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 July 2, 2021.

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 15-year periods. As of July 2, 2021, the Company has determined that exercise of the renewal options is not reasonably certain and thus the 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 facility. Rental income of $615,000 and $869,000 was included in other income for the three months ended July 2, 2021 and July 3, 2020, respectively. Rental income of $1,407,000 and $1,861,000 was included in other income for the six months ended July 2, 2021 and July 3, 2020, 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)	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020
Operating lease cost	$	1,623	$	1,678	$	3,261	$	3,564
Variable lease cost		255		312		547		602
Short-term lease cost		105		163		251		288

Three Months Ended

Six Months Ended

(In thousands)

July 2, 2021

July 3, 2020

July 2, 2021

July 3, 2020

Cash paid for amounts included in the

measurement of operating lease

liabilities

1,535

1,638

3,814

4,072

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

July 2,

2021

January 1,

2021

Weighted Average Remaining Lease Term

4.2 years

4.5 years

Weighted Average Discount Rate

4.1%

4.2%

	Operating
(In thousands)	Leases
2021 (excluding the six months ended July 2, 2021)		3,120
2022		5,750
2023		4,009
2024		2,303
2025		1,491
2026		1,507
2027		1,466
Total lease payments	$	19,646
Less imputed interest		(2,154	)
Total lease liability	$	17,492