v3.22.4
Leases and Other Commitments
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases and Other Commitments
6. Leases and Other Commitments
Leases
We lease office, manufacturing and warehouse space facilities under various domestic and international non-cancellable operating and finance lease arrangements. We also have land leases in Penang, Malaysia that expire through 2082 for the build-out of our international manufacturing facility. Our leases, excluding our land leases in Penang, Malaysia, have remaining lease terms of up to eighteen years. Some of the leases include one or more options to extend the leases for up to five years per option. Options to extend or terminate the lease are included in the lease liability if they are reasonably certain of being exercised. Leases are classified as operating or financing at lease commencement.
Operating lease right-of-use assets and lease liabilities are presented separately in our consolidated balance sheets. Finance lease right-of-use assets are included in property and equipment and finance lease liabilities are included in accounts payable and accrued liabilities and in other long-term liabilities in our consolidated balance sheets.
As of December 31, 2022, the maturities of our operating and finance lease liabilities were as shown in the table below:
(In millions)Operating LeasesFinance Leases
2023$26.6 $7.3 
202425.0 6.3 
202523.9 5.4 
202623.5 5.4 
202718.3 5.4 
Thereafter18.1 65.5 
Total future lease cost (1)
135.4 95.3 
Less: Imputed interest (20.3)(31.5)
Present value of future payments115.1 63.8 
Less: Current portion(20.5)(4.2)
Long-term portion$94.6 $59.6 
(1) Total future lease cost excludes $0.6 million of legally binding minimum lease payments for leases signed but not yet commenced.
Certain lease agreements require us to return designated areas of leased space to its original condition upon termination of the lease agreement, for which we record an asset retirement obligation and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, the asset retirement obligation is accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease agreement. Asset retirement obligations of $11.1 million and $7.4 million as of December 31, 2022 and 2021, respectively, are included in other long-term liabilities in our consolidated balance sheets.
The components of lease expense for the twelve months ended December 31, 2022, 2021 and 2020 were as follows:
Twelve Months Ended
December 31,
(In millions) 202220212020
Finance lease cost:
Amortization of right-of-use assets$5.6 $4.1 $2.0 
Interest on lease liabilities3.3 3.0 1.9 
Operating lease cost22.6 23.3 18.4 
Right-of-use asset impairment6.3 — — 
Short-term lease cost3.5 2.3 1.3 
Variable lease cost (1)
8.0 6.0 4.2 
Total lease cost$49.3 $38.7 $27.8 
(1) Variable lease costs are primarily related to common area maintenance charges and property taxes.
As the result of the Company’s transition to a flexible working environment, we vacated a building in San Diego during the fourth quarter and made it available for sublease. This resulted in an impairment indicator. We tested the asset group as of November 30, 2022 consisting primarily of the leasehold improvements and right-of-use asset for recoverability by comparing its carrying value to an estimate of future undiscounted cash flows. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group were below its carrying value.
We determined the fair value of the asset group by discounting the estimated future cash flows using level 3 fair value inputs under ASC 820 as described in Note 1. As a result of the impairment test, we recorded a non-cash charge of $23.0 million for the twelve months ended December 31, 2022 in the “Selling, general and administrative” caption of our consolidated statements of operations. The fair value of the asset group immediately subsequent to the impairment was $2.5 million and was categorized as Level 3 within the ASC 820, “Fair Value Measurements” fair value hierarchy.
Other information related to our leases is as follows:
Twelve Months Ended
December 31,
(Dollars in millions)202220212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$26.0 $23.3 $18.3 
Operating cash flows from finance leases3.1 1.9 0.7 
Financing cash flows from finance leases15.5 9.9 8.5 
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases15.6 13.1 33.5 
Finance leases$16.1 $6.4 $41.7 
Weighted average remaining lease term:
Operating leases5.5 years5.5 years6.1 years
Finance leases15.2 years15.9 years23.3 years
Weighted average discount rate:
Operating leases6.0 %5.0 %5.0 %
Finance leases5.1 %5.1 %5.0 %
Amortization of operating lease right-of-use asset included in cash flows from operating activities in our consolidated statements of cash flows was $16.4 million for the twelve months ended December 31, 2022, $18.0 million for the twelve months ended December 31, 2021 and $12.4 million for the twelve months ended December 31, 2020.
