The Company determines if an arrangement is a lease at the inception of the arrangement. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and long-term operating lease liabilities in the Company’s condensed consolidated balance sheet. The Company does not have any finance leases as of June 28, 2024.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The amortization of operating lease ROU assets and the change in operating lease liabilities is disclosed as a single line item in the condensed consolidated statements of cash flows.

The Company leases office, laboratory, and storage space in 13 states and the District of Columbia, as well as in China, Hong Kong, Singapore, Switzerland, and the United Kingdom. Leases for these office, laboratory, and storage facilities have terms generally ranging between one and ten years. Some of these leases include options to extend or terminate the lease, none of which are currently included in the lease term as the Company has determined that exercise of these options is not reasonably certain.

The Company has a Test and Engineering Center on 147 acres of land in Phoenix, Arizona. The Company leases this land from the State of Arizona under a 30-year lease agreement that expires in January of 2028 and has options to renew for two fifteen-year periods. On June 19, 2024, the Company entered into an agreement with the State of Arizona to extend this lease for 15 years beginning on January 17, 2028. The Company is currently obligated to make payments under the lease of $1,009,000 per year, which obligation will continue at that level until January 16, 2028. Beginning on January 17, 2028, the Company’s payments under the lease will increase to approximately $6,183,000 per year for the 15-year extension term with adjustments to the annual rent payment in 2033 and 2038 based on the consumer price index. As a result of this extension, the Company added an additional right-of-use asset in exchange for an operating lease liability of $48,683,000 during the second quarter of 2024. As of June 28, 2024, the Company has determined that the exercise of the second renewal option is not reasonably certain and thus that extension is not included in the lease term.

The Company’s equipment leases are included in the ROU asset and liability balances, but are not material.

The Company leases excess space in its Silicon Valley and Natick facilities. Rental income of $927,000 and $853,000 was included in other income for the three months ended June 28, 2024 and June 30, 2023, respectively.

Rental income of $1,769,000 and $1,609,000 was included in other income for the six months ended June 28, 2024 and June 30, 2023, respectively.

The components of lease expense included in other operating expenses on the condensed consolidated statements of income were as follows:


	Three Months Ended				Six Months Ended
(In thousands)	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Operating lease cost	$	2,392	$	1,778	$	4,507	$	3,565
Variable lease cost		385		503		748		873
Short-term lease cost		343		405		650		681

Supplemental cash flow information related to operating leases was as follows:


	Three Months Ended				Six Months Ended
(In thousands)	June 28, 2024		June 30, 2023		June 28, 2024		June 30, 2023
Cash paid for amounts included in the measurement of operating lease liabilities	$	1,804	$	1,437	$	4,348	$	3,801

Supplemental balance sheet information related to operating leases was as follows:


	June 28, 2024	June 30, 2023
Weighted Average Remaining Lease Term	14.5 years	6.5 years
Weighted Average Discount Rate	6.4%	5.0%

Maturities of operating lease liabilities as of June 28, 2024:


	Operating
(In thousands)	Leases
2024 (excluding the six months ended June 28, 2024)		3,130
2025		7,160
2026		6,333
2027		5,048
2028		8,502
Thereafter		94,959
Total lease payments	$	125,132
Less imputed interest		(49,836	)
Total lease liability	$	75,296