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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 1-13165
ARTIVION, INC.
(Exact name of registrant as specified in its charter)
Delaware59-2417093
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1655 Roberts Boulevard, NW, Kennesaw, Georgia
30144
(Address of principal executive offices)(Zip Code)
(770) 419-3355
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueAORTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
x
Accelerated Filer
o
Non-accelerated Filer
o
Smaller Reporting Company
o
Emerging Growth Company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at July 29, 2022
Common Stock, $0.01 par value40,316,054


Table of Contents
TABLE OF CONTENTS
2

Table of Contents
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Artivion, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
In Thousands, Except Per Share Data
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenues:
Products$58,936 $56,076 $116,478 $109,421 
Preservation services21,404 20,072 41,075 37,814 
Total revenues80,340 76,148 157,553 147,235 
Cost of products and preservation services:
Products18,230 16,178 35,638 31,089 
Preservation services9,938 9,457 19,024 17,795 
Total cost of products and preservation services28,168 25,635 54,662 48,884 
Gross margin52,172 50,513 102,891 98,351 
Operating expenses:
General, administrative, and marketing38,983 40,830 77,938 79,468 
Research and development8,648 8,360 18,776 16,114 
Total operating expenses47,631 49,190 96,714 95,582 
Operating income4,541 1,323 6,177 2,769 
Interest expense4,101 4,855 8,049 8,895 
Interest income(30)(18)(46)(42)
Other expense (income), net3,770 (1,331)3,903 600 
Loss before income taxes(3,300)(2,183)(5,729)(6,684)
Income tax expense (benefit)959 (5)1,919 (1,368)
Net loss$(4,259)$(2,178)$(7,648)$(5,316)
Loss per share:
Basic$(0.11)$(0.06)$(0.19)$(0.14)
Diluted$(0.11)$(0.06)$(0.19)$(0.14)
Weighted-average common shares outstanding:
Basic 40,031 38,943 39,941 38,841 
Diluted40,031 38,943 39,941 38,841 
Net loss$(4,259)$(2,178)$(7,648)$(5,316)
Other comprehensive (loss) income:
Foreign currency translation adjustments(14,796)2,973 (18,571)(7,317)
Comprehensive (loss) income$(19,055)$795 $(26,219)$(12,633)
See accompanying Notes to Condensed Consolidated Financial Statements
3

Table of Contents
Artivion, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
In Thousands
June 30,
2022
December 31,
2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$40,382 $55,010 
Trade receivables, net57,558 53,019 
Other receivables7,995 5,086 
Inventories, net74,318 76,971 
Deferred preservation costs, net44,785 42,863 
Prepaid expenses and other15,390 14,748 
Total current assets240,428 247,697 
Goodwill240,939 250,000 
Acquired technology, net154,866 166,994 
Operating lease right-of-use assets, net42,659 45,714 
Property and equipment, net36,268 37,521 
Other intangibles, net32,470 34,502 
Deferred income taxes9,916 2,357 
Other assets7,318 8,267 
Total assets$764,864 $793,052 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$10,545 $10,395 
Accrued compensation9,732 13,163 
Accrued expenses7,842 7,687 
Taxes payable4,709 3,634 
Accrued procurement fees2,130 3,689 
Current maturities of operating leases3,207 3,149 
Current portion of long-term debt1,590 1,630 
Other liabilities1,891 1,606 
Total current liabilities41,646 44,953 
Long-term debt306,941 307,493 
Contingent consideration 44,400 49,400 
Non-current maturities of operating leases42,141 44,869 
Non-current finance lease obligation3,766 4,374 
Deferred income taxes32,609 28,799 
Deferred compensation liability5,154 5,952 
Other liabilities6,698 6,484 
Total liabilities$483,355 $492,324 
Commitments and contingencies
Shareholders' equity:
Preferred stock  
Common stock (issued shares of 41,744 in 2022 and 41,397 in 2021)
417 414 
Additional paid-in capital329,871 322,874 
Retained (deficit) earnings (5,673)1,975 
Accumulated other comprehensive loss (28,458)(9,887)
Treasury stock, at cost, 1,487 shares as of June 30, 2022 and December 31, 2021
(14,648)(14,648)
Total shareholders' equity281,509 300,728 
Total liabilities and shareholders' equity$764,864 $793,052 
See accompanying Notes to Condensed Consolidated Financial Statements
4

Table of Contents
Artivion, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
In Thousands
(Unaudited)
Six Months Ended
