Leases

12 Months Ended

Jun. 26, 2022

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 26, 2022, June 27, 2021, and June 28, 2020:

	Year Ended
	June 26, 2022		June 27, 2021		June 28, 2020
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,439	$	7,131	$	3,613
Interest on lease liabilities	658		697		506
Total finance lease cost	$	8,097	$	7,828	$	4,119
Operating lease cost	$	69,250	$	51,519	$	46,101
Variable lease cost	259,041		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 26, 2022, June 27, 2021, and June 28, 2020, respectively.

Supplemental cash flow information related to leases was as follows as of June 26, 2022, June 27, 2021, and June 28, 2020:

	Year Ended
	June 26, 2022		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	$	64,808	$	63,895	$	50,223
Financing cash flows paid for principal portion of finance leases	11,513		5,952		3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	121,580	$	48,993	$	108,816
Finance leases	13,868		29,497		3,019

Supplemental balance sheet information related to leases were as follows as of June 26, 2022 and June 27, 2021:

	June 26, 2022		June 27, 2021
	(in thousands)
Operating leases
Other assets	$	226,648	$	173,784
Accrued expenses and other current liabilities	$	54,110	$	45,310
Other long-term liabilities	164,613		118,385
Total operating lease liabilities	$	218,723	$	163,695
Finance Leases
Property and Equipment, net	$	42,153	$	44,054
Current portion of long-term debt and lease liabilities	$	7,381	$	11,349
Long-term debt and lease liabilities, less current portion	35,990		29,398
Total finance lease liabilities	$	43,371	$	40,747

	June 26, 2022			June 27, 2021
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	5.4	3.05	%	5.5	2.30	%
Finance leases	6.4	2.01	%	5.3	1.69	%

As of June 26, 2022, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2023	$	58,785	$	8,094
2024	46,383		7,861
2025	34,910		7,124
2026	28,305		7,165
2027	21,643		6,790
Thereafter	50,754		9,657
Total lease payments	$	240,780	$	46,691
Less imputed interest	(22,057)		(3,320)
Total	$	218,723	$	43,371

Selected Leases and Related Guarantees

The Company leases the majority of its administrative, research and development 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 has finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility 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 26, 2022 and June 27, 2021.

During the seven-year 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.

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 26, 2022, June 27, 2021, and June 28, 2020:

	Year Ended
	June 26, 2022		June 27, 2021		June 28, 2020
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,439	$	7,131	$	3,613
Interest on lease liabilities	658		697		506
Total finance lease cost	$	8,097	$	7,828	$	4,119
Operating lease cost	$	69,250	$	51,519	$	46,101
Variable lease cost	259,041		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 26, 2022, June 27, 2021, and June 28, 2020, respectively.

Supplemental cash flow information related to leases was as follows as of June 26, 2022, June 27, 2021, and June 28, 2020:

	Year Ended
	June 26, 2022		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	$	64,808	$	63,895	$	50,223
Financing cash flows paid for principal portion of finance leases	11,513		5,952		3,539
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	121,580	$	48,993	$	108,816
Finance leases	13,868		29,497		3,019

Supplemental balance sheet information related to leases were as follows as of June 26, 2022 and June 27, 2021:

	June 26, 2022		June 27, 2021
	(in thousands)
Operating leases
Other assets	$	226,648	$	173,784
Accrued expenses and other current liabilities	$	54,110	$	45,310
Other long-term liabilities	164,613		118,385
Total operating lease liabilities	$	218,723	$	163,695
Finance Leases
Property and Equipment, net	$	42,153	$	44,054
Current portion of long-term debt and lease liabilities	$	7,381	$	11,349
Long-term debt and lease liabilities, less current portion	35,990		29,398
Total finance lease liabilities	$	43,371	$	40,747

	June 26, 2022			June 27, 2021
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	5.4	3.05	%	5.5	2.30	%
Finance leases	6.4	2.01	%	5.3	1.69	%

As of June 26, 2022, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2023	$	58,785	$	8,094
2024	46,383		7,861
2025	34,910		7,124
2026	28,305		7,165
2027	21,643		6,790
Thereafter	50,754		9,657
Total lease payments	$	240,780	$	46,691
Less imputed interest	(22,057)		(3,320)
Total	$	218,723	$	43,371

Selected Leases and Related Guarantees

The Company leases the majority of its administrative, research and development 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 has finance leases for certain improved properties in Fremont and Livermore, California (the “California Facility 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 26, 2022 and June 27, 2021.

During the seven-year 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.