Leases

3 Months Ended

Apr. 02, 2023

Leases [Abstract]

Leases

LeasesWe have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as vehicles and equipment. We make certain judgments in determining whether a contract contains a lease in accordance with ASU 2016-02. Our leases have remaining lease terms within 1 to 15 years; some of which include extension and termination options. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of the lease. We have a few short-term operating leases with terms less than twelve months - these leases are not recorded on our balance sheet and the overall rent expense is not material.

We also have certain lease contracts that contain both lease and non-lease components. We have elected the practical expedient to account for these components together as a single, combined lease component. The rate implicit in most of our leases is not readily determinable. As a result, we utilize the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.

Our lease agreements do not contain material residual value guarantees. Our variable lease expense was approximately $0.8 million for each the three months ended April 2, 2023 and April 3, 2022.

The components of lease expense were as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Operating lease cost	$	5,517	$	5,428
Finance lease cost
Amortization of right-of-use asset	$	201	$	288
Interest on lease liabilities	80		6
Total finance lease cost	$	281	$	294

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,665	$	4,776

Operating cash flows from finance leases were not material during the three months ended April 2, 2023 and April 3, 2022.

Supplemental balance sheet information related to leases was as follows:

	April 2, 2023		December 31, 2022
	(In thousands, except lease term and discount rate)
Operating leases:
Total operating lease right-of-use assets	$	74,451	$	73,376
Accrued liabilities	$	16,725	$	16,442
Long-term operating lease liabilities	61,400		59,250
Total operating lease liabilities	$	78,125	$	75,692
Finance leases:
Other long-lived assets, at cost	$	6,340	$	6,323
Accumulated depreciation	(891)		(733)
Other long-lived assets, net	$	5,449	$	5,590
Accrued liabilities	$	487	$	391
Other long-term liabilities	5,867		5,928
Total finance lease liabilities	$	6,354	$	6,319

	April 2, 2023		December 31, 2022
	(In thousands, except lease term and discount rate)
Weighted Average Remaining Lease Term
Operating leases	6 years		6 years
Finance leases	10 years		10 years
Weighted Average Discount Rate
Operating leases	5.2	%	5.2	%
Finance leases	4.2	%	4.2	%

The following table summarizes maturities of lease liabilities as of April 2, 2023 and December 31, 2022, respectively:

	April 2, 2023		December 31, 2022
	(In thousands)
2023	$	13,153	$	15,815
2024	15,343		14,809
2025	14,010		13,472
2026	12,495		11,964
2027	6,664		6,464
Thereafter	21,094		20,907
Total	$	82,759	$	83,431

In addition, we are party to two lease guarantees. Belden covenanted the lease payments for two Grass Valley property leases which will expire in 2029 and 2035, and collectively have approximately $19 million of fixed lease payments remaining. These lease guarantees were retained by Belden and not transferred to the buyer of Grass Valley. During 2022, Grass Valley defaulted on both property leases. As of April 2, 2023, we have a liability for expected, future payments of $8.8 million. The liability is based on certain assumptions, such as receiving a level of sublease income, that we will reassess on an ongoing basis. We will update the estimated liability balance for changes in assumptions as needed.

Leases

LeasesWe have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as vehicles and equipment. We make certain judgments in determining whether a contract contains a lease in accordance with ASU 2016-02. Our leases have remaining lease terms within 1 to 15 years; some of which include extension and termination options. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of the lease. We have a few short-term operating leases with terms less than twelve months - these leases are not recorded on our balance sheet and the overall rent expense is not material.

We also have certain lease contracts that contain both lease and non-lease components. We have elected the practical expedient to account for these components together as a single, combined lease component. The rate implicit in most of our leases is not readily determinable. As a result, we utilize the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.

Our lease agreements do not contain material residual value guarantees. Our variable lease expense was approximately $0.8 million for each the three months ended April 2, 2023 and April 3, 2022.

The components of lease expense were as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Operating lease cost	$	5,517	$	5,428
Finance lease cost
Amortization of right-of-use asset	$	201	$	288
Interest on lease liabilities	80		6
Total finance lease cost	$	281	$	294

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,665	$	4,776

Operating cash flows from finance leases were not material during the three months ended April 2, 2023 and April 3, 2022.

Supplemental balance sheet information related to leases was as follows:

	April 2, 2023		December 31, 2022
	(In thousands, except lease term and discount rate)
Operating leases:
Total operating lease right-of-use assets	$	74,451	$	73,376
Accrued liabilities	$	16,725	$	16,442
Long-term operating lease liabilities	61,400		59,250
Total operating lease liabilities	$	78,125	$	75,692
Finance leases:
Other long-lived assets, at cost	$	6,340	$	6,323
Accumulated depreciation	(891)		(733)
Other long-lived assets, net	$	5,449	$	5,590
Accrued liabilities	$	487	$	391
Other long-term liabilities	5,867		5,928
Total finance lease liabilities	$	6,354	$	6,319

	April 2, 2023		December 31, 2022
	(In thousands, except lease term and discount rate)
Weighted Average Remaining Lease Term
Operating leases	6 years		6 years
Finance leases	10 years		10 years
Weighted Average Discount Rate
Operating leases	5.2	%	5.2	%
Finance leases	4.2	%	4.2	%

The following table summarizes maturities of lease liabilities as of April 2, 2023 and December 31, 2022, respectively:

	April 2, 2023		December 31, 2022
	(In thousands)
2023	$	13,153	$	15,815
2024	15,343		14,809
2025	14,010		13,472
2026	12,495		11,964
2027	6,664		6,464
Thereafter	21,094		20,907
Total	$	82,759	$	83,431

In addition, we are party to two lease guarantees. Belden covenanted the lease payments for two Grass Valley property leases which will expire in 2029 and 2035, and collectively have approximately $19 million of fixed lease payments remaining. These lease guarantees were retained by Belden and not transferred to the buyer of Grass Valley. During 2022, Grass Valley defaulted on both property leases. As of April 2, 2023, we have a liability for expected, future payments of $8.8 million. The liability is based on certain assumptions, such as receiving a level of sublease income, that we will reassess on an ongoing basis. We will update the estimated liability balance for changes in assumptions as needed.