Note 4. Leases

On June 29, 2019, the first day of our fiscal 2020, we adopted ASC 842 using the modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to the opening balance of accumulated deficit to be recognized on the date of adoption with prior periods not restated.

We lease facilities under non-cancelable operating lease agreements. These leases have varying terms that range from one to 20 years and contain leasehold improvement incentives, rent holidays and escalation clauses. In addition, some of these leases have renewal options for up to 3 years.

We determine if an arrangement contains a lease at inception. These operating leases are included in "Right of use assets" on our September 27, 2019 unaudited condensed consolidated balance sheets and represent our right to use the underlying asset for the lease term. Our obligation to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our September 27, 2019 unaudited condensed consolidated balance sheets. We did not enter into any finance leases during the quarter ended September 27, 2019.

Operating lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we used the incremental borrowing rate based on the remaining lease term at commencement date in determining the present value of future payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. Variable lease payments are expensed as incurred and are not included within the ROU asset and lease liability calculation. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Certain of our lease arrangements include non-lease components and we account for non-lease components together with lease components for all such lease arrangements.

Leases with an initial term of 12 months or less are not recorded on our balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Adoption of ASC 842

Upon our adoption of ASC 842, we recorded total ROU assets of $7.9 million, with corresponding liabilities of $8.3 million, on our unaudited condensed consolidated balance sheets. The ROU assets include adjustments for prepayments and accrued lease payments. The adoption did not impact our prior year condensed consolidated statements of operations and statements of cash flows. As of September 27, 2019, total ROU assets were approximately $6.7 million, and short-term lease liabilities and long-term lease liabilities were approximately $4.2 million and $2.8 million, respectively. Cash paid for lease liabilities was $1.3 million for the three months ended September 27, 2019.

The following summarizes our lease costs, lease term and discount rate for the three months ended September 27, 2019 (in thousands, except for weighted average):



	Amount
	(In thousands)
Operating lease costs	$	320
Short-term lease costs	484
Variable lease costs	63
Total lease costs	$	867



Weighted average remaining lease term	4.5 years
Weighted average discount rate	6.6	%

As of September 27, 2019, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):



	Amount
	(In thousands)
Remainder of 2020	$	3,965
2021	1,505
2022	468
2023	230
2024	231
Thereafter	2,011
Total lease payments	8,410
Less: interest	(1,410		)
Present value of lease liabilities	$	7,000

Prior to our adoption of the new lease accounting standard, as of June 28, 2019, our future minimum lease payments under all non-cancelable operating leases were as follows:



Fiscal years	Amount
	(In thousands)
2020	$	2,052
2021	1,268
2022	456
2023	243
2024	249
Thereafter	2,090
Total	$	6,358