June 30,
20222021
Net cash flows from operating activities:
Net loss$(7,648)$(5,316)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization11,497 11,999 
Non-cash compensation6,100 4,595 
Non-cash lease expense 3,803 3,575 
Write-down of inventories and deferred preservation costs2,177 2,988 
Change in fair value of contingent consideration(5,000)4,270 
Deferred income taxes(1,611)(4,269)
Other 940 2,174 
Changes in operating assets and liabilities:
Prepaid expenses and other assets(205)(2,076)
Inventories and deferred preservation costs(3,653)(11,712)
Receivables(9,635)(5,454)
Accounts payable, accrued expenses, and other liabilities(5,677)(1,166)
Net cash flows used in operating activities(8,912)(392)
Net cash flows from investing activities:
Capital expenditures(4,055)(7,249)
Other(939)205 
Net cash flows used in investing activities(4,994)(7,044)
Net cash flows from financing activities:
Proceeds from exercise of stock options and issuance of common stock2,318 2,321 
Payment of debt issuance costs  (2,219)
Redemption and repurchase of stock to cover tax withholdings(1,739)(1,831)
Repayment of term loan(1,370)(1,405)
Other(241)(603)
Net cash flows used in financing activities(1,032)(3,737)
Effect of exchange rate changes on cash and cash equivalents310 242 
Decrease in cash and cash equivalents(14,628)(10,931)
Cash and cash equivalents beginning of period55,010 61,958 
Cash and cash equivalents end of period$40,382 $51,027 
See accompanying Notes to Condensed Consolidated Financial Statements
5

Table of Contents
Artivion, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
In Thousands
(Unaudited)
Common
Stock
Additional
Paid-In
Capital
Retained
Deficit
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at March 31, 202241,688 $417 $326,799 $(1,414)$(13,662)(1,487)$(14,648)$297,492 
Net loss— — — (4,259)— — — (4,259)
Other comprehensive loss— — — — (14,796)— — (14,796)
Equity compensation57 — 3,081 — — — — 3,081 
Redemption and repurchase of stock to cover tax withholdings(1)— (9)— — — — (9)
Balance at June 30, 202241,744 $417 $329,871 $(5,673)$(28,458)(1,487)$(14,648)$281,509 
Common
Stock
Additional
Paid-In
Capital
Retained Earnings
(Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at December 31, 202141,397 $414 $322,874 $1,975 $(9,887)(1,487)$(14,648)$300,728 
Net loss— — — (7,648)— — — (7,648)
Other comprehensive loss— — — — (18,571)— — (18,571)
Equity compensation262 2 6,419 — — — — 6,421 
Exercise of options140 2 1,678 — — — — 1,680 
Employee stock purchase plan37 — 638 — — — — 638 
Redemption and repurchase of stock to cover tax withholdings(92)(1)(1,738)— — — — (1,739)
Balance at June 30, 202241,744 $417 $329,871 $(5,673)$(28,458)(1,487)$(14,648)$281,509 
See accompanying Notes to Condensed Consolidated Financial Statements
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Artivion, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (continued)
In Thousands
(Unaudited)
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at March 31, 202140,585 $406 $301,449 $13,671 $(3,547)(1,487)$(14,648)$297,331 
Net loss— — — (2,178)— — — (2,178)
Other comprehensive income— — — — 2,973 — — 2,973 
Equity compensation37 — 2,267 — — — — 2,267 
Exercise of options121 1 1,459 — — — — 1,460 
Redemption and repurchase of stock to cover tax withholdings(1)— (18)— — — — (18)
Balance at June 30, 202140,742 $407 $305,157 $11,493 $(574)(1,487)$(14,648)$301,835 
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Shareholders'
Equity
SharesAmountSharesAmount
Balance at December 31, 202040,394 $404 $316,192 $20,022 $6,743 (1,487)$(14,648)$328,713 
Net loss— — — (5,316)— — — (5,316)
Other comprehensive loss— — — — (7,317)— — (7,317)
Impact of adoption of ASU 2020-06
— — (16,426)(3,213)— — — (19,639)
Equity compensation244 2 4,902 — — — — 4,904 
Exercise of options140 1 1,730 — — — — 1,731 
Employee stock purchase plan37 1 589 — — — — 590 
Redemption and repurchase of stock to cover tax withholdings(73)(1)(1,830)— — — — (1,831)
Balance at June 30, 202140,742 $407 $305,157 $11,493 $(574)(1,487)$(14,648)$301,835 
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Artivion, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.    Basis of Presentation and Summary of Significant Accounting Policies
Overview
