Leases

12 Months Ended

Dec. 31, 2022

11.

Leases

The lease accounting guidance under ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company's leasing activity is primarily related to buildings used for manufacturing, warehousing, sales, and administrative activities. The Company determines if an arrangement is a lease at inception. Many of the Company's lease agreements contain renewal options; however, the Company does not recognize ROU assets or lease liabilities for renewal periods unless it is determined that lease renewal is reasonably certain at inception or when a triggering event occurs. Some of the Company's lease agreements contain rent escalation clauses, free-rent periods, or other lease concessions. The Company recognizes its minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Variable lease costs represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred. The Company's variable lease costs are not material.

In determining its ROU assets and lease liabilities, the Company applies a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When the Company cannot readily determine the discount rate implicit in the lease agreement, it utilizes its fully collateralized incremental borrowing rate. To estimate its specific incremental borrowing rates the Company considers, among other factors, interest rates on its existing credit facilities, risk-free rates, the types of assets being leased, and the term of the leases.

The components of lease expense were as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Operating lease cost (a)	$	3,558	$	3,232	$	3,450
Finance lease cost:
Amortization of right-of-use assets		309		308		308
Interest on lease liability		289		315		338
Total finance lease cost		598		623		646
Total lease cost	$	4,156	$	3,855	$	4,096
(a) includes variable lease costs which are immaterial

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,637	$	3,171	$	3,338
Operating cash flows from finance leases	$	289	$	315	$	338
Financing cash flows from finance leases	$	600	$	603	$	467
Right of use assets obtained in exchange for lease obligations
Operating leases	$	3,487	$	2,206	$	545

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021
Operating leases
Right-of-use assets from operating leases	$	11,373	$	10,893

Accounts payable and accrued expenses	$	3,228	$	2,414
Operating lease liabilities		8,453		8,762
Total operating lease liabilities	$	11,681	$	11,176

Finance leases
Property, plant and equipment, net	$	2,329	$	2,619

Accounts payable and accrued expenses	$	645	$	600
Other liabilities		5,537		6,183
Total finance lease liabilities	$	6,182	$	6,783


Weighted-average remaining lease term as of December 31, 2022 were as follows:
Operating leases		10 years
Finance leases		8 years
Weighted-average discount rate
Operating leases		4.7%
Finance leases		4.6%

As of December 31, 2022, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2023		3,405			907
2024		2,979			925
2025		2,375			943
2026		1,543			962
2027		668			982
Thereafter		1,891			2,597
Total minimum lease payments	$	12,861		$	7,316
Less imputed interest		(1,180	)		(1,134	)
Lease liability	$	11,681		$	6,182