Leases

12 Months Ended

Dec. 31, 2022

LEASES The Company leases certain office spaces and research and development laboratory facilities, vehicles, and office equipment with remaining lease terms ranging from one to fifteen years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options, which allows the Company to, at its election, renew or extend the lease for a fixed period of time. These optional periods have not been considered in the determination of the ROU assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options. During the twelve months ended December 31, 2022, in an effort to reduce its real estate footprint, the Company ceased the use of certain of its leased Salt Lake City facilities and one of its South San Francisco facilities. As a result, the Company recorded an impairment charge on ROU assets of $13.0 million and an impairment charge of $3.9 million on the related property, plant and equipment, which consisted primarily of leasehold improvements. The total $16.9 million impairment is included in Goodwill and long-lived asset impairment charges in the Consolidated Statement of Operations.

The Company performed evaluations of its contracts and determined each of its identified leases are operating leases. For the year ended December 31, 2022, the Company incurred $22.1 million in lease costs which are included in operating expenses in the Consolidated Statements of Operations in relation to these operating leases. Of such lease costs, $3.2 million was variable lease expense, which was not included in the measurement of the Company's operating ROU assets and lease liabilities. The variable rent expense is comprised primarily of the Company's proportionate share of operating expenses, property taxes, and insurance and is classified as lease expense due to the Company's election to not separate lease and non-lease components. For the year ended December 31, 2021, the Company incurred $20.7 million in lease costs which are included in operating expenses in the Consolidated Statements of Operations in relation to these operating leases. Of such lease costs, $3.2 million was variable lease expense, which was not included in the measurement of the Company's operating ROU assets and lease liabilities.

In the first quarter of 2022, the Company entered into a non-cancelable operating lease for approximately 230,000 square feet in west Salt Lake City, Utah. The lease has a term of 15 years, which, along with rent payments, are expected to commence in the third quarter of 2023. The Company will take possession of the leased facility in phases, which began in the three months ended June 30, 2022. As a result, the Company has recognized the related lease balances for the phase, or portion, of the leased facility that the Company has taken possession of, and will recognize the additional phases of the leased facility as possession occurs. As of December 31, 2022, the Company has recognized an approximately $13.9 million ROU asset and corresponding lease liability, net of tenant improvement allowance not yet received. Total future rent payments under the lease are approximately $78.0 million.

The Company also took possession of a lease for approximately 63,000 square feet in South San Francisco, California with a term of 10 years, which, along with rent payments, are expected to commence in the third quarter of 2023. As a result, the Company recognized the related ROU asset and lease liability, net of tenant improvement allowance not yet received, of $30.7 million in the Consolidated Balance Sheets as of December 31, 2022. Total future rent payments under the lease are approximately $58.8 million.

As of December 31, 2022, the maturities of the Company’s operating lease liabilities were as follows (in millions):


Year Ended:
2023	$	20.2
2024	23.8
2025	17.9
2026	16.3
2027	15.0
Thereafter	92.6
Total future lease payments	185.8
Less: amounts representing interest	(18.9)
Present value of future lease payments	166.9
Less: leases not yet commenced	(21.9)
Less: current maturities of operating lease liabilities	(14.1)
Noncurrent operating lease liabilities	$	130.9

As of December 31, 2022, the weighted average remaining lease term is 10.3 years and the weighted average discount rate used to determine the operating lease liability was 5.87%.

As the implicit rate in the Company's leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. When calculating the Company’s incremental borrowing rates, the Company gives consideration to its credit risk, term of the lease, total lease payments and adjusts for the impacts of collateral, as necessary. The lease term used may reflect any option to extend or terminate the lease when it is reasonably certain the Company will exercise such options. Lease expenses for the Company's operating leases are recognized on a straight-line basis over the lease term.