The accompanying Condensed Consolidated Financial Statements include the accounts of Artivion, Inc. and its subsidiaries (“Artivion,” the “Company,” “we,” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying Condensed Consolidated Balance Sheet as of December 31, 2021 has been derived from audited financial statements. The accompanying unaudited Condensed Consolidated Financial Statements as of, and for the three and six months ended, June 30, 2022 and 2021 have been prepared in accordance with (i) accounting principles generally accepted in the US for interim financial information and (ii) the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the US Securities and Exchange Commission (the “SEC”). Accordingly, such statements do not include all the information and disclosures that are required by accounting principles generally accepted in the US for a complete presentation of financial statements. In the opinion of management, all adjustments (including those of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes included in Artivion’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 22, 2022.
Significant Accounting Policies
A summary of our significant accounting policies is included in Note 1 of the “Notes to Consolidated Financial Statements” contained in our Form 10-K for the year ended December 31, 2021. Management believes that the consistent application of these policies enables us to provide users of the financial statements with useful and reliable information about our operating results and financial condition. The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the US, which require us to make estimates and assumptions. We did not experience any significant changes during the three and six months ended June 30, 2022 in any of our Significant Accounting Policies from those contained in our Form 10-K for the year ended December 31, 2021.
New Accounting Standards
Recently Adopted
In August 2020 the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). The update simplifies the accounting for convertible instruments by eliminating two accounting models (i.e., the cash conversion model and beneficial conversion feature model) and reducing the number of embedded conversion features that could be recognized separately from the host contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. On January 1, 2021 we adopted ASU 2020-06 using the modified retrospective approach. See Note 8 for further discussion of convertible debt.
Not Yet Effective
In March 2020 the FASB issued ASU 2020-04, Reference Rate Reform Topic 848 (“ASC 848”). The amendments in this ASU were put forth in response to the market transition from the LIBOR and other interbank offered rates to alternative reference rates. Accounting principles generally accepted in the United States of America require entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform. The standard provides this temporary election through December 31, 2022 and cannot be applied to contract modifications that occur after December 31, 2022. We are in the process of evaluating the effect that the adoption of this standard will have on our financial position and results of operations.
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2.    Financial Instruments
The following is a summary of our financial instruments measured at fair value on a recurring basis (in thousands):
June 30, 2022Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$10,025 $ $ $10,025 
Total assets$10,025 $ $ $10,025 
Long-term liabilities:
Contingent consideration  (44,400)(44,400)
Total liabilities$ $ $(44,400)$(44,400)
December 31, 2021Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$10,015 $ $ $10,015 
Total assets$10,015 $ $ $10,015 
Long-term liabilities:
Contingent consideration  (49,400)(49,400)
Total liabilities$ $ $(49,400)$(49,400)
We used prices quoted from our investment advisors to determine the Level 1 valuation of our investments in money market funds.
On September 2, 2020 we entered into a Securities Purchase Agreement to acquire 100% of the outstanding equity interests of Ascyrus Medical LLC (“Ascyrus”). Ascyrus developed the AMDS, the world’s first aortic arch remodeling device for use in the treatment of acute Type A aortic dissections. As part of the acquisition, we may be required to pay additional consideration in cash of up to $100.0 million to the former shareholders of Ascyrus upon the achievement of certain milestones and the sales-based additional earn-out.
