Leases (Notes)

12 Months Ended

Dec. 31, 2022

LEASES

We determine if an arrangement is a lease at inception. Our operating lease assets are separately stated in operating lease right-of-use ("ROU") assets and our financing lease assets are included in other assets on our consolidated balance sheets. Our lease liabilities are included in accrued liabilities, and other long-term liabilities on our consolidated balance sheets. We have elected not to recognize an ROU asset and lease liability for leases with terms of twelve months or less.

Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Most of our leases do not provide an implicit rate, therefore we use our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term based on the information available at commencement date. Our lease ROU assets exclude lease incentives and initial direct costs incurred. Our lease terms include options to extend when it is reasonably certain that we will exercise that option. All of our leases have stated lease payments, which may include fixed rental increases.

Our leases are for corporate, research and development and sales and support offices, distribution facilities, device service centers and certain equipment. Our leases have original lease terms of one year to fifteen years, some of which include options to extend the leases for up to an additional five years. For all of our leases, we do not include optional periods of extension in our current lease terms for the exercise of options to extend is not reasonably certain.

The following table presents the components of our lease cost (in thousands):


	Year ended December 31,
	2022		2021		2020
Operating lease cost	$	22,038	$	11,251	$	11,284
Finance lease cost — interest	112		122		91
Finance lease cost — reduction of ROU asset	712		648		383
Short-term lease cost	7		14		263
Total lease cost	$	22,869	$	12,035	$	12,021

Interest expense on our finance leases is included in interest expense, net in our consolidated statements of operations. The reduction of the operating and finance ROU assets is included as noncash lease expense in selling, general and administrative expenses in our consolidated statements of operations.

The following table presents the supplemental cash flow information related to our leases (in thousands):


	Year ended December 31,
	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)	$	25,225	$	11,256	$	10,185
Operating cash flows from finance leases	$	112	$	122	$	91

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	5,994	$	2,589	$	20,847
Finance leases	$	715	$	558	$	3,062

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(1) We acquired $55.2 million of operating right-of-use assets as part of the Smiths Medical acquisition, see Note 2: Acquisitions.

The following table presents the supplemental balance sheet information related to our operating leases (in thousands, except lease term and discount rate):


	As of December 31,
	2022			2021
Operating leases
Operating lease right-of-use assets	$	74,864		$	39,847

Accrued liabilities	$	18,169		$	9,009
Other long-term liabilities	60,916			33,971
Total operating lease liabilities	$	79,085		$	42,980

Weighted-Average Remaining Lease Term
Operating leases	6.1 years			5.9 years

Weighted-Average Discount Rate
Operating leases	4.34		%	4.98		%

The following table presents the supplemental balance sheet information related to our finance leases (in thousands, except lease term and discount rate):


	As of December 31,
	2022			2021
Finance leases
Finance lease right-of-use assets	$	2,598		$	2,673

Accrued liabilities	$	816		$	643
Other long-term liabilities	1,855			2,067
Total finance lease liabilities	$	2,671		$	2,710

Weighted-Average Remaining Lease Term
Finance leases	4.8 years			5.6 years

Weighted-Average Discount Rate
Finance leases	4.23		%	4.28		%

As of December 31, 2022, the maturities of our operating and finance lease liabilities for each of the next five years are approximately (in thousands):


	Operating Leases		Finance Leases
2023	$	21,800	$	914
2024	17,786		657
2025	12,699		442
2026	11,297		322
2027	7,830		189
Thereafter	17,346		426
Total Lease Payments	88,758		2,950
Less imputed interest	(9,673)		(279)
Total	$	79,085	$	2,671