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LEASES

9 Months Ended

Sep. 30, 2022

The Company leases identified assets comprising of real estate and equipment. Real estate leases consist primarily of office and warehouse space and equipment leases consist of vehicles and warehouse equipment. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.

Leases are classified as either finance leases or operating leases based on criteria in ASC 842, “Leases”. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.

Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term and is included in operating expenses in the condensed consolidated statement of income. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the condensed consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in interest and other income (expense), net in the condensed consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 12 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

The components of lease cost were comprised of the following:


	Three-Months		Three-Months		Nine-Months		Nine-Months
	Ended		Ended		Ended		Ended
	September 30,		September 30,		September 30,		September 30,
	2022		2021		2022		2021
Operating lease cost	$	2,306	$	1,103	$	6,238	$	3,348

Short-term lease cost		1,001		1,235		2,870		3,370

Variable lease cost		189		185		567		532

Finance leases:
Amortization of ROU assets		140		138		415		394
Interest on lease liabilities		8		6		18		15
Finance lease cost		148		144		433		409

Total lease cost	$	3,644	$	2,667	$	10,108	$	7,659

Supplemental cash flow information for the following periods:


	Nine-Months		Nine-Months
	Ended September 30,		Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	5,859	$	3,057
Operating cash outflows from finance leases		18		15
Financing cash outflows from finance leases		1,678		1,970

ROU assets obtained in exchange for lease obligations:
Finance leases		1,654		2,767
Operating leases		20,093		251

ROU assets for operating and finance leases recognized in the Company’s condensed consolidated balance sheets were comprised of the following at:


	September 30, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	36,681	$	404	$	37,085	Other Assets
Finance leases		—		1,753		1,753	Property and Equipment, net


	December 31, 2021
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	22,518	$	639	$	23,157	Other Assets
Finance leases		—		2,646		2,646	Property and Equipment, net

Operating and finance lease liabilities recognized in the Company’s condensed consolidated balance sheets were as follows at:


	September 30, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	7,028	$	917
Other liabilities		29,265		48
Total	$	36,293	$	965


	December 31, 2021
	Operating Leases		Finance Leases
Accrued liabilities	$	3,990	$	960
Other liabilities		17,389		41
Total	$	21,379	$	1,001

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2022 and December 31, 2021 were as follows:


	September 30, 2022
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	7.1		0.8
Weighted-average discount rate	3.4	%	2.7	%


	December 31, 2021
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	8.1		0.7
Weighted-average discount rate	3.5	%	1.3	%

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at September 30, 2022:


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2022 (from October 1, 2022 to December 31, 2022)	$	2,038	$	410
2023		7,829		525
2024		6,473		23
2025		4,808		17
2026		3,895		2
2027 and thereafter		15,974		—
Total lease payments		41,017		977
Less imputed interest		(4,724)		(12)
Total	$	36,293	$	965

As of September 30, 2022, the Company did not have any significant additional operating or finance leases that have not yet commenced.