Leases

6 Months Ended

Jun. 30, 2023

13. Leases

The Company determines if an arrangement is a lease at inception. The Company has leases for manufacturing facilities, distribution centers, warehouses, office space and equipment, with remaining lease terms of one to thirteen years. Certain of these leases include options to extend the lease for up to five years, and some include options to terminate the lease early. Leases with an initial term of 12 months or less are not recorded on the statement of financial position; the Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Operating leases with an initial term greater than 12 months are included in Right of use asset – operating leases (“ROU assets”), Operating lease liability – short term, and Operating lease liability – long term and finance leases are included in Property, plant and equipment, Finance lease liability – short term, and Finance lease liability – long term in the Condensed Consolidated Statement of Financial Position (Unaudited).

The ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the obligation to make lease payments. ROU assets and lease liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. When leases do not provide an implicit rate, the Company’s incremental borrowing rate is used, which is then applied at the portfolio level, based on the information available at commencement date in determining the present value of lease payments. The Company has also elected not to separate lease and non-lease components. The lease terms include options to extend or terminate the lease when it is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

Amounts included in the Condensed Consolidated Statement of Financial Position (Unaudited) related to leases include:


		June 30,		December 31,
	Classification	2023		2022
Assets:
Operating lease assets	Right of use asset - operating leases	$	27,518	$	28,908
Finance lease assets	Property, plant and equipment, net		8,731		9,075
Total lease assets		$	36,249	$	37,983

Liabilities:
Current	Operating lease liability - short-term	$	5,691	$	6,177
Long-term	Operating lease liability - long-term		21,982		22,786
Total operating lease liabilities			27,673		28,963
Current	Finance lease liability - short-term		534		518
Long-term	Finance lease liability - long-term		8,645		8,919
Total finance lease liabilities			9,179		9,437
Total lease liabilities		$	36,852	$	38,400

The components of lease expense include:


		For the Quarter Ended June 30,				For the Six Months Ended June 30,
Lease Cost	Classification	2023		2022		2023		2022
Operating lease cost (1)	Cost of sales	$	1,618	$	1,376	$	3,171	$	2,732
Operating lease cost (1)	Selling, general and administrative expenses		782		666		1,637		1,277
Finance lease cost
Amortization expense	Cost of sales		173		173		345		345
Interest expense on lease liabilities	Interest expense, net		81		85		162		171
Total lease cost		$	2,654	$	2,300	$	5,315	$	4,525

(1)

Includes short-term leases and variable lease costs, which are immaterial

Supplemental cash flow information related to leases was as follows:


	For the Six Months Ended June 30,
Supplemental Cash Flow Information	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,785	$	3,286
Operating cash flows from finance leases	$	162	$	171
Financing cash flows from finance leases	$	258	$	249
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	1,956	$	1,296
Finance leases	$	—	$	—


Lease Term and Discount Rate	June 30, 2023			December 31, 2022
Weighted-average remaining lease term (years):
Operating leases		6.12			6.44
Finance leases		12.68			13.17
Weighted-average discount rate:
Operating leases		3.9	%		3.6	%
Finance leases		3.5	%		3.5	%


Maturity of Lease Liabilities - As of June 30, 2023	Operating Leases			Finance Leases			Total
2023(1)	$	3,563		$	420		$	3,983
2024		5,927			861			6,788
2025		5,088			865			5,953
2026		4,410			865			5,275
2027		3,511			887			4,398
After 2027		8,382			7,521			15,903
Total lease payments		30,881			11,419			42,300
Less: interest		(3,208	)		(2,240	)		(5,448	)
Present value of lease liabilities	$	27,673		$	9,179		$	36,852

(1)

Represents amounts due in 2023 after June 30, 2023