LEASES

6 Months Ended

Jun. 30, 2022

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 June 30, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $8.9 million. During the three months ended June 30, 2021, leased assets obtained in exchange for new operating lease liabilities were insignificant. As of June 30, 2022, obligations related to operating leases that the Company has executed but have not yet commenced totaled approximately $0.2 million on a non-discounted basis, which the Company generally expects to be recognized over the next three years.

During the three and six months ended June 30, 2022, the Company entered into sale-leaseback-sublease transactions. Amounts related to these transactions during the second quarter of 2022 were insignificant. In addition, certain of the transactions occurred with a related party—such transactions were at market value and arm’s length.

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


	Classification	June 30, 2022		December 31, 2021
Right-of-Use Assets
Operating	Other assets	$	19,139	$	11,379
Finance	Property, plant and equipment, net of depreciation	—		2,658
Total leased ROU assets		$	19,139	$	14,037
Liabilities
Current
Operating	Other accrued liabilities	$	5,160	$	3,507
Finance	Current portion of finance lease obligations	—		59
Noncurrent
Operating	Non-current liabilities	13,980		7,872
Finance	Finance lease obligations	—		—
Total lease liabilities		$	19,140	$	11,438

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


	Classification	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	1,209	$	1,229
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	—		36
Interest on lease liabilities	Interest expense	—		7
Net lease cost		$	1,209	$	1,272


	Classification	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	2,318	$	2,484
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		72
Interest on lease liabilities	Interest expense	1		15
Net lease cost		$	2,355	$	2,571

Maturity of the Company’s lease liabilities as of June 30, 2022 is as follows (in thousands):


	Operating Leases		Finance Leases		Total
2022 (remainder)	$	3,089	$	—	$	3,089
2023	5,523		—		5,523
2024	4,408		—		4,408
2025	3,386		—		3,386
2026	2,894		—		2,894
Thereafter	2,025		—		2,025
Total lease payments	$	21,325	$	—	$	21,325
Less: interest	2,185		—
Present value of lease payments	$	19,140	$	—

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:


	June 30, 2022		December 31, 2021
Weighted average remaining lease term (years)
Operating leases	4.2		4.3
Finance leases	0.0		0.1
Weighted average discount rate
Operating leases	5.02	%	5.12	%
Finance leases	—	%	6.16	%

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


	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,342	$	2,450
Operating cash flows from finance leases	$	1	$	9
Financing cash flows from finance leases	$	59	$	172

LEASES

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


	Classification	June 30, 2022		December 31, 2021
Right-of-Use Assets
Operating	Other assets	$	19,139	$	11,379
Finance	Property, plant and equipment, net of depreciation	—		2,658
Total leased ROU assets		$	19,139	$	14,037
Liabilities
Current
Operating	Other accrued liabilities	$	5,160	$	3,507
Finance	Current portion of finance lease obligations	—		59
Noncurrent
Operating	Non-current liabilities	13,980		7,872
Finance	Finance lease obligations	—		—
Total lease liabilities		$	19,140	$	11,438

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


	Classification	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	1,209	$	1,229
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	—		36
Interest on lease liabilities	Interest expense	—		7
Net lease cost		$	1,209	$	1,272


	Classification	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Operating lease cost	Cost of sales, selling expenses and general and administrative expense	$	2,318	$	2,484
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		72
Interest on lease liabilities	Interest expense	1		15
Net lease cost		$	2,355	$	2,571

Maturity of the Company’s lease liabilities as of June 30, 2022 is as follows (in thousands):


	Operating Leases		Finance Leases		Total
2022 (remainder)	$	3,089	$	—	$	3,089
2023	5,523		—		5,523
2024	4,408		—		4,408
2025	3,386		—		3,386
2026	2,894		—		2,894
Thereafter	2,025		—		2,025
Total lease payments	$	21,325	$	—	$	21,325
Less: interest	2,185		—
Present value of lease payments	$	19,140	$	—


	June 30, 2022		December 31, 2021
Weighted average remaining lease term (years)
Operating leases	4.2		4.3
Finance leases	0.0		0.1
Weighted average discount rate
Operating leases	5.02	%	5.12	%
Finance leases	—	%	6.16	%

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


	Six Months Ended June 30, 2022		Six Months Ended June 30, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,342	$	2,450
Operating cash flows from finance leases	$	1	$	9
Financing cash flows from finance leases	$	59	$	172