Leases (Notes)

12 Months Ended

Dec. 28, 2019



4.	Leases

The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and marketing and research and development offices. For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the term. The Company's leases typically include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts and excludes all variable lease payments from the measurement of right-of-use assets and lease liabilities. The Company's variable lease payments generally include usage based nonlease components. The Company's lease agreements do not contain any residual

value guarantees or restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term.

The Company's existing leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at December 30, 2018 (date of initial application) or the lease commencement date for new leases post adoption. At December 28, 2019, the Company's weighted average discount rate was 3.61%, while the weighted average remaining lease term was 9.21 years.

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



	December 28, 2019
Operating lease cost	$	8,777
Variable lease cost	4,096
Total lease cost	$	12,873

Rental expense under operating leases for fiscal years 2018 and 2017 amounted to $12.9 million and $8.9 million, respectively.

Supplemental cash flow information related to leases was as follows (in thousands):



	December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,540
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	53,227

Maturities of operating lease liabilities were as follows as of December 28, 2019 (in thousands):




2020	$	8,936
2021	8,263
2022	7,592
2023	7,145
2024	6,308
Thereafter	34,957
Total minimum lease payments	$	73,201
Less: imputed interest	11,430
Present value of future minimum lease payments	$	61,771
Less: current portion of operating lease liabilities (Note 9)	6,843
Long-term lease liabilities	$	54,928

Financial Statement Impact of Adopting ASC 842

The Company adopted ASC 842 effective December 30, 2018 using the alternative transition method. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company elected the practical expedient to use hindsight in determining lease term. The adoption of the new standard resulted in the recognition of right-of-use assets and lease liabilities of approximately $52.8 million and $67.3 million, respectively. The standard did not materially impact the Company's consolidated income or cash flows.