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Leases

12 Months Ended

Dec. 31, 2023

17.LEASES

We have operating leases for facilities used for manufacturing, research and development, sales and distribution, and office space, as well as leases for manufacturing and office equipment, vehicles, and land. Our leases have remaining terms ranging from less than one year to approximately 26 years. A number of our lease agreements contain options to renew at our discretion for periods of up to 15 years and options to terminate the leases within one year. The lease term used to calculate ROU assets and lease liabilities includes renewal and termination options that are deemed reasonably certain to be exercised. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. We do not have any bargain purchase options in our leases. For leases with an initial term of one year or less, we do not record a ROU asset or lease liability on our consolidated balance sheet. Substantially all of the ROU assets and lease liabilities as of December 31, 2023 recorded on our consolidated balance sheet are related to our cardiovascular segment.

From time to time, we enter into agreements to sublease a portion of our facilities to third parties. Such sublease income is not material. We also lease certain hardware consoles to customers and record rental revenue as a component of net sales. Rental revenue under such console leasing arrangements for the years ended December 31, 2023, 2022 and 2021 was not significant.

The following was included in our consolidated balance sheet as of December 31, 2023 and 2022 (in thousands):


	2023		2022
Assets
ROU operating lease assets	$	63,047	$	65,262

Liabilities
Short-term operating lease liabilities	$	12,087	$	11,005
Long-term operating lease liabilities		56,259		59,736
Total operating lease liabilities	$	68,346	$	70,741

We recognize lease expense for operating leases on a straight-line basis over the term of the lease. Net lease cost for the years ended December 31, 2023, 2022 and 2021 was $14.4 million, $13.8 million, and $15.9 million, respectively. The components of lease costs for the years ended December 31, 2023, 2022 and 2021 were as follows, in thousands:



Lease Cost	Classification	2023		2022		2021
Operating lease cost (a)	Selling, general and administrative expenses	$	14,879	$	14,219	$	16,013
Sublease (income) (b)	Selling, general and administrative expenses		(488)		(409)		(75)
Net lease cost		$	14,391	$	13,810	$	15,938


(a)	Includes expense related to short-term leases and variable payments, which were not significant.

(b)	Does not include rental revenue from leases of hardware consoles to customers, which was not significant.

Supplemental cash flow information for the years ended December 31, 2023, 2022 and 2021 was as follows, in thousands:


	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities	$	13,804	$	13,710	$	14,970
Right-of-use assets obtained in exchange for lease obligations	$	8,891	$	11,130	$	1,524

Generally, our lease agreements do not specify an implicit rate. Therefore, we estimate our incremental borrowing rate, which is defined as the interest rate we would pay to borrow on a collateralized basis, considering such factors as length of lease term and the risks of the economic environment in which the leased asset operates. As of December 31, 2023, 2022 and 2021, our lease agreements had the following remaining lease term and discount rates:


	2023	2022	2021
Weighted average remaining lease term	9.6 years	10.4 years	11.4 years
Weighted average discount rate	3.4%	3.4%	3.4%

As of December 31, 2023, maturities of operating lease liabilities were as follows, in thousands:


Year ended December 31,	Amounts due under operating leases
2024	$	13,706
2025		10,718
2026		8,867
2027		7,432
2028		6,089
Thereafter		33,950
Total lease payments		80,762
Less: Imputed interest		(12,416)
Total	$	68,346

As of December 31, 2023, we had entered into an agreement related to an operating lease in Mexico for manufacturing space that had not yet commenced. The lease will commence in March 2024 with average annual maturities of approximately $700,000 expected for a period of approximately 11 years.