Leases

3 Months Ended

Mar. 31, 2021

15. 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 fifteen 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 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:

		March 31,		December 31,
	Classification	2021		2020
Assets:
Operating lease assets	Right of use asset - operating leases	$	20,820	$	18,390
Finance lease assets	Property, plant and equipment, net		10,282		—
Total lease assets		$	31,102	$	18,390

Liabilities:
Current	Operating lease liability - short-term	$	4,269	$	4,359
Long-term	Operating lease liability - long-term		16,300		13,755
Total operating lease liabilities		$	20,569	$	18,114
Current	Finance lease liability - short-term	$	487	$	—
Long-term	Finance lease liability - long-term		9,812		—
Total finance lease liabilities			10,299		—
Total lease liabilities		$	30,868	$	18,114

The components of lease expense include:

		For the Quarter Ended March 31,
Lease Cost	Classification	2021		2020
Operating lease cost ⁽¹⁾	Cost of sales	$	1,070	$	399
Operating lease cost ⁽¹⁾	Selling, general and administrative expenses		551		441
Finance lease cost
Depreciation expense	Cost of sales		57		—
Interest expense on lease liabilities	Interest expense, net		30		—
Total lease cost		$	1,708	$	840

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

Supplemental cash flow information related to leases was as follows:

	For the Quarter Ended March 31,
Supplemental Cash Flow Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,252	$	622
Operating cash flows from finance leases	$	30	$	—
Financing cash flows from finance leases	$	40	$	—
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,523	$	—
Finance leases	$	10,339	$	—

Lease Term and Discount Rate	March 31, 2021			December 31, 2020
Weighted-average remaining lease term (years):
Operating leases		6.53			5.66
Finance leases		14.93			—
Weighted-average discount rate:
Operating leases		3.6	%		3.7	%
Finance leases		3.5	%		—

Maturity of Lease Liabilities - As of March 31, 2021	Operating Leases			Finance Leases			Total
2021⁽¹⁾	$	3,750		$	630		$	4,380
2022		4,433			840			5,273
2023		3,835			840			4,675
2024		2,472			861			3,333
2025		1,682			865			2,547
After 2025		6,827			9,273			16,100
Total lease payments		22,999			13,309			36,308
Less: interest		(2,430	)		(3,010	)		(5,440	)
Present value of lease liabilities	$	20,569		$	10,299		$	30,868

(1)	Represents amounts due in 2021 after March 31, 2021

In March 2021, a 15-year finance lease for a new manufacturing and distribution facility in Bristol, Indiana commenced. While the Company has taken possession of the new Bristol facility, construction remains in process as of March 31, 2021 to complete it for its intended use. As described in Note 5, this lease agreement was in connection with the Ameri-Kart Plan, which includes facility consolidation for this business within the Material Handling Segment.