Leases

12 Months Ended

Oct. 03, 2020

LEASES

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.

In fiscal 2020, we completed a sale-leaseback transaction for our Hamburg, Germany facility in which we sold the buildings for a purchase price, net of expenses, of $19.6 million and leased back a portion of the facilities with lease terms from 6 to 15 years with early termination provisions after 3 and 5 years, respectively. The sale qualified for sale-leaseback operating lease accounting classification and we recorded a gain, net of selling costs, on the transaction of $2.2 million, which is recorded in selling, general and administrative expense in the consolidated statements of operations. We also recorded operating lease right of use assets of $5.1 million and corresponding operating lease liabilities of $5.1 million. The non-cash portion of the gain of $4.0 million is included in Other non-cash expense (gain) within cash flows from operations in our consolidated statements of cash flows.

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


	Fiscal
	2020
Operating lease cost	$	19,629
Variable lease cost	1,421
Short-term lease cost	459
Sublease income	(126)
Total lease cost	$	21,383


	Fiscal year-end
	2020
Weighted average remaining lease term	7.8
Weighted average discount rate	4.9	%

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


	Fiscal year-end
	2020
Operating cash outflows from operating leases	$	19,391
ROU assets obtained in exchange for new operating lease liabilities	10,884

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

Maturities of our operating lease liabilities, which do not include short-term leases and variable lease payments at October 3, 2020 are as follows (in thousands):


	Operating Leases
2021	$	18,781
2022	17,909
2023	15,627
2024	12,107
2025	10,844
2026 and thereafter	36,902
Total minimum lease payments	112,170
Amounts representing interest	(21,540)
Present value of total operating lease liabilities	$	90,630

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


	Amount
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

Rent expense was $22.9 million and $22.1 million in fiscal 2019, and 2018, respectively.