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Leases | 9 Months Ended
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Sep. 27, 2019
Leases [Abstract] |
LEASES | LEASES In May 2017, we entered into a Lease Agreement (the Lease) for our corporate headquarters located at 1851, 1801 and 1751 Harbor Bay Parkway, Alameda, California (the Initial Premises). The Lease was subsequently amended in October 2017, June 2018 and April 2019, resulting in the addition of the building located at 1601 Harbor Bay Parkway and increasing the leased space to an aggregate of 169,606 square feet (the Current Premises) as of September 30, 2019. We have made certain tenant improvements to the space leased on the Initial Premises, for which we received $8.2 million in reimbursements in January 2019. The Lease’s initial term is through January 31, 2028. Rent payments began February 1, 2018, following the conclusion of a partial twelve-month rent abatement period. We have two five-year options to extend the Lease and a one-time option to terminate the Lease without cause on the last day of the 8 th year of the initial term (the Early Termination Right); none of these optional periods have been considered in the determination of the right-of-use asset or the lease liability for the Lease as we did not consider it reasonably certain that we would exercise any such options. The Lease further provides that we are obligated to pay the landlord certain variable costs, including taxes and operating expenses. The April 2019 amendment to the Lease (the Third Lease Amendment) provides, among other things, for the (i) expansion of the Initial Premises by 37,544 square feet of office facilities located at 1601 Harbor Bay Parkway, Alameda, California (the 1601 Expansion Space) and (ii) surrender of 2,703 square feet of office facilities located at 1751 Harbor Bay Parkway, Alameda, California (the 1751 Space). The term for the 1601 Expansion Space will run coterminous with the term of the Lease for the existing space. We have been provided an allowance of $1.7 million for tenant improvements to the 1601 Expansion Space. As of September 30, 2019, we have surrendered the 1751 Space and we have taken possession of the 1601 Expansion Space, and accordingly we have adjusted our right-of-use asset and lease liability, and have begun to recognize lease costs for the Third Lease Amendment. The balance sheet classification of our lease liabilities were as follows (in thousands):
| September 30, 2019 |  | December 31, 2018
Operating lease liabilities: |  |  |
Current portion included in Other current liabilities | $ | 2,695 |  |  | $ | 2,738 |
Long-term portion of lease liabilities | 23,661 |  |  | 12,099 |
Total operating lease liabilities | 26,356 |  |  | 14,837 |
Financing lease liabilities: |  |  |
Current portion included in Other current liabilities | 50 |  |  | 49 |
Long-term portion of lease liabilities | 44 |  |  | 79 |
Total financing lease liabilities | 94 |  |  | 128 |
Total lease liabilities | $ | 26,450 |  |  | $ | 14,965 |
The components of lease costs for operating leases, which were included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Income, were as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Operating lease cost | $ | 692 |  |  | $ | 1,614 |  |  | $ | 1,768 |  |  | $ | 3,587 |
Variable lease cost | 274 |  |  | 363 |  |  | 654 |  |  | 1,366 |
Total lease costs | $ | 966 |  |  | $ | 1,977 |  |  | $ | 2,422 |  |  | $ | 4,953 |
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2019 was $2.1 million and was included in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. As of September 30, 2019, the maturities of our operating lease liabilities were as follows (in thousands):
Remainder of 2019 | $ | 745 |
Years ending December 31, |
2020 | 3,625 |
2021 | 3,731 |
2022 | 3,852 |
2023 | 3,959 |
Thereafter | 17,444 |
Total lease payments | 33,356 |
Less: |
Present value adjustment | (5,258 | )
Tenant improvement reimbursements (1) | (1,742 | )
Operating lease liabilities | $ | 26,356 |
____________________
(1) | Represents anticipated tenant improvement reimbursements applicable to the portion of the 1601 Expansion Space.
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, we use our incremental borrowing rate. The weighted average discount rate used to determine the operating lease liability was 4.20%. As of September 30, 2019, the weighted average remaining lease term is 8.3 years.
