Leases

3 Months Ended

Dec. 28, 2019

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease obligations on our Consolidated Balance Sheets. Our operating leases are primarily for office space, cars, servers, and office equipment. Finance leases are included in property and equipment, accrued expenses and other current liabilities, and other liabilities on our Consolidated Balance Sheets.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the leases. Right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The right-of-use assets include any lease payments made and exclude lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Our operating leases expire at various dates through 2037. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Certain office space leases require us to pay for taxes, insurance, maintenance and other operating expenses in addition to rent.

Our headquarters are located at 121 Seaport Boulevard, Boston, Massachusetts (the Boston lease). The Boston lease is for approximately 250,000 square feet and runs from January 1, 2019 through June 30, 2037. Base rent for the first year of the lease is $11.0 million and will increase by $1 per square foot per year thereafter ($0.3 million per year) with base rent first becoming payable on July 1, 2020. In addition to the base rent, PTC is required to pay its pro rata portions of building operating costs and real estate taxes (together, “Additional Rent”). Additional Rent is estimated to be approximately $7.1 million for the first year we begin paying rent. The lease provides for $25 million in landlord funding for leasehold improvements ($100 per square foot). Leasehold improvement funding provision was fully utilized by us and was reflected as a derecognition adjustment to the right-of-use asset.

The components of lease cost reflected in the Consolidate Statement of Operations for the three months ended December 28, 2019 were as follows:



(in thousands)	Three months ended
	December 28, 2019
Operating lease cost	$	8,757
Short-term lease cost	1,874
Variable lease cost	1,914
Sublease income	(1,012		)
Total lease cost	$	11,533

Other information related to leases for the three months ended December 28, 2019 was as follows:



(dollar amounts in thousands)	Three months ended
	December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,498

Right-of-use assets obtained in exchange for new operating lease liabilities	$	5,380
Right-of-use assets obtained in exchange for new financing lease liabilities	$	1,500
Weighted-average remaining lease term - operating leases	12.4 years
Weighted-average remaining lease term - financing leases	5 years
Weighted-average discount rate - operating leases	5.6		%
Weighted-average discount rate - financing leases	3.0		%

Maturities of lease liabilities as of December 28, 2019 are as follows:



(in thousands)	Operating Leases
Remainder of 2020	$	21,863
2021	30,858
2022	22,045
2023	18,939
2024	17,965
Thereafter	185,847
Total future lease payments	$	297,517
Less: imputed interest	(72,254		)
Total	$	225,263

As of December 28, 2019, we have additional operating and finance leases that have not yet commenced of $3.8 million and $1.5 million, respectively. These leases will commence in 2020 with lease terms of 7 years to 5 years.

Under the prior lease standard (ASC 840), as of September 30, 2019, future minimum lease payments under noncancellable operating leases are as follows (in thousands):



2020	$	31,868
2021	33,094
2022	25,624
2023	19,279
2024	16,909
Thereafter	186,037
Total minimum lease payments	$	312,811