44,344

As of October 1, 2022, the Company’s future operating leases that have not yet commenced are immaterial.