Purchase Commitments
We are party to various purchase arrangements related to our manufacturing and research and development activities. We had approximately $442.7 million as of December 31, 2022 and $324.1 million as of December 31, 2021 of open purchase orders and contractual obligations in the ordinary course of business, the majority of which are due within one year
Leases and Other Commitments
6. Leases and Other Commitments
Leases
We lease office, manufacturing and warehouse space facilities under various domestic and international non-cancellable operating and finance lease arrangements. We also have land leases in Penang, Malaysia that expire through 2082 for the build-out of our international manufacturing facility. Our leases, excluding our land leases in Penang, Malaysia, have remaining lease terms of up to eighteen years. Some of the leases include one or more options to extend the leases for up to five years per option. Options to extend or terminate the lease are included in the lease liability if they are reasonably certain of being exercised. Leases are classified as operating or financing at lease commencement.
Operating lease right-of-use assets and lease liabilities are presented separately in our consolidated balance sheets. Finance lease right-of-use assets are included in property and equipment and finance lease liabilities are included in accounts payable and accrued liabilities and in other long-term liabilities in our consolidated balance sheets.
As of December 31, 2022, the maturities of our operating and finance lease liabilities were as shown in the table below:
(In millions)Operating LeasesFinance Leases
2023$26.6 $7.3 
202425.0 6.3 
202523.9 5.4 
202623.5 5.4 
202718.3 5.4 
Thereafter18.1 65.5 
Total future lease cost (1)
135.4 95.3 
Less: Imputed interest (20.3)(31.5)
Present value of future payments115.1 63.8 
Less: Current portion(20.5)(4.2)
Long-term portion$94.6 $59.6 
(1) Total future lease cost excludes $0.6 million of legally binding minimum lease payments for leases signed but not yet commenced.
Certain lease agreements require us to return designated areas of leased space to its original condition upon termination of the lease agreement, for which we record an asset retirement obligation and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, the asset retirement obligation is accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease agreement. Asset retirement obligations of $11.1 million and $7.4 million as of December 31, 2022 and 2021, respectively, are included in other long-term liabilities in our consolidated balance sheets.
The components of lease expense for the twelve months ended December 31, 2022, 2021 and 2020 were as follows:
Twelve Months Ended
December 31,
(In millions) 202220212020
Finance lease cost:
Amortization of right-of-use assets$5.6 $4.1 $2.0 
Interest on lease liabilities3.3 3.0 1.9 
Operating lease cost22.6 23.3 18.4 
Right-of-use asset impairment6.3 — — 
Short-term lease cost3.5 2.3 1.3 
Variable lease cost (1)
8.0 6.0 4.2 
Total lease cost$49.3 $38.7 $27.8 
(1) Variable lease costs are primarily related to common area maintenance charges and property taxes.
As the result of the Company’s transition to a flexible working environment, we vacated a building in San Diego during the fourth quarter and made it available for sublease. This resulted in an impairment indicator. We tested the asset group as of November 30, 2022 consisting primarily of the leasehold improvements and right-of-use asset for recoverability by comparing its carrying value to an estimate of future undiscounted cash flows. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group were below its carrying value.
We determined the fair value of the asset group by discounting the estimated future cash flows using level 3 fair value inputs under ASC 820 as described in Note 1. As a result of the impairment test, we recorded a non-cash charge of $23.0 million for the twelve months ended December 31, 2022 in the “Selling, general and administrative” caption of our consolidated statements of operations. The fair value of the asset group immediately subsequent to the impairment was $2.5 million and was categorized as Level 3 within the ASC 820, “Fair Value Measurements” fair value hierarchy.
Other information related to our leases is as follows:
Twelve Months Ended
December 31,
(Dollars in millions)202220212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$26.0 $23.3 $18.3 
Operating cash flows from finance leases3.1 1.9 0.7 
Financing cash flows from finance leases15.5 9.9 8.5 
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases15.6 13.1 33.5 
Finance leases$16.1 $6.4 $41.7 
Weighted average remaining lease term:
Operating leases5.5 years5.5 years6.1 years
Finance leases15.2 years15.9 years23.3 years
Weighted average discount rate:
Operating leases6.0 %5.0 %5.0 %
Finance leases5.1 %5.1 %5.0 %
Amortization of operating lease right-of-use asset included in cash flows from operating activities in our consolidated statements of cash flows was $16.4 million for the twelve months ended December 31, 2022, $18.0 million for the twelve months ended December 31, 2021 and $12.4 million for the twelve months ended December 31, 2020.
Purchase Commitments
We are party to various purchase arrangements related to our manufacturing and research and development activities. We had approximately $442.7 million as of December 31, 2022 and $324.1 million as of December 31, 2021 of open purchase orders and contractual obligations in the ordinary course of business, the majority of which are due within one year