Leases

9 Months Ended

Jul. 04, 2020

We determine if an arrangement contains a lease at inception for arrangements with an initial term of more than 12 months, and classify it as either a finance or operating lease. We lease certain real and personal property from unrelated third parties under non-cancellable operating leases that expire at various dates through fiscal 2032. These operating leases are mainly for administrative offices, research-and-development and manufacturing facilities, as well as sales offices in various countries around the world. Certain leases require us to pay property taxes, insurance and routine maintenance, and include escalation clauses. Many leases include one or more options to renew. We assume renewals in our determination of the lease term when the renewals are deemed to be reasonably assured at lease commencement. We have also entered into various finance leases to obtain servers and certain other equipment for our operations. These arrangements are typically for three to six years. Our assets, liabilities and lease costs related to finance leases are immaterial.

As the rates implicit in our leases are not readily determinable, we use incremental borrowing rates based on the information available at the commencement date in determining the present value of future lease payments. We consider both the credit rating and the length of the lease when calculating the incremental borrowing rate. We combine lease and non-lease components into a single lease component for both our operating and finance leases.

For the purpose of lease liability measurement, we consider only payments that are fixed and determinable at the time of commencement. Any variable payments that depend on an index or rate are expensed as incurred.

We generally recognize sublease income on a straight-line basis over the sublease term.

As a result of interim impairment testing performed on long-lived assets in the quarter ended April 4, 2020, we recorded non-cash pre-tax charges related to the ROU assets of the ILS reporting unit of $1.8 million in the quarter ended April 4, 2020. See Note 8, "Goodwill and Intangible Assets" for discussion of the interim impairment testing.

The components of operating lease costs (in thousands), lease term (in years) and discount rate are as follows:


	Three Months Ended		Nine Months Ended
	July 4, 2020		July 4, 2020
Operating lease cost	$	4,907	$	14,875
Variable lease cost	348		1,036
Short-term lease cost	123		383
Sublease income	(32)		(96)
Total lease cost	$	5,346	$	16,198


	July 4, 2020
Weighted average remaining lease term	8.1
Weighted average discount rate	4.9	%

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


	Nine Months Ended
	July 4, 2020
Operating cash outflows from operating leases	$	14,672
ROU assets obtained in exchange for new operating lease liabilities	2,746

See Note 9, "Balance Sheet Details" for supplemental balance sheet information related to leases.

As of July 4, 2020, maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments, are as follows (in thousands):


	Operating Leases
2020 (remainder)	$	3,788
2021	17,582
2022	15,871
2023	12,632
2024	10,128
2025 and thereafter	45,631
Total minimum lease payments	105,632
Amounts representing interest	(21,575)
Present value of total lease liabilities	$	84,057

As of September 28, 2019, future minimum lease payments as defined under the previous lease accounting guidance of ASC 840 under non-cancellable operating leases were as follows (in thousands):


	Operating Leases
2020	$	19,578
2021	14,579
2022	10,405
2023	6,817
2024	4,156
2025 and thereafter	10,755
Total minimum lease payments	$	66,290

LEASES