Leases

12 Months Ended

Jun. 27, 2021

Leases [Abstract]

Leases

Leases

The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. 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 years ended June 27, 2021 and June 28, 2020:

	Year Ended
	June 27, 2021		June 28, 2020
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,131	$	3,613
Interest on lease liabilities	697		506
Total finance lease cost	$	7,828	$	4,119
Operating lease cost	$	51,519	$	46,101
Variable lease cost	219,040		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 27, 2021 and June 28, 2020, respectively.

Supplemental cash flow information related to leases was as follows as of June 27, 2021 and June 28, 2020:

	Year Ended
	June 27, 2021		June 28, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	63,895	$	50,223
Financing cash flows paid for principal portion of finance leases	5,952		3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	48,993	108,816
Finance leases	29,497		3,019

Supplemental balance sheet information related to leases were as follows as of June 27, 2021 and June 28, 2020:

	June 27, 2021		June 28, 2020
	(in thousands)
Operating leases
Other assets	$	173,784	$	174,583
Accrued expenses and other current liabilities	$	45,310	$	49,480
Other long-term liabilities	118,385		123,889
Total operating lease liabilities	$	163,695	$	173,369
Finance Leases
Property and Equipment, net	$	44,054	$	18,409
Current portion of long-term debt and lease liabilities	$	11,349	$	3,770
Long-term debt and lease liabilities, less current portion	29,398		11,477
Total finance lease liabilities	$	40,747	$	15,247

	June 27, 2021			June 28, 2020
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	5.5	2.30	%	9.0	2.57	%
Finance leases	5.3	1.69	%	4.1	2.79	%

As of June 27, 2021, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2022	$	48,487	$	11,870
2023	32,774		6,438
2024	22,756		5,882
2025	17,803		5,152
2026	12,702		5,062
Thereafter	38,628		8,244
Total lease payments	$	173,150	$	42,648
Less imputed interest	(9,455)		(1,901)
Total	$	163,695	$	40,747

Selected Leases and Related Guarantees

The Company had leases regarding certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) that were classified as operating leases as of June 28, 2020. On September 21, 2020, the Company renewed these leases for an additional seven-year term, and concluded the modified leases are finance leases, and recognized approximately $31.4 million of property and equipment, net, for the associated right of use assets, and $29.8 million of finance lease obligations ($3.1 million classified in current portion of long-term debt and finance lease obligations and the remainder in long-term debt and finance lease obligations, less current portion). 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 27, 2021 and June 28, 2020.

During the term of the California Facility Leases and when the terms of the California Facility Leases expire, the property subject to the California Facility Leases may be re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate maximum guarantee made by the Company under the California Facility Leases is $298.4 million.

The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable 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 year 2019 was $28.1 million.

Leases

Leases

The Company leases certain office spaces, manufacturing and warehouse spaces, equipment, and vehicles. 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 years ended June 27, 2021 and June 28, 2020:

	Year Ended
	June 27, 2021		June 28, 2020
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,131	$	3,613
Interest on lease liabilities	697		506
Total finance lease cost	$	7,828	$	4,119
Operating lease cost	$	51,519	$	46,101
Variable lease cost	219,040		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 27, 2021 and June 28, 2020, respectively.

Supplemental cash flow information related to leases was as follows as of June 27, 2021 and June 28, 2020:

	Year Ended
	June 27, 2021		June 28, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	63,895	$	50,223
Financing cash flows paid for principal portion of finance leases	5,952		3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	48,993	108,816
Finance leases	29,497		3,019

Supplemental balance sheet information related to leases were as follows as of June 27, 2021 and June 28, 2020:

	June 27, 2021		June 28, 2020
	(in thousands)
Operating leases
Other assets	$	173,784	$	174,583
Accrued expenses and other current liabilities	$	45,310	$	49,480
Other long-term liabilities	118,385		123,889
Total operating lease liabilities	$	163,695	$	173,369
Finance Leases
Property and Equipment, net	$	44,054	$	18,409
Current portion of long-term debt and lease liabilities	$	11,349	$	3,770
Long-term debt and lease liabilities, less current portion	29,398		11,477
Total finance lease liabilities	$	40,747	$	15,247

	June 27, 2021			June 28, 2020
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	5.5	2.30	%	9.0	2.57	%
Finance leases	5.3	1.69	%	4.1	2.79	%

As of June 27, 2021, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2022	$	48,487	$	11,870
2023	32,774		6,438
2024	22,756		5,882
2025	17,803		5,152
2026	12,702		5,062
Thereafter	38,628		8,244
Total lease payments	$	173,150	$	42,648
Less imputed interest	(9,455)		(1,901)
Total	$	163,695	$	40,747

Selected Leases and Related Guarantees

The Company had leases regarding certain improved properties in Fremont and Livermore, California (the “California Facility Leases”) that were classified as operating leases as of June 28, 2020. On September 21, 2020, the Company renewed these leases for an additional seven-year term, and concluded the modified leases are finance leases, and recognized approximately $31.4 million of property and equipment, net, for the associated right of use assets, and $29.8 million of finance lease obligations ($3.1 million classified in current portion of long-term debt and finance lease obligations and the remainder in long-term debt and finance lease obligations, less current portion). 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 27, 2021 and June 28, 2020.

During the term of the California Facility Leases and when the terms of the California Facility Leases expire, the property subject to the California Facility Leases may be re-marketed. The Company has guaranteed to the lessor that each property will have a certain minimum residual value. The aggregate maximum guarantee made by the Company under the California Facility Leases is $298.4 million.

The Company leases the majority of its administrative, R&D and manufacturing facilities, regional sales/service offices, and certain equipment under non-cancelable 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 year 2019 was $28.1 million.