LEASES

6 Months Ended

May 03, 2020

NOTE 7 – LEASES

We adopted Accounting Standards Update (“ASU”) 2016-02 and all subsequent amendments, collectively codified in ASC Topic 842 “Leases” (“Topic 842”), on November 1, 2019. The guidance requires modified retrospective adoption, either at the beginning of the earliest period presented or at the beginning of the period of adoption. We elected to apply the guidance at the beginning of the period of adoption and recorded, as of November 1, 2019, right-of-use (ROU) leased assets of $6.5 million. In conjunction with this, we recorded lease liabilities, which had been discounted at our incremental borrowing rates, of $6.5 million.

The guidance allows a number of elections and practical expedients, of which we elected the following:

Election not to recognize short-term leases on the balance sheet.

Practical expedient to not separate lease and non-lease components in a contract.

Practical expedient “package” for transitioning to the new guidance:

Not reassessing whether any expired or existing contracts are, or contain, leases.

Not reassessing lease classification for any existing or expired leases.

Not reassessing initial direct costs for any existing leases.

Our involvement in lease arrangements has typically been as a lessee. We determine if an agreement is or contains a lease on the date of the lease agreement or commitment, if earlier. Our evaluation considers whether the arrangement includes an identified asset and whether it affords us the right to control the asset. Our having the right to control the identified asset is determined by whether we are entitled to substantially all of its economic benefits and can direct its use.

We recognize leases on our consolidated balance sheet when a lessor makes an asset underlying a lease having a term in excess of twelve months available for our use. The present value of lease payments over the term of the lease, which is determined using our incremental borrowing rate for collateralized loans at the commencement date of the lease, provides the basis for the initial measurement of ROU assets and their related lease liabilities. Variable lease payments, other than those that are dependent on an index or on a rate, are not included in the measurement of ROU assets and their related lease liabilities. Lease terms will include extension periods if the lease agreement includes an option to extend the lease that we are reasonably certain to exercise.

ROU assets underlying our leases include the land and facilities of some of our operating facilities, other real property, and machinery and equipment. As of May 3, 2020, we had ROU assets under operating leases of $6.5 million, included in “Other Assets”, and $1.8 and $4.1 million of lease liabilities, included in Accrued liabilities and Other liabilities, respectively. The following tables present lease payments under non-cancellable leases as of May 3, 2020.

	Fiscal Year
	2020		2021		2022		2023		2024		Thereafter		Total Lease Payments		Imputed Interest*			Total
Lease payments	$	996	$	1,802	$	1,686	$	787	$	444	$	391	$	6,106	$	(255	)	$	5,851

*Imputed interest represents difference between undiscounted cash flows and discounted cash flows.

The following table presents lease costs for the three and six-month periods ended May 3, 2020.

	Three Months Ended		Six Months Ended
	May 3, 2020		May 3, 2020

Operating lease costs	$	633	$	1,797
Short-tern lease costs	$	102	$	212
Variable lease costs	$	129	$	129

Presented below is other information related to our operating leases.

Supplemental cash flows information:
	Three Months Ended		Six Months Ended
	May 3, 2020		May 3, 2020

Operating cash flows used for operating leases	$	502	$	2,387
ROU assets obtained in exchange for lease obligations	$	58	$	340

	As of
	May 3, 2020

Weighted-average remaining lease term	3.7 years
Weighted-average discount rate		2.41	%

Rent expense, as calculated under guidance in effect prior to our adoption of the new leases guidance, was $3.0 million in fiscal year 2019. At October 31, 2019, future minimum lease payments under non-cancelable operating leases with initial terms in excess of one year were as presented in the table below. The amounts are undiscounted and were calculated in accordance with guidance in effect prior to our adoption of the new leases guidance.

2020	$	1,885
2021		1,613
2022		1,535
2023		742
2024		424
Thereafter		377
	$	6,576