Leases

12 Months Ended

Jun. 28, 2020

Leases [Abstract]

Leases

Leases

The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. On July 1, 2019 the Company adopted ASC 842.  Refer to Note 3 - Recent Accounting Pronouncements for additional information regarding the adoption. While the majority of the Company’s lease arrangements are operating leases, the Company has certain leases that qualify as finance leases.

The components of lease expense were as follows for the year ended June 28, 2020 (in thousands):

Financing lease cost:
Amortization of right-of-use assets	$	3,613
Interest on lease liabilities	506
Total finance lease cost	$	4,119
Operating lease cost	$	46,101
Variable lease cost	91,851

Variable lease payments are expensed as incurred and are not included within the right of use asset and lease liability calculation. Variable lease payments primarily include costs associated with the Company’s third party logistics arrangements that contain one or more embedded leases. Variable lease costs will fluctuate based on factory output and material receipt volumes. Short-term rental expense, for agreements less than one year in duration, were immaterial for the twelve months ended June 28, 2020.

Supplemental cash flow information related to leases was as follows as of June 28, 2020 (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	50,223
Financing cash flows paid for principal portion of finance leases	3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	108,816
Finance leases	3,019

Supplemental balance sheet information related to leases were as follows as of June 28, 2020 (in thousands):

Operating leases
Other assets	$	174,583
Accrued expenses and other current liabilities	$	49,480
Other long-term liabilities	123,889
Total operating lease liabilities	$	173,369
Finance Leases
Property and Equipment, net	$	18,409
Current portion of long-term debt and lease liabilities	$	3,770
Long-term debt and lease liabilities	11,477
Total finance lease liabilities	$	15,247

	June 28, 2020
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)
Operating leases	9.0	2.57	%
Finance leases	4.1	2.79	%

As of June 28, 2020, the maturities of lease liabilities are as follows:

	Operating Leases			Finance Leases
	(in thousands)
2021	$	50,611		$	4,170
2022	31,178			6,709
2023	22,446			1,541
2024	18,279			1,080
2025	14,761			617
Thereafter	49,660			2,304
Total lease payments	$	186,935		$	16,421
Less imputed interest	(13,566		)	(1,174		)
Total	$	173,369		$	15,247

Selected Operating Leases and Related Guarantees

The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable operating leases. Certain of the Company’s facility leases for buildings located at its Fremont, California headquarters; Tualatin, Oregon campus; and certain other facility leases provide the Company with options to extend the leases for additional periods or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based on the general rate of inflation. The Company’s rental expense for facilities occupied during fiscal years 2019, and 2018 was $28.1 million, and $23.5 million, respectively.

The Company has operating leases regarding certain improved properties in Fremont and Livermore, California (the “California Operating Leases”). The Company is required to maintain cash collateral in an aggregate of approximately $250 million in separate interest-bearing accounts as security for the Company’s obligations. These amounts are recorded with other restricted cash and investments in the Company’s Consolidated Balance Sheet as of June 28, 2020.

During the term of the California Operating Leases and when the terms of the California Operating Leases expire, the property subject to those Operating Leases may be re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate guarantee made by the Company under the California Operating Leases is generally no more than $220.4 million; however, under certain default circumstances, the guarantee with regard to the California Operating Lease may be 100% of the lessor’s aggregate investment in the applicable property, which in no case will exceed $250.0 million, in the aggregate.

Leases

Leases

The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. On July 1, 2019 the Company adopted ASC 842.  Refer to Note 3 - Recent Accounting Pronouncements for additional information regarding the adoption. While the majority of the Company’s lease arrangements are operating leases, the Company has certain leases that qualify as finance leases.

The components of lease expense were as follows for the year ended June 28, 2020 (in thousands):

Financing lease cost:
Amortization of right-of-use assets	$	3,613
Interest on lease liabilities	506
Total finance lease cost	$	4,119
Operating lease cost	$	46,101
Variable lease cost	91,851

Variable lease payments are expensed as incurred and are not included within the right of use asset and lease liability calculation. Variable lease payments primarily include costs associated with the Company’s third party logistics arrangements that contain one or more embedded leases. Variable lease costs will fluctuate based on factory output and material receipt volumes. Short-term rental expense, for agreements less than one year in duration, were immaterial for the twelve months ended June 28, 2020.

Supplemental cash flow information related to leases was as follows as of June 28, 2020 (in thousands):

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	50,223
Financing cash flows paid for principal portion of finance leases	3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	108,816
Finance leases	3,019

Supplemental balance sheet information related to leases were as follows as of June 28, 2020 (in thousands):

Operating leases
Other assets	$	174,583
Accrued expenses and other current liabilities	$	49,480
Other long-term liabilities	123,889
Total operating lease liabilities	$	173,369
Finance Leases
Property and Equipment, net	$	18,409
Current portion of long-term debt and lease liabilities	$	3,770
Long-term debt and lease liabilities	11,477
Total finance lease liabilities	$	15,247

	June 28, 2020
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)
Operating leases	9.0	2.57	%
Finance leases	4.1	2.79	%

As of June 28, 2020, the maturities of lease liabilities are as follows:

	Operating Leases			Finance Leases
	(in thousands)
2021	$	50,611		$	4,170
2022	31,178			6,709
2023	22,446			1,541
2024	18,279			1,080
2025	14,761			617
Thereafter	49,660			2,304
Total lease payments	$	186,935		$	16,421
Less imputed interest	(13,566		)	(1,174		)
Total	$	173,369		$	15,247

Selected Operating Leases and Related Guarantees

The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable operating leases. Certain of the Company’s facility leases for buildings located at its Fremont, California headquarters; Tualatin, Oregon campus; and certain other facility leases provide the Company with options to extend the leases for additional periods or to purchase the facilities. Certain of the Company’s facility leases provide for periodic rent increases based on the general rate of inflation. The Company’s rental expense for facilities occupied during fiscal years 2019, and 2018 was $28.1 million, and $23.5 million, respectively.

The Company has operating leases regarding certain improved properties in Fremont and Livermore, California (the “California Operating Leases”). The Company is required to maintain cash collateral in an aggregate of approximately $250 million in separate interest-bearing accounts as security for the Company’s obligations. These amounts are recorded with other restricted cash and investments in the Company’s Consolidated Balance Sheet as of June 28, 2020.

During the term of the California Operating Leases and when the terms of the California Operating Leases expire, the property subject to those Operating Leases may be re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate guarantee made by the Company under the California Operating Leases is generally no more than $220.4 million; however, under certain default circumstances, the guarantee with regard to the California Operating Lease may be 100% of the lessor’s aggregate investment in the applicable property, which in no case will exceed $250.0 million, in the aggregate.