The contingent consideration represents the estimated fair value of future potential payments. The fair value of the contingent consideration liability was estimated by discounting to present value the contingent payments expected to be made based on a probability-weighted scenario approach. We applied a discount rate based on our unsecured credit spread and the term commensurate risk-free rate to the additional consideration to be paid, and then applied a risk-based estimate of the probability of achieving each scenario to calculate the fair value of the contingent consideration. This fair value measurement was based on unobservable inputs, including management estimates and assumptions about the future achievement of milestones and future estimate of revenues, and is, therefore, classified as Level 3 within the fair value hierarchy. We used a discount rate of approximately 12% and estimated future achievement of milestone dates between 2025 and 2026 to calculate the fair value of contingent consideration as of June 30, 2022. We will remeasure this liability at each reporting date and will record changes in the fair value of the contingent consideration in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in passage of time, discount rates, the timing and amount of our revenue estimates, and the timing and expectation of regulatory approvals.
We performed an assessment of the fair value of the contingent consideration and recorded income of $3.2 million and $5.0 million for the three and six months ended June 30, 2022, respectively, and expense of $3.3 million and $4.3 million for the three and six months ended June 30, 2021, respectively, in General, administrative, and marketing expenses on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income, as a result of this assessment.
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The fair value of the contingent consideration component of the Ascyrus acquisition was updated using Level 3 inputs. Changes in fair value of Level 3 assets and liabilities are listed in the tables below (in thousands):
Contingent Consideration
Balance as of December 31, 2021$(49,400)
Change in valuation 5,000 
Balance as of June 30, 2022$(44,400)
3.    Cash Equivalents
The following is a summary of cash equivalents (in thousands):
June 30, 2022Cost BasisUnrealized
Holding
Gains
Estimated
Market
Value
Cash equivalents:
Money market funds$10,025 $ $10,025 
Total assets$10,025 $ $10,025 
December 31, 2021Cost BasisUnrealized
Holding
Gains
Estimated
Market
Value
Cash equivalents:
Money market funds$10,015 $ $10,015 
Total assets$10,015 $ $10,015 
There were no gross realized gains or losses on cash equivalents for the three and six months ended June 30, 2022 and 2021.
4.    Inventories, net and Deferred Preservation Costs
Inventories at June 30, 2022 and December 31, 2021 were comprised of the following (in thousands):
June 30,
2022
December 31,
2021
Raw materials and supplies$34,565 $35,780 
Work-in-process11,856 9,712 
Finished goods27,897 31,479 
Total inventories, net $74,318 $76,971 
To facilitate product usage, we maintain consignment inventory of our On-X heart valves at domestic hospital locations and On-X heart valves and aortic stent grafts at international hospital locations. We retain title and control over this consignment inventory until the device is implanted, at which time we invoice the hospital and recognize revenue. As of June 30, 2022 we had $14.2 million in consignment inventory, with approximately 39% in domestic locations and 61% in international locations. As of December 31, 2021 we had $12.9 million in consignment inventory, with approximately 43% in domestic locations and 57% in international locations.
Total deferred preservation costs were $44.8 million and $42.9 million as of June 30, 2022 and December 31, 2021, respectively.
Inventory and deferred preservation costs obsolescence reserves were $2.6 million and $3.2 million as of June 30, 2022 and December 31, 2021, respectively.
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5.    Goodwill and Other Intangible Assets
Indefinite Lived Intangible Assets
As of June 30, 2022 and December 31, 2021 the carrying values of our indefinite lived intangible assets were as follows (in thousands):
 June 30,
2022
December 31,
2021
Goodwill$240,939$250,000
In-process R&D2,0252,208
Procurement contracts and agreements2,0132,013
Trademarks22666
We monitor the phases of development of our acquired in-process research and development projects, including the risks associated with further development and the amount and timing of benefits expected to be derived from the completed projects. Incremental costs associated with development are charged to expense as incurred. Capitalized costs are amortized over the estimated useful life of the developed asset once completed. Our in-process research and development projects are reviewed for impairment annually, or more frequently, if events or changes in circumstances indicate that the asset might be impaired. We did not record any impairment of indefinite lived intangible assets during the three and six months ended June 30, 2022. In-process research and development, procurement contracts and agreements, and trademarks are included in Other intangibles, net on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.
