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Leases

12 Months Ended

Dec. 28, 2019

Adoption of Topic 842

Effective December 30, 2018, the Company adopted Topic 842 utilizing the modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption with prior periods not restated.

The primary impact for the Company was the balance sheet recognition of operating lease ROU assets and operating lease liabilities. In addition, the Company's financing lease obligations that historically did not qualify for sale leaseback accounting under ASC 840-40, “Leases - Sale-Leaseback Transactions” (“ASC 840-40”) now meet the criteria for sale under Topic 842 and are recorded as operating leases. As a result, the Company reclassified financing liabilities of $198.3 million from accrued expenses and long-term financing lease obligations and assets of $174.6 million from property, plant and equipment, net, to $23.7 million accumulated deficit adjustment reflecting the cumulative effect of an accounting change related to the sale-leasebacks.

The following table summarizes the impacts of adopting Topic 842 on the Company's consolidated balance sheet as of December 29, 2018 (in thousands):



	As Reported Balance as of December 29, 2018		Adjustments due to Topic 842			As Adjusted Balance as of December 29, 2018
Assets
Property, plant and equipment, net	$	342,820	$	(174,386	)	$	168,434
Operating lease right-of-use assets	$	—	$	78,855		$	78,855
Other non-current assets	$	14,849	$	(4,884	)	$	9,965

Liabilities
Accrued expenses and other current liabilities	$	131,891	$	(7,343	)	$	124,548
Long-term financing lease obligation	$	193,538	$	(193,538	)	$	—
Other long-term liabilities	$	68,082	$	(4,907	)	$	63,175
Operating lease liabilities - short-term	$	—	$	19,209		$	19,209
Operating lease liabilities - long-term	$	—	$	62,467		$	62,467

Equity
Accumulated deficit	$	956,970	$	(23,697	)	$	933,273

The Company has operating leases for real estate and automobiles. During the year ended December 28, 2019, operating lease expense was approximately $41.5 million (including $15.9 million of accelerated rent expense due to restructuring resulting in abandonment of lease facilities). Variable lease cost, short-term lease cost and sublease income were immaterial during the year ended December 28, 2019. As of December 28, 2019, $18.1 million was included in accrued expenses and other current liabilities and $64.2 million as long term operating lease liabilities.

The following table presents maturity of lease liabilities under the Company's non-cancelable operating leases as of December 28, 2019 (in thousands):




2020	$	24,717
2021	18,265
2022	15,488
2023	12,208
2024	10,212
Thereafter	36,124
Total lease payments	$	117,014
Less: interest⁽¹⁾	34,698
Present value of lease liabilities	$	82,316

⁽¹⁾ Calculated using the interest rate for each lease.

The following table presents supplemental information for the year ended December 28, 2019 (in thousands, except for weighted average and percentage data):



Weighted average remaining lease term	7.38
Weighted average discount rate	9.10		%
Cash paid for amounts included in the measurement of lease liabilities	$	27,027
Operating cash flow from operating leases
Leased assets obtained in exchange for new operating lease liabilities	$	21,847

ASC 840-40 Disclosures

The following table presents future minimum lease payments related to the non-cancelable portion of operating leases as of December 29, 2018 (in thousands):



	2019		2020		2021		2022		2023		Thereafter		Total
Operating lease payments	$	18,352	$	14,047	$	7,888	$	5,926	$	4,905	$	18,303	$	69,421

Financing Lease Obligations

During the year ended December 28, 2019, the Company entered into finance lease arrangements for manufacturing and facility related equipments. The lease term ranged from 3 to 5 years with option to purchase at the end of the term. Finance lease cost was approximately $0.5 million for the twelve months ended December 28, 2019 out of which $0.4 million was amortization of right of use asset and $0.1 million was interest cost. As of December 28, 2019, $1.4 million was included in accrued expenses and other current liabilities and $2.4 million as long term finance lease obligation related to these equipment finance lease arrangements.

The following table presents maturity of lease liability under the Company's finance leases as of December 28, 2019 (in thousands):




2020	$	1,563
2021	1,204
2022	936
2023	406
Thereafter	—
Total lease payments	$	4,109
Less: interest	335
Present value of lease liabilities	$	3,774

The following table presents supplemental information for the twelve months ended December 28, 2019 (in thousands, except for weighted average and percentage data):



Weighted average remaining lease term	3.03
Weighted average discount rate	7.00		%
Cash paid for amounts included in the measurement of lease liabilities	$	163
Operating cash flow from operating leases
Leased assets obtained in exchange for new finance lease liabilities	$	4,258

The Company evaluated two sale-leaseback transactions that were assumed by the Company in the Acquisition (as defined in Note 7, "Business Combination" to the Notes to Consolidated Financial Statements). It was determined that these transactions did not qualify for sale-leaseback accounting under ASC 840-40.

The Company leases a facility (land and all attached real property) in Naperville, Illinois that was sold to a third party and subsequently leased back. This was determined to be a failed sale-leaseback due to a $31.5 million imposition reimbursement payment to be made over 10 years, which was linked to the total building income generated each year. As a result of purchase accounting, the financing lease obligation was recorded at the present value of the remaining lease payments and expected value of the facility at the end of the occupancy period. The financing lease obligation will continue to be amortized over the remaining period of the lease term under ASC 840-40. The assets will continue to be depreciated over their remaining useful lives under ASC 840-40.

Additionally, the Company leases a facility (land and all attached real property) in Espoo, Finland, which was sold to a third party and subsequently leased back. The lease was determined to be a failed sale-leaseback due to the deposit being considered a form of collateral. The amount of the deposit was equal to one year of rental payments, whereas typical deposits are approximately two to three months of rental payments. As a result of purchase accounting, the financing lease obligation was recorded at the present value of the remaining lease payments and expected value of the facility at the end of the occupancy period. The financing lease

obligation will continue to be amortized over the remaining period of the lease term under ASC 840-40. The assets will continue to be depreciated over their remaining useful lives.

In conjunction with the adoption of the new lease accounting standard in the first quarter of 2019, the transactions qualified for sale-leaseback accounting under Topic 842, as control of the underlying assets was transferred to the lessor. As such, the balances of fixed assets, accrued expenses and other long-term liabilities as of the transition date related to the Naperville, Illinois and Espoo, Finland leases were reclassified to accumulated deficit as a cumulative effect of an accounting change.

Leases