Leases

9 Months Ended

Sep. 30, 2022

Leases

Leases

(12)        Leases

The Company leases its office facilities and office equipment under noncancelable lease agreements which expire at various dates through March 2033. Some of these lease agreements include an option to renew at the end of the term. The Company also leases certain office facilities on a month-to-month basis. In some instances, the Company is also required to pay its pro rata share of real estate taxes and utility costs in connection with the premises. Some of the leases contain fixed annual increases of minimum rent.

The Company’s leases frequently allow for lease payments that could vary based on factors such as inflation and the incurrence of contractual charges such as those for common area maintenance or utilities.

Renewal and/or early termination options are common in the lease arrangements, particularly with respect to real estate leases. The Company’s right-of-use assets and lease liabilities generally include periods covered by renewal options and exclude periods covered by early termination options (based on the conclusion that it is reasonably certain that the Company will exercise such renewal options and not exercise such early termination options).

The Company is also party to certain sublease arrangements related to real estate leases, where the Company acts as the lessee and intermediate lessor.

The Company has acquired patient medical equipment and supplies, and office equipment through multiple finance leases. The finance lease obligations represent the present value of minimum lease payments under the respective agreement, payable monthly at various interest rates.

The following table presents information about the Company’s right-of-use assets and lease liabilities as of September 30, 2022 and December 31, 2021 (in thousands):

	Consolidated Balance Sheets Line Item	September 30, 2022		December 31, 2021
Right-of-use (ROU) assets:
Operating lease ROU assets	Operating lease right-of-use assets	$	128,635	$	147,760
Finance lease ROU assets	Equipment and other fixed assets, net		1,056		17,410
Total ROU assets		$	129,691	$	165,170
Operating lease liabilities:
Current operating lease liabilities	Current portion of operating lease obligations	$	28,769	$	31,418
Noncurrent operating lease liabilities	Operating lease obligations, less current portion		103,859		120,180
Total operating lease liabilities		$	132,628	$	151,598
Finance lease liabilities:
Current finance lease liabilities	Current portion of finance lease obligations	$	2,695	$	15,446
Noncurrent finance lease liabilities	Other long-term liabilities		—		132
Total finance lease liabilities		$	2,695	$	15,578

The following table presents information about lease costs and expenses and sublease income for the three and nine months ended September 30, 2022 and 2021 (in thousands). The amounts below are included in cost of net revenue in the accompanying consolidated statements of operations for the periods presented.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease costs	$	9,248	$	9,837	$	28,547	$	27,695
Finance lease costs:
Amortization of ROU assets	$	640	$	8,487	$	7,266	$	27,549
Other lease costs and income:
Variable leases costs (1)	$	3,728	$	3,784	$	12,680	$	10,061
Sublease income	$	336	$	405	$	1,019	$	911
Short-term lease costs	$	—	$	4,093	$	—	$	19,905

(1) Amounts represent variable costs incurred that were not included in the initial measurement of the lease liability such as common area maintenance and utilities costs associated with leased real estate.

The following table provides the weighted average remaining lease terms and weighted average discount rates for the Company’s leases as of September 30, 2022 and December 31, 2021:

	September 30, 2022	December 31, 2021
Weighted average remaining lease term, weighted based on lease liability balances:
Operating leases	6.2 years	6.7 years
Finance leases	0.5 year	1.0 year
Weighted average discount rate, weighted based on remaining balance of lease payments:
Operating leases	3.9%	3.8%

The following table provides the undiscounted amount of future cash flows related to the Company’s operating and finance leases, as well as a reconciliation of such undiscounted cash flows to the amounts included in the Company’s lease liabilities as of September 30, 2022 (in thousands):

	Operating Leases		Finance Leases
2022	$	8,778	$	1,920
2023		31,757		795
2024		26,347		—
2025		21,966		—
2026		16,158		—
Thereafter		47,027		—
Total future undiscounted lease payments	$	152,033	$	2,715
Less: amount representing interest		(19,405)		(20)
Present value of future lease payments (lease liability)	$	132,628	$	2,695

The following table provides certain cash flow and supplemental non-cash information related to the Company’s lease liabilities for the nine months ended September 30, 2022 and 2021, respectively (in thousands):

	Nine Months Ended September 30,
Cash paid for amounts included in the measurement of lease liabilities:	2022		2021
Operating cash payments for operating leases	$	28,416	$	27,154
Financing cash payments for finance leases	$	14,219	$	31,043
Lease liabilities arising from obtaining right-of-use assets:
Operating leases	$	5,411	$	84,212
Finance leases	$	1,335	$	22,902