Based on our experience with similar agreements, we believe that our acquired procurement contracts and agreements have indefinite useful lives, as we expect to continue to renew these contracts for the foreseeable future. We believe that our trademarks have indefinite useful lives as we currently anticipate that our trademarks will contribute to our cash flows indefinitely.
We evaluate our goodwill and non-amortizing intangible assets for impairment on an annual basis during the fourth quarter of the year, and, if necessary, during interim periods if factors indicate that an impairment review is warranted. As of June 30, 2022 we concluded that our assessment of current factors did not indicate that goodwill or non-amortizing intangible assets are more likely than not to be impaired. We will continue to evaluate the recoverability of these non-amortizing intangible assets in future periods as necessary.
As of June 30, 2022 and December 31, 2021 the carrying value of goodwill, all of which is related to our Medical devices segment, is as follows (in thousands):
Medical Devices Segment
Balance as of December 31, 2021$250,000
Foreign currency translation(9,061)
Balance as of June 30, 2022$240,939
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Definite Lived Intangible Assets
The definite lived intangible assets balance includes balances related to acquired technology, customer relationships, distribution and manufacturing rights and know-how, patents, and other definite lived intangible assets. As of June 30, 2022 and December 31, 2021 the gross carrying values, accumulated amortization, and approximate amortization period of our definite lived intangible assets were as follows (in thousands):
June 30, 2022Gross Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted Average
Useful Life
(Years)
Acquired technology$205,124$50,258$154,86617.7
Other intangibles:
Customer lists and relationships30,98110,33220,64920.6
Distribution and manufacturing rights and know-how9,0314,7984,2335.0
Patents4,1363,16097617.0
Other4,4032,0552,3484.5
Total other intangibles$48,551$20,345$28,20610.7
December 31, 2021Gross Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted Average
Useful Life
(Years)
Acquired technology$213,626$46,632$166,99417.7
Other intangibles:
Customer lists and relationships31,1489,61821,53020.5
Distribution and manufacturing rights and know-how9,8474,3085,5395.0
Patents4,0833,14493917.0
Other3,9691,7622,2074.4
Total other intangibles$49,047$18,832$30,21510.6
Amortization Expense
The following is a summary of amortization expense as recorded in General, administrative, and marketing expenses on our Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Amortization expense$3,905 $4,238 $7,989 $8,498 
As of June 30, 2022 scheduled amortization of intangible assets for the next five years is as follows (in thousands):
Remainder
of 2022
20232024202520262027Total
Amortization expense$7,437 14,662 14,302 12,452 12,233 12,113 $73,199 
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6.    Income Taxes
Income Tax Expense
Our effective income tax rate was an expense of 29% and 34% for the three and six months ended June 30, 2022, respectively, as compared to a benefit of under 1% and 20% for the three and six months ended June 30, 2021, respectively. Our income tax rate for the three and six months ended June 30, 2022 was primarily impacted by changes in our valuation allowance against our net deferred tax assets, non-deductible executive compensation, the foreign derived intangible income deduction, the research and development tax credit, changes in our uncertain tax position liabilities, and tax shortfalls on stock compensation. Our income tax rate for the three and six months ended June 30, 2021 was primarily impacted by non-deductible executive compensation, changes in our valuation allowance against our net deferred tax assets, changes in our uncertain tax position liabilities, the research and development tax credit, and excess tax benefits on stock compensation.
Deferred Income Taxes
We generate deferred tax assets primarily as a result of finance leases, net operating losses, amortization of research and development expenses, excess interest carryforward, stock compensation, and accrued compensation. Our deferred tax liabilities are primarily made up of intangible assets acquired in previous years, finance leases, and unrealized gains and losses.
We maintained a net deferred tax liability of $22.7 million and $26.4 million as of June 30, 2022 and December 31, 2021, respectively. Our valuation allowance against our deferred tax assets was $16.2 million and $13.3 million as of June 30, 2022 and December 31, 2021, respectively, primarily related to net operating loss carryforwards and disallowed excess interest carryforwards.
7.    Leases
We have operating and finance lease obligations resulting from the lease of land and buildings that comprise our corporate headquarters and various manufacturing facilities; leases related to additional manufacturing, office, and warehouse space; leases on company vehicles; and leases on a variety of office and other equipment.
