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Note R - Leases

12 Months Ended

Sep. 26, 2020

NOTE R – LEASES

General Lease Description

We have operating leases with initial noncancelable lease terms in excess of one year covering the rental of various facilities and equipment. Certain of these leases contain renewal options and some provide options to purchase during the lease term. Our operating lease include leases for real estate from some of our office and manufacturing facilities as well as manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these operating leases range from 1 month to 15 years.

We have finance leases with initial noncancelable lease terms in excess of one year covering the rental of various equipment. These leases are generally for manufacturing and non-manufacturing equipment used in our business. The remaining lease terms for these finance leases range from 1 year to 5 years.

Significant Assumptions and Judgments

Contract Contains a Lease

In evaluating our contracts to determine whether a contract is or contains a lease, we considered the following:

•

Whether explicitly or implicitly identified assets have been deployed in the contract; and

•

Whether we obtain substantially all of the economic benefits from the use of that underlying asset, and we can direct how and for what purpose the asset is used during the term of the contract.

Allocation of Consideration

In determining how to allocate consideration between lease and non-lease components in a contract that was deemed to contain a lease, we used judgment and consistent application of assumptions to reasonably allocate the consideration.

Options to Extend or Terminate Leases

We have leases which contain options to extend or terminate the leases. On a lease-by-lease basis, we have determined if the extension should be considered reasonably certain to be exercised and thus a right-of-use asset and a lease liability should be recorded.

Discount Rate

The discount rate for leases, if not explicitly stated in the lease, is the incremental borrowing rate, which is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We used a discount rate to calculate the present value of the lease liability at the date of adoption. In the development of the discount rate, we considered our internal borrowing rate, treasury security rates, collateral and credit risk specific to us, and our lease portfolio characteristics.

As of September 26, 2020, the weighted-average discount rate of our operating and finance leases was 3.3% and 3.1%, respectively.

Practical Expedients and Accounting Policy Elections

We elected the package of practical expedients that permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs and made an accounting policy election to exclude short-term leases with an initial term of 12 months or less from our Consolidated Balance Sheets.

Amounts Recognized in the Financial Statements

The components of lease expense were as follows:

	Twelve Months Ended
	September 26, 2020
Operating lease cost in Cost of goods sold and Operating Expenses	$	17,250
Finance lease cost:
Amortization of assets in Cost of goods sold and Operating Expenses	$	337
Interest on lease liabilities in Interest expense & other		29
Total finance lease cost	$	366
Short-term lease cost in Cost of goods sold and Operating Expenses		-
Total net lease cost	$	17,616

Supplemental balance sheet information related to leases is as follows:

	September 26, 2020
Operating Leases
Operating lease right-of-use assets	$	58,110

Current operating lease liabilities	$	13,173
Noncurrent operating lease liabilities		47,688
Total operating lease liabilities	$	60,861

Finance Leases
Finance lease right-of-use assets in Property, plant and equipment, net	$	684

Current finance lease liabilities	$	349
Noncurrent finance lease liabilities		368
Total finance lease liabilities	$	717

$6.9 million of right of use assets was impaired in our foodservice segment, which represents the full right-of-use asset value of the lease of a Midwest manufacturing plant in which the lease was terminated.

Supplemental cash flow information related to leases is as follows:

	Twelve Months Ended
	September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17,324
Operating cash flows from finance leases	$	340
Financing cash flows from finance leases	$	29

Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets	$	685
Supplemental noncash information on lease liabilities removed due to purchase of leased asset	$	-

As of September 26, 2020, the maturities of lease liabilities were as follows:

	Operating Leases			Finance Leases
2021	$	14,765		$	369
2022		12,491			168
2023		10,637			98
2024		8,263			98
2025		5,204			26
Thereafter		16,288			-
Total minimum payments	$	67,649		$	759
Less amount representing interest		(6,788	)		(42	)
Present value of lease obligations	$	60,861		$	717

As of September 26, 2020, the weighted-average remaining term of our operating and finance leases was 7.1 years and 3.5 years, respectively.

As previously disclosed in our 2019 Annual Report on Form 10-K and under the previous lease accounting standard (Topic 840), as of September 28, 2019, future minimum lease payments under noncancelable leases with initial lease terms in excess of one year were as follows:

	Operating Leases		Capital Leases
2020	$	14,814	$	339
2021		12,686		349
2022		10,491		156
2023		8,971		91
2024		6,988		95
Thereafter		25,588		27
Total minimum payments	$	79,538	$	1,057
Less amount representing interest				-
Present value of capital lease obligations			$	1,057