LEASES

9 Months Ended

Sep. 30, 2021

The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration.

The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally one to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. During the three months ended September 30, 2021, leased assets obtained in exchange for new operating lease liabilities totaled approximately $2.3 million. During the three months ended September 30, 2020, leased assets obtained in exchange for new operating lease liabilities totaled approximately $0.3 million. Obligations related to operating leases that the Company has executed but have not yet commenced were insignificant as of September 30, 2021.

Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):


	Classification	September 30, 2021		December 31, 2020
Right-of-Use Assets
Operating	Other assets	$	11,647	$	10,842
Finance	Property, plant and equipment, net of depreciation	2,694		2,802
Total leased ROU assets		$	14,341	$	13,644
Liabilities
Current
Operating	Other accrued liabilities	$	3,625	$	4,117
Finance	Current portion of finance lease obligations	119		348
Noncurrent
Operating	Non-current liabilities	8,416		6,967
Finance	Finance lease obligations	—		30
Total lease liabilities		$	12,160	$	11,462

Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):


	Classification	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	1,329	$	1,217
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		36
Interest on lease liabilities	Interest expense	6		11
Net lease cost		$	1,371	$	1,264


	Classification	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	3,813	$	3,844
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	108		108
Interest on lease liabilities	Interest expense	21		44
Net lease cost		$	3,942	$	3,996

Maturity of the Company’s lease liabilities as of September 30, 2021 is as follows (in thousands):


	Operating Leases		Finance Leases		Total
2021 (remainder)	$	1,179	$	90	$	1,269
2022	3,883		30		3,913
2023	3,062		—		3,062
2024	1,945		—		1,945
2025	1,346		—		1,346
Thereafter	2,040		—		2,040
Total lease payments	$	13,455	$	120	$	13,575
Less: interest	1,414		1
Present value of lease payments	$	12,041	$	119

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:


	September 30, 2021		December 31, 2020
Weighted average remaining lease term (years)
Operating leases	4.3		3.6
Finance leases	0.3		1.1
Weighted average discount rate
Operating leases	5.11	%	5.07	%
Finance leases	6.16	%	6.16	%

Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):


	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,660	$	3,820
Operating cash flows from finance leases	$	12	$	27
Financing cash flows from finance leases	$	259	$	244

LEASES

Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):


	Classification	September 30, 2021		December 31, 2020
Right-of-Use Assets
Operating	Other assets	$	11,647	$	10,842
Finance	Property, plant and equipment, net of depreciation	2,694		2,802
Total leased ROU assets		$	14,341	$	13,644
Liabilities
Current
Operating	Other accrued liabilities	$	3,625	$	4,117
Finance	Current portion of finance lease obligations	119		348
Noncurrent
Operating	Non-current liabilities	8,416		6,967
Finance	Finance lease obligations	—		30
Total lease liabilities		$	12,160	$	11,462

Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):


	Classification	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	1,329	$	1,217
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		36
Interest on lease liabilities	Interest expense	6		11
Net lease cost		$	1,371	$	1,264


	Classification	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	3,813	$	3,844
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	108		108
Interest on lease liabilities	Interest expense	21		44
Net lease cost		$	3,942	$	3,996

Maturity of the Company’s lease liabilities as of September 30, 2021 is as follows (in thousands):


	Operating Leases		Finance Leases		Total
2021 (remainder)	$	1,179	$	90	$	1,269
2022	3,883		30		3,913
2023	3,062		—		3,062
2024	1,945		—		1,945
2025	1,346		—		1,346
Thereafter	2,040		—		2,040
Total lease payments	$	13,455	$	120	$	13,575
Less: interest	1,414		1
Present value of lease payments	$	12,041	$	119


	September 30, 2021		December 31, 2020
Weighted average remaining lease term (years)
Operating leases	4.3		3.6
Finance leases	0.3		1.1
Weighted average discount rate
Operating leases	5.11	%	5.07	%
Finance leases	6.16	%	6.16	%

Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):


	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,660	$	3,820
Operating cash flows from finance leases	$	12	$	27
Financing cash flows from finance leases	$	259	$	244