LEASES | LEASES In May 2017, we entered into a Lease Agreement (the Lease) for our corporate headquarters located at 1851, 1801 and 1751 Harbor Bay Parkway, Alameda, California (the Initial Premises). The Lease was subsequently amended in October 2017, June 2018 and April 2019, resulting in the addition of the building located at 1601 Harbor Bay Parkway and increasing the leased space to an aggregate of 169,606 square feet (the Current Premises) as of September 30, 2019. We have made certain tenant improvements to the space leased on the Initial Premises, for which we received $8.2 million in reimbursements in January 2019. The Lease’s initial term is through January 31, 2028. Rent payments began February 1, 2018, following the conclusion of a partial twelve-month rent abatement period. We have two five-year options to extend the Lease and a one-time option to terminate the Lease without cause on the last day of the 8 th year of the initial term (the Early Termination Right); none of these optional periods have been considered in the determination of the right-of-use asset or the lease liability for the Lease as we did not consider it reasonably certain that we would exercise any such options. The Lease further provides that we are obligated to pay the landlord certain variable costs, including taxes and operating expenses. The April 2019 amendment to the Lease (the Third Lease Amendment) provides, among other things, for the (i) expansion of the Initial Premises by 37,544 square feet of office facilities located at 1601 Harbor Bay Parkway, Alameda, California (the 1601 Expansion Space) and (ii) surrender of 2,703 square feet of office facilities located at 1751 Harbor Bay Parkway, Alameda, California (the 1751 Space). The term for the 1601 Expansion Space will run coterminous with the term of the Lease for the existing space. We have been provided an allowance of $1.7 million for tenant improvements to the 1601 Expansion Space. As of September 30, 2019, we have surrendered the 1751 Space and we have taken possession of the 1601 Expansion Space, and accordingly we have adjusted our right-of-use asset and lease liability, and have begun to recognize lease costs for the Third Lease Amendment. The balance sheet classification of our lease liabilities were as follows (in thousands):
| September 30, 2019 |  | December 31, 2018
Operating lease liabilities: |  |  |
Current portion included in Other current liabilities | $ | 2,695 |  |  | $ | 2,738 |
Long-term portion of lease liabilities | 23,661 |  |  | 12,099 |
Total operating lease liabilities | 26,356 |  |  | 14,837 |
Financing lease liabilities: |  |  |
Current portion included in Other current liabilities | 50 |  |  | 49 |
Long-term portion of lease liabilities | 44 |  |  | 79 |
Total financing lease liabilities | 94 |  |  | 128 |
Total lease liabilities | $ | 26,450 |  |  | $ | 14,965 |
The components of lease costs for operating leases, which were included in Selling, general and administrative expenses in our Condensed Consolidated Statements of Income, were as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Operating lease cost | $ | 692 |  |  | $ | 1,614 |  |  | $ | 1,768 |  |  | $ | 3,587 |
Variable lease cost | 274 |  |  | 363 |  |  | 654 |  |  | 1,366 |
Total lease costs | $ | 966 |  |  | $ | 1,977 |  |  | $ | 2,422 |  |  | $ | 4,953 |
Cash paid for amounts included in the measurement of lease liabilities for the nine months ended September 30, 2019 was $2.1 million and was included in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows. As of September 30, 2019, the maturities of our operating lease liabilities were as follows (in thousands):
Remainder of 2019 | $ | 745 |
Years ending December 31, |
2020 | 3,625 |
2021 | 3,731 |
2022 | 3,852 |
2023 | 3,959 |
Thereafter | 17,444 |
Total lease payments | 33,356 |
Less: |
Present value adjustment | (5,258 | )
Tenant improvement reimbursements (1) | (1,742 | )
Operating lease liabilities | $ | 26,356 |
____________________
(1) | Represents anticipated tenant improvement reimbursements applicable to the portion of the 1601 Expansion Space.
Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, we use our incremental borrowing rate. The weighted average discount rate used to determine the operating lease liability was 4.20%. As of September 30, 2019, the weighted average remaining lease term is 8.3 years.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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