LEASES

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

LEASES

LEASES

The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the ROU asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from December 31, 2021. In addition, the Company has historically not been exercising purchase options with equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with a new lease. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.

The Company did not identify any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2021: (1) 1-2 years, 1.45% (2) 3-4 years, 2.04% (3) 5-9 years, 2.38% and (4) 10+ years, 3.10%.

In connection with the acquisition of Zumbro, the Company assumed a finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023.

Right of use assets and lease liabilities at December 31, 2021 and 2020 are summarized as follows:

Right of use assets	2021		2020
Operating leases	$	6,929	$	5,838
Finance leases	2,359		2,572
Total	$	9,288	$	8,410

Lease liabilities - current	2021		2020
Operating leases	$	2,194	$	2,178
Finance leases	167		159
Total	$	2,361	$	2,337

Lease liabilities - non-current	2021		2020
Operating leases	$	4,811	$	3,607
Finance leases	2,303		2,472
Total	$	7,114	$	6,079

For the years ended December 31, 2021, 2020, and 2019, the Company's total lease costs were as follows, which included both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:

	Year ended December 31
	2021			2020			2019
Lease Cost
Operating lease cost	$	3,143		$	3,105		$	3,181
Finance Lease cost
Amortization of ROU asset	210			210			—
Interest on lease liabilities	129			137			—
Total finance lease	339			347			—
Total lease cost	$	3,482		$	3,452		$	3,181
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,097		$	2,864		$	3,216
Operating cash flows from finance leases	129			137			—
Financing cash flows from finance leases	159			151			—
	$	3,385		$	3,152		$	3,216
ROU assets obtained in exchange for new operating lease liabilities, net of ROU asset disposals	$	3,804		$	1,042		$	10,173
ROU assets obtained in exchange for new finance lease liabilities, net of ROU asset disposals	$	—		$	2,782		$	—
Weighted-average remaining lease term - operating leases	4.21 years			4.15 years			4.93 years
Weighted-average remaining lease term - finance leases	11.41 years			12.25 years			n/a
Weighted-average discount rate - operating leases	3.5		%	4.5		%	4.6		%
Weighted-average discount rate - finance leases	5.1		%	5.1		%	n/a

Rent expense charged to operations under operating lease agreements for 2021, 2020, and 2019 aggregated approximately $3,143, $3,105, and $3,181, respectively.

LEASES

LEASES

The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the ROU asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from December 31, 2021. In addition, the Company has historically not been exercising purchase options with equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with a new lease. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.

The Company did not identify any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during 2021: (1) 1-2 years, 1.45% (2) 3-4 years, 2.04% (3) 5-9 years, 2.38% and (4) 10+ years, 3.10%.

In connection with the acquisition of Zumbro, the Company assumed a finance lease commitment for a warehouse, with an expiration date of March 31, 2033. The warehouse can be purchased at a pre-determined price beginning in 2023.

Right of use assets and lease liabilities at December 31, 2021 and 2020 are summarized as follows:

Right of use assets	2021		2020
Operating leases	$	6,929	$	5,838
Finance leases	2,359		2,572
Total	$	9,288	$	8,410

Lease liabilities - current	2021		2020
Operating leases	$	2,194	$	2,178
Finance leases	167		159
Total	$	2,361	$	2,337

Lease liabilities - non-current	2021		2020
Operating leases	$	4,811	$	3,607
Finance leases	2,303		2,472
Total	$	7,114	$	6,079

For the years ended December 31, 2021, 2020, and 2019, the Company's total lease costs were as follows, which included both amounts recognized in profits or losses during the period and amounts capitalized on the balance sheet, and the cash flows arising from lease transactions:

	Year ended December 31
	2021			2020			2019
Lease Cost
Operating lease cost	$	3,143		$	3,105		$	3,181
Finance Lease cost
Amortization of ROU asset	210			210			—
Interest on lease liabilities	129			137			—
Total finance lease	339			347			—
Total lease cost	$	3,482		$	3,452		$	3,181
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,097		$	2,864		$	3,216
Operating cash flows from finance leases	129			137			—
Financing cash flows from finance leases	159			151			—
	$	3,385		$	3,152		$	3,216
ROU assets obtained in exchange for new operating lease liabilities, net of ROU asset disposals	$	3,804		$	1,042		$	10,173
ROU assets obtained in exchange for new finance lease liabilities, net of ROU asset disposals	$	—		$	2,782		$	—
Weighted-average remaining lease term - operating leases	4.21 years			4.15 years			4.93 years
Weighted-average remaining lease term - finance leases	11.41 years			12.25 years			n/a
Weighted-average discount rate - operating leases	3.5		%	4.5		%	4.6		%
Weighted-average discount rate - finance leases	5.1		%	5.1		%	n/a

Rent expense charged to operations under operating lease agreements for 2021, 2020, and 2019 aggregated approximately $3,143, $3,105, and $3,181, respectively.