On January 6, 2021 we executed a modification to extend the lease of our headquarters located in Kennesaw, Georgia. This modification resulted in an increase in the present value of future lease obligations and corresponding right-of-use asset of $23.3 million, using a discount rate of 6.41%.
On June 1, 2021 we began occupancy of the newly constructed addition to our leased international headquarters located in Hechingen, Germany. This lease resulted in an increase in the present value of future lease obligations and corresponding right-of-use asset of $9.8 million, using a discount rate of 5.46%.
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Information related to leases included in the Condensed Consolidated Balance Sheets is as follows (in thousands, except lease term and discount rate):
Operating leases:June 30,
2022
December 31,
2021
Operating lease right-of-use assets$56,376 $58,097 
Accumulated amortization(13,717)(12,383)
Operating lease right-of-use assets, net$42,659 $45,714 
Current maturities of operating leases$3,207 $3,149 
Non-current maturities of operating leases 42,141 44,869 
Total operating lease liabilities$45,348 $48,018 
Finance leases:
Property and equipment, at cost$6,200 $6,759 
Accumulated amortization(2,180)(2,105)
Property and equipment, net$4,020 $4,654 
Current maturities of finance leases$489 $528 
Non-current maturities of finance leases3,766 4,374 
Total finance lease liabilities$4,255 $4,902 
Weighted average remaining lease term (in years):
Operating leases12.312.5
Finance leases8.48.8
Weighted average discount rate:
Operating leases5.9%5.8%
Finance leases2.0%2.0%
Current maturities of finance leases are included as a component of Other current liabilities on our Condensed Consolidated Balance Sheets. A summary of lease expenses for our finance and operating leases included in General, administrative, and marketing expenses on our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income are as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Amortization of property and equipment$131$155$268$310
Interest expense on finance leases22284757
Total finance lease expense153183315367
Operating lease expense1,8831,8093,8033,575
Sublease income(91)(92)(183)(216)
Total lease expense$1,945$1,900$3,935$3,726
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A summary of our cash flow information related to leases is as follows (in thousands):
Six Months Ended
June 30,
Cash paid for amounts included in the measurement of lease liabilities:20222021
Operating cash flows for operating leases$3,210$2,957
Financing cash flows for finance leases244306
Operating cash flows for finance leases4457
Future minimum lease payments and sublease rental income are as follows (in thousands):
Finance
Leases
 Operating
Leases
 Sublease
Income
Remainder of 2022$268$2,506$122
20235755,606
20245706,198
20255495,124
20265314,703
Thereafter2,12741,447
Total minimum lease payments$4,620$65,584$122
Less amount representing interest(365)(20,236)  
Present value of net minimum lease payments4,25545,348  
Less current maturities(489)(3,207)  
Lease liabilities, less current maturities$3,766$42,141  
8.    Debt
Credit Agreement
On December 1, 2017 we entered into a credit and guaranty agreement for a $255.0 million senior secured credit facility, consisting of a $225.0 million secured term loan facility (the “Term Loan Facility”) and a $30.0 million secured revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”). We and each of our existing domestic subsidiaries (subject to certain exceptions and exclusions) guarantee the obligations under the Credit Agreement (the “Guarantors”). The Credit Agreement is secured by a security interest in substantially all existing and after-acquired real and personal property (subject to certain exceptions and exclusions) of us and the Guarantors.
On June 2, 2021 we entered into an amendment to our Credit Agreement to extend the maturity dates of our Term Loan and Revolving Credit Facility. As part of the amendment, the maturity dates of both our Term Loan and Revolving Credit Facility were each extended by two and one-half years, until June 1, 2027 and June 1, 2025, respectively, subject to earlier springing maturities triggered if our 4.25% Convertible Senior Notes, described below, remain outstanding on April 1, 2025 and December 31, 2024, respectively. With respect to the Term Loan, if the Convertible Senior Notes remain outstanding on April 1, 2025, the Term Loan’s maturity date will be April 1, 2025, or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 91 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2027. In the case of the Revolving Credit Facility, if the Convertible Senior Notes are still outstanding on December 31, 2024, the Revolving Credit Facility’s maturity date will be either December 31, 2024 or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i)