LEASES

6 Months Ended

Jul. 01, 2023

LEASES

LEASES

NOTE 9 – LEASES

The Company leases land, office and shop space, and equipment. Arrangements are assessed at inception to determine if a lease exists and, with the adoption of ASC 842, “Leases,” right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of lease payments over the lease term. Because the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate at the inception of a lease to calculate the present value of lease payments. The Company has elected to apply the short-term lease exception for all asset classes, excluding lease liabilities from the balance sheet and recognizing the lease payments in the period they are incurred.

The components of lease expense were as follows (dollars in thousands):

		Three Months Ended				Six Months Ended
	Financial Statement Classification	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Finance leases:
Amortization expense	SG&A Expense	$	61	$	53	$	115	$	106
Interest expense	Interest expense, net		13		11		26		22
Total finance lease expense			74		64		141		128
Operating leases:
Operating costs	Operating costs		252		58		687		103
Selling, general and administrative expenses	SG&A Expense		619		465		1,209		876
Total operating lease expense			871		523		1,896		979
Total lease expense		$	945	$	587	$	2,037	$	1,107

Supplemental balance sheet information related to leases was as follows (dollars in thousands):

	Financial Statement Classification	July 1, 2023		December 31, 2022
ROU Assets:
Operating leases	Right of use asset	$	7,205	$	8,072
Finance leases	Property and equipment, net		930		761
Total ROU Assets:		$	8,135	$	8,833
Lease liabilities:
Current liabilities
Operating leases	Current portion of leases	$	1,320	$	1,638
Finance leases	Current portion of leases		276		211
Noncurrent Liabilities:
Operating leases	Long-term leases		6,161		6,669
Finance leases	Long-term leases		659		548
Total lease liabilities		$	8,416	$	9,066

The weighted average remaining lease term and weighted average discount rate were as follows:

	At July 1, 2023
Weighted average remaining lease term (years)
Operating leases		7.1
Finance leases		3.6
Weighted average discount rate
Operating leases		10.9	%
Finance leases		10.1	%

Maturities of operating lease liabilities as of July 1, 2023 are as follows (dollars in thousands):

Years ending:	Operating leases			Finance leases			Total
2023 (remaining months)		908			161			1,069
2024		1,323			301			1,624
2025		1,140			264			1,404
2026		918			234			1,152
2027 and thereafter		4,112			80			4,192
Total lease payments		8,401			1,040			9,441
Less: imputed interest		(920	)		(105	)		(1,025	)
Total lease liabilities		7,481		$	935		$	8,416