Leases

We adopted ASC 842, "Leases," effective on December 30, 2018, the first day of our 2019 fiscal year, using the modified retrospective transition method. The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. We elected the "package of practical expedients" that would allow us to carryforward our historical lease classifications, not reassess historical contracts to determine if they contain leases, and not reassess the initial direct costs for any existing leases. We also elected the practical expedient to not separate lease and non-lease components. Concurrent with our adoption of Topic 842, we have early adopted ASU 2019-01, Leases (Topic 842): Codification Improvements, which grants disclosure relief for interim periods during the year in which a company adopts Topic 842.

Right-of-use ("ROU") 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 lease. Operating lease ROU assets and liabilities are recognized on the commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. At inception, we determine if an arrangement is a lease, if it includes options to extend or terminate the lease, and if it is reasonably certain that we will exercise the options. Lease cost, representing lease payments over the term of the lease and any capitalizable direct costs less any incentives received, is recognized on a straight-line basis over the lease term as lease expense. We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center.

Our leases have remaining lease terms of 1 to 8 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The exercise of lease renewal options is at our sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and lease payment obligation, respectively. For our leases that contain variable lease payments, residual value guarantees, or restrictive covenants, we have concluded that these inputs are not significant to the determination of the ROU asset and lease liability. For our operating leases, the weighted-average remaining lease term is 6.5 years and the weighted-average discount rate is 7.0% as of June 29, 2019.

Our adoption of Topic 842 resulted in the non-cash recognition of additional net ROU assets and lease liabilities of approximately $29.9 million and $32.3 million, respectively, as of December 30, 2018. The difference between these amounts resulted from an adjustment to the deferred rent balance existing under the prior guidance. Adoption of this standard did not materially affect our consolidated net earnings.

All of our facilities are leased under operating leases, which expire at various times through 2027. We recorded fixed operating lease expenses of $1.9 million and $3.9 million for the second quarter and first six months of fiscal 2019, respectively.

The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during the first six months of fiscal 2019:



Operating lease right-of-use assets	(in thousands)
Balance as of December 29, 2018	—
Right-of-use assets recorded from adoption of ASC 842	29,893
Right-of-use assets obtained in exchange for new lease obligations during the period	298
Amortization of right-of-use asset during the period	(2,907	)
Impairment of right-of-use asset on Portland, Oregon office (recorded in Restructuring charges)	(977	)
Adjustments for present value and foreign currency effects	(215	)
Balance as of June 29, 2019	26,092

Operating lease liabilities	(in thousands)
Balance as of December 29, 2018	—
Lease liabilities recorded from adoption of ASC 842	32,273
Lease liabilities incurred for new lease obligations during the period	298
Accretion of lease liabilities	999
Operating cash used by payments on lease liabilities	(4,613	)
Adjustments for present value, foreign currency, and restructuring liability effects	(361	)
Balance as of June 29, 2019	28,596
Less: Current portion of operating lease liabilities	(4,804	)
Long-term operating lease liabilities, net of current portion	23,792

Maturities of operating lease liabilities as of June 29, 2019 are as follows:



Fiscal year	(in thousands)

2019 (remaining 6 months)	$	2,963
2020	7,082
2021	5,300
2022	4,461
2023	4,589
Thereafter	11,408
Total lease payments	35,803
Less: amount representing interest	(7,048		)
Less: amount representing restructuring liability adjustments	$	(159	)
Total lease liabilities	$	28,596

Prior to 2019, the reporting of future minimum lease commitments included the lease obligations associated with previously restructured facilities. After adoption of Topic 842 for the first quarter of 2019, the lease obligations for previously restructured facilities were $7.7 million and continued to be recorded in Other long-term liabilities on our Consolidated Balance Sheets.