LEASES

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

LEASES

LEASES

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 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 leases on a straight-line basis over the lease term. 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 space, 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 upon 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. Leased assets obtained in exchange for new operating lease liabilities during the year ended December 31, 2022 and December 31, 2021 were approximately $16.6 million and $4.6 million, respectively. As of December 31, 2022, obligations related to leases that the Company has executed but have not yet commenced were insignificant.

During the year ended December 31, 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for the year ended December 31, 2022. In addition, certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. The Company has no other significant lease agreements in place for which the Company is a lessor or sublessor.

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

	Classification	December 31, 2022		December 31, 2021
Right-of-Use Assets
Operating	Other assets	$	23,003	$	11,379
Finance	Property, plant and equipment, net	—		2,658
Total leased ROU assets		$	23,003	$	14,037
Liabilities
Current
Operating	Other accrued liabilities	$	6,120	$	3,507
Finance	Current portion of finance lease obligations	—		59
Noncurrent
Operating	Non-current liabilities	16,883		7,872
Finance	Finance lease obligations	—		—
Total lease liabilities		$	23,003	$	11,438

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

	Classification	Twelve Months Ended December 31, 2022		Twelve Months Ended December 31, 2021
Operating lease cost	Cost of sales, selling expenses, and general and administrative expense	$	5,785	$	5,031
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		144
Interest on lease liabilities	Interest expense	1		55
Net lease cost		$	5,822	$	5,230

Maturity of the Company’s lease liabilities for leases that have commenced is as follows (in thousands):

	Operating Leases		Finance Leases		Total
2023	$	7,096	$	—	$	7,096
2024	5,984		—		5,984
2025	4,920		—		4,920
2026	4,381		—		4,381
2027	2,346		—		2,346
Thereafter	793		—		793
Total lease payments	$	25,520	$	—	$	25,520
Less: interest	2,517		—
Present value of lease payments	$	23,003	$	—

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:

	December 31, 2022		December 31, 2021
Weighted average remaining lease term (years)
Operating leases	4.3		4.3
Finance leases	0.0		0.1
Weighted average discount rate
Operating leases	4.92	%	5.12	%
Finance leases	—	%	6.16	%

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

	Twelve Months Ended December 31, 2022		Twelve Months Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,844	$	4,847
Operating cash flows from finance leases	$	1	$	13
Financing cash flows from finance leases	$	59	$	319

LEASES

LEASES

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 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 leases on a straight-line basis over the lease term. 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 space, 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 upon 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. Leased assets obtained in exchange for new operating lease liabilities during the year ended December 31, 2022 and December 31, 2021 were approximately $16.6 million and $4.6 million, respectively. As of December 31, 2022, obligations related to leases that the Company has executed but have not yet commenced were insignificant.

During the year ended December 31, 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for the year ended December 31, 2022. In addition, certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. The Company has no other significant lease agreements in place for which the Company is a lessor or sublessor.

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

	Classification	December 31, 2022		December 31, 2021
Right-of-Use Assets
Operating	Other assets	$	23,003	$	11,379
Finance	Property, plant and equipment, net	—		2,658
Total leased ROU assets		$	23,003	$	14,037
Liabilities
Current
Operating	Other accrued liabilities	$	6,120	$	3,507
Finance	Current portion of finance lease obligations	—		59
Noncurrent
Operating	Non-current liabilities	16,883		7,872
Finance	Finance lease obligations	—		—
Total lease liabilities		$	23,003	$	11,438

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

	Classification	Twelve Months Ended December 31, 2022		Twelve Months Ended December 31, 2021
Operating lease cost	Cost of sales, selling expenses, and general and administrative expense	$	5,785	$	5,031
Finance lease cost
Amortization of ROU leased assets	Depreciation and amortization within Cost of sales	36		144
Interest on lease liabilities	Interest expense	1		55
Net lease cost		$	5,822	$	5,230

Maturity of the Company’s lease liabilities for leases that have commenced is as follows (in thousands):

	Operating Leases		Finance Leases		Total
2023	$	7,096	$	—	$	7,096
2024	5,984		—		5,984
2025	4,920		—		4,920
2026	4,381		—		4,381
2027	2,346		—		2,346
Thereafter	793		—		793
Total lease payments	$	25,520	$	—	$	25,520
Less: interest	2,517		—
Present value of lease payments	$	23,003	$	—

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:

	December 31, 2022		December 31, 2021
Weighted average remaining lease term (years)
Operating leases	4.3		4.3
Finance leases	0.0		0.1
Weighted average discount rate
Operating leases	4.92	%	5.12	%
Finance leases	—	%	6.16	%

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

	Twelve Months Ended December 31, 2022		Twelve Months Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,844	$	4,847
Operating cash flows from finance leases	$	1	$	13
Financing cash flows from finance leases	$	59	$	319