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LEASES

12 Months Ended

Dec. 31, 2022

The Company has entered into various non-cancellable operating and finance lease agreements for certain of the Company’s offices, manufacturing and warehouse facilities, retail and service locations, equipment and vehicles, worldwide. The Company has determined if an arrangement is a lease, or contains a lease, including embedded leases, at inception and records the leases in the Company’s financial statements upon later of ASC 842 adoption date of January 1, 2021, or lease commencement, which is the date when the underlying asset is made available for use by the lessor.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our assessed lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Certain operating leases provide for annual increases to lease payments based on an index or rate. The Company estimates the annual increase in lease payments based on the index or rate at the lease commencement date, for both the Company’s historical leases and for new leases commencing after January 1, 2021. Differences between the estimated lease payment and actual payment are expensed as incurred. Lease expense for finance lease payments is recognized as amortization expense of the finance lease ROU asset and interest expense on the finance lease liability over the lease term.

In August 2022, the Company entered into a four-year agreement (“Lease Agreement”) to lease land in Casa Grande, Arizona adjacent to our manufacturing facility. The Company classified this lease as a finance lease because the Lease Agreement contains a purchase option which the Company is reasonably certain to exercise. As of December 31, 2022, assets and liabilities associated with the finance lease were $79.3 million and $81.1 million, respectively.

Contemporaneously with the execution of the Lease Agreement, the Company entered into a sale agreement, pursuant to which the Company sold certain parcels of land for $31.7 million to the lessor and leased back these parcels of land under the Lease Agreement. The sale of the land and subsequent lease did not result in change in the transfer of control of the land; therefore, the sale-leaseback transaction is accounted for as a failed sale and leaseback financing obligation. The Company recorded the sales proceeds received as a financial liability within Other long-term liabilities on our consolidated balance sheets as of December 31, 2022.

The balances for the operating and finance leases where the Company is the lessee are presented as follows within the Company’s consolidated balance sheets (in thousands):


	December 31, 2022		December 31, 2021
Operating leases:
Operating lease right-of-use assets	$	215,160	$	161,974

Other current liabilities	$	11,269	$	11,056
Other long-term liabilities	243,843		185,323
Total operating lease liabilities	$	255,112	$	196,379

Finance leases:
Property, plant and equipment, net	$	90,386	$	10,567
Total finance lease assets	$	90,386	$	10,567

Finance lease liabilities, current portion	$	10,586	$	4,183
Finance lease liabilities, net of current portion	81,336		6,083
Total finance lease liabilities	$	91,922	$	10,266

The components of lease expense are as follows within the Company’s consolidated statements of operations and comprehensive loss (in thousands):


	Year Ended December 31,
	2022		2021
Operating lease expense:
Operating lease expense (1)	$	44,617	$	31,097
Variable lease expense	1,712		2,406

Finance lease expense:
Amortization of leased assets	$	4,812	$	3,020
Interest on lease liabilities	2,453		460
Total finance lease expense	$	7,265	$	3,480
Total lease expense	$	53,594	$	36,983

(1) Excluded short-term leases, which were immaterial.

Other information related to leases where the Company is the lessee was as follows:


	December 31, 2022		December 31, 2021
Weighted-average remaining lease term (in years):
Operating leases	7.6		7.8
Finance leases	3.5		2.5

Weighted-average discount rate:
Operating leases	10.52	%	10.98	%
Finance leases	5.57	%	5.58	%

Supplemental cash flow information related to leases where the Company is the lessee is as follows (in thousands):


	Year Ended December 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	15,482	$	10,019
Operating cash flows from finance leases (interest payments)	509		460
Financing cash flows from finance leases	4,977		3,088
Leased assets obtained in exchange for new operating lease liabilities	73,502		84,078
Leased assets obtained in exchange for new finance lease liabilities	84,392		9,693

As of December 31, 2022, the maturities of the Company’s operating and finance lease liabilities (excluding short-term leases) were as follows (in thousands):


	Operating Leases		Finance Leases
2023	$	38,064	$	10,937
2024	54,504		8,340
2025	53,838		6,619
2026	50,434		82,488
2027	44,039		117
Thereafter	146,784		37
Total minimum lease payments	387,663		108,538
Less: Interest	(132,551)		(16,616)
Present value of lease obligations	255,112		91,922
Less: Current portion	(11,269)		(10,586)
Long-term portion of lease obligations	$	243,843	$	81,336

As of December 31, 2022, the Company entered into additional leases for facilities and equipment that have not yet commenced with undiscounted future lease payments of $26.8 million. The leases are expected to commence over the next twelve months.

LEASES