NOTE 1

LEASE FINANCING OBLIGATIONS

We have acquired licenses to engineering design tools (“Design Tools”) under capital leases. We acquired licenses to Design Tools of $6.9 million in January 2015 under a two-year license and two three-year licenses with prepayment of $1.0 million, $4.4 million in October 2014 under a three-year license with a prepayment of $1.5 million for the first year license and $0.9 million in July 2012 under a three-year license all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item in the consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets as of July 3, 2016 and March 27, 2016, respectively. The effective interest rates for the Design Tools range from 2.0% to 7.25%.

Amortization expense related to the Design Tools, which was recorded using the straight-line method over the remaining useful life for the periods indicated below, was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	878	$	1,073

During the three months ended July 3, 2016, we recorded an impairment charge of $1.5 million and a restructuring expense of $0.4 million associated with a portion of these Design Tools.

Future minimum lease and sublease income payments for the lease financing obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Design tools
2017 (9 months remaining)	$	3,950
2018		1,529
Total minimum lease payments		5,479
Less: amount representing interest		(851	)
Present value of future minimum lease payments		4,628
Less: short-term lease financing obligations		(3,772	)
Long-term lease financing obligations	$	856

Interest expense for the lease financing obligations for the periods indicated below was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Interest expense	$	38	$	48

In the course of our business, we enter into arrangements accounted for as operating leases related to rental of office space. Rent expenses for all operating leases for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Rent expense	$	100	$	181

Our future minimum lease payments for the lease operating obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Facilities
2017 (9 months remaining)	$	1,277
2018		1,239
2019		155
2020		49
Total future minimum lease payments	$	2,720

We sold our Fremont Campus in May 2016 for a net sales price of $24.1 million. Our Fremont Campus consists of approximately 151,000 square feet of office space and 4.5 acres of partially developed property adjacent to the buildings. Pursuant to the agreement, we have simultaneously leased back a portion of the Real Property through December 2017.

Under the Lease Agreement, our financial obligations include a base monthly rent of $86,338 per month for the property located at 48720 Kato Road, and an additional monthly rent of $600 with respect to the portion of the building located at 48710 Kato Road, Fremont, California. We are also responsible for our monthly share of certain expenses related to the leased facilities, including our share of insurance premiums, taxes and common area expenses. We generated a gain on sale of $11.9 million as a result of this sale and leaseback transaction, $2.6 million of the gain has been deferred and is being recognized on a straight-line basis over the term of the lease. During the three months ended July 3, 2016, we recognized amortization of the deferred gain of $0.2 million, which was reflected as reduction of rent in the accompanying condensed consolidated statement of operations. Based on the terms of the agreement, we have classified and are accounting for the

lease as an operating lease. The classification as an operating lease required judgment and estimates in developing key assumptions that include, but are not limited to, the lease term, the discount rate used in discounting future lease payments and the economic useful life of the asset.