Annual report pursuant to Section 13 and 15(d)

Leases

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Leases
12 Months Ended
Nov. 01, 2020
Leases [Abstract]  
Leases Leases
The Company adopted ASC 842, Leases on November 4, 2019 using the modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize ROU assets and lease liabilities for short-term leases that have a term of 12 months or less.

The Company’s material operating leases consist of branch locations, as well as corporate office space. Our leases have remaining terms of 1 - 11 years. The lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal option periods. Volt determines if an arrangement meets the criteria of a lease at inception, at which time it also performs an analysis to determine whether the lease qualifies as operating or financing. The Company does not currently have any finance leases.
Upon adoption, the Company recorded approximately $47.2 million of ROU assets and $52.0 million of lease liabilities related to operating leases in the Consolidated Balance Sheet. At transition, the ROU asset was measured at the initial amount of the lease liability adjusted for any deferred rent and cease-use liabilities. The Company also recognized a $22.2 million cumulative-effect adjustment to retained earnings related to the deferred gain on the sale and leaseback of real estate. This gain was previously being amortized at approximately $0.5 million per quarter as an offset to rent expense in the Consolidated Statements of Operations. Since the Company has a full valuation allowance against its deferred tax assets, the impact is a reduction to our deferred tax assets and related valuation allowance, which resulted in no tax impact to the net change to equity.
Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent Volt's right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. As the rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases.
The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead account for each as a single lease component, for all underlying asset classes. Some leasing
arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.
Operating leases are included in Right of use assets - operating leases and Operating lease liabilities, current and long-term, in the Consolidated Balance Sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term and is included in Selling, administrative and other operating costs in the Consolidated Statement of Operations. During fiscal 2020, cash paid for the amount that was included in the measurement of operating lease liabilities was $11.6 million and the ROU assets obtained in exchange for operating lease liabilities was $2.0 million.
The components of lease expense were as follows (in thousands): Year Ended
November 1, 2020
Operating lease expense $ 10,990 
Sublease income (1,577)
Variable lease expense 760 
Total (1) (2)
$ 10,173 
(1) Approximately $0.3 million of lease expense is included in restructuring.
(2) The Company has minimal short-term lease expense.

Weighted average remaining lease terms and discount rates were as follows: Year Ended
November 1, 2020
Weighted average remaining lease term (years) 7.97
Weighted average discount rate 6.3  %

Maturities of operating lease liabilities as of November 1, 2020 were as follows (in thousands):
Fiscal Year: Amount
2021 $ 9,638 
2022 8,073 
2023 6,936 
2024 5,610 
2025 5,255 
Thereafter 22,895 
Total future lease payments $ 58,407 
Less: Imputed interest 13,031 
Total operating lease liabilities $ 45,376 

Maturities of operating leases accounted for under ASC 840 as of fiscal year-end 2019 were as follows (in thousands):
Fiscal Year: Amount
2020 $ 11,782 
2021 9,287 
2022 7,457 
2023 6,328 
2024 5,486 
Thereafter 28,422 
Total future lease payments $ 68,762