Leases

12 Months Ended

Jun. 25, 2023

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 25, 2023, June 26, 2022, and June 27, 2021:

	Year Ended
	June 25, 2023		June 26, 2022		June 27, 2021
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,899	$	7,439	$	7,131
Interest on lease liabilities	863		658		697
Total finance lease cost	$	8,762	$	8,097	$	7,828
Operating lease cost	$	75,660	$	69,250	$	51,519
Variable lease cost	227,726		259,041		219,040

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 25, 2023, June 26, 2022, and June 27, 2021, respectively.

Supplemental cash flow information related to leases was as follows as of June 25, 2023, June 26, 2022, and June 27, 2021:

	Year Ended
	June 25, 2023		June 26, 2022		June 27, 2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	74,397	$	64,808	$	63,895
Financing cash flows paid for principal portion of finance leases	14,985		11,513		5,952
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	91,592	$	121,580	$	48,993
Finance leases	20,161		13,868		29,497

Supplemental balance sheet information related to leases was as follows as of June 25, 2023 and June 26, 2022:

	June 25, 2023		June 26, 2022
	(in thousands)
Operating leases
Other assets	$	242,656	$	226,648
Accrued expenses and other current liabilities	$	64,682	$	54,110
Other long-term liabilities	172,886		164,613
Total operating lease liabilities	$	237,568	$	218,723
Finance Leases
Property and Equipment, net	$	53,721	$	42,153
Current portion of long-term debt and lease liabilities	$	7,937	$	7,381
Long-term debt and lease liabilities, less current portion	38,239		35,990
Total finance lease liabilities	$	46,176	$	43,371

	June 25, 2023			June 26, 2022
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	4.9	3.80	%	5.4	3.05	%
Finance leases	5.2	2.56	%	6.4	2.01	%

As of June 25, 2023, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2024	$	72,035	$	8,796
2025	53,620		7,867
2026	41,303		7,429
2027	30,264		7,025
2028	22,748		12,617
Thereafter	44,718		5,444
Total lease payments	$	264,688	$	49,178
Less imputed interest	(27,120)		(3,002)
Total	$	237,568	$	46,176

Selected Leases and Related Guarantees

The Company leases the some 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 Sheets as of June 25, 2023 and June 26, 2022.

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. During the fiscal year ended June 25, 2023, the Company recognized an immaterial liability associated with one of the leased properties in other long-term liabilities in its Consolidated Balances Sheets, as a result of an annual assessment of potential liability under the residual value guarantee arrangements.

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 25, 2023, June 26, 2022, and June 27, 2021:

	Year Ended
	June 25, 2023		June 26, 2022		June 27, 2021
	(in thousands)
Financing lease cost:
Amortization of right-of-use assets	$	7,899	$	7,439	$	7,131
Interest on lease liabilities	863		658		697
Total finance lease cost	$	8,762	$	8,097	$	7,828
Operating lease cost	$	75,660	$	69,250	$	51,519
Variable lease cost	227,726		259,041		219,040

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 25, 2023, June 26, 2022, and June 27, 2021, respectively.

Supplemental cash flow information related to leases was as follows as of June 25, 2023, June 26, 2022, and June 27, 2021:

	Year Ended
	June 25, 2023		June 26, 2022		June 27, 2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	74,397	$	64,808	$	63,895
Financing cash flows paid for principal portion of finance leases	14,985		11,513		5,952
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	91,592	$	121,580	$	48,993
Finance leases	20,161		13,868		29,497

Supplemental balance sheet information related to leases was as follows as of June 25, 2023 and June 26, 2022:

	June 25, 2023		June 26, 2022
	(in thousands)
Operating leases
Other assets	$	242,656	$	226,648
Accrued expenses and other current liabilities	$	64,682	$	54,110
Other long-term liabilities	172,886		164,613
Total operating lease liabilities	$	237,568	$	218,723
Finance Leases
Property and Equipment, net	$	53,721	$	42,153
Current portion of long-term debt and lease liabilities	$	7,937	$	7,381
Long-term debt and lease liabilities, less current portion	38,239		35,990
Total finance lease liabilities	$	46,176	$	43,371

	June 25, 2023			June 26, 2022
	Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate		Weighted-Average Remaining Lease Term	Weighted-Average Discount Rate
	(in years)			(in years)
Operating leases	4.9	3.80	%	5.4	3.05	%
Finance leases	5.2	2.56	%	6.4	2.01	%

As of June 25, 2023, the maturities of lease liabilities are as follows:

	Operating Leases		Finance Leases
	(in thousands)
2024	$	72,035	$	8,796
2025	53,620		7,867
2026	41,303		7,429
2027	30,264		7,025
2028	22,748		12,617
Thereafter	44,718		5,444
Total lease payments	$	264,688	$	49,178
Less imputed interest	(27,120)		(3,002)
Total	$	237,568	$	46,176

Selected Leases and Related Guarantees

The Company leases the some 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 Sheets as of June 25, 2023 and June 26, 2022.

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. During the fiscal year ended June 25, 2023, the Company recognized an immaterial liability associated with one of the leased properties in other long-term liabilities in its Consolidated Balances Sheets, as a result of an annual assessment of potential liability under the residual value guarantee arrangements.