LEASES

9 Months Ended

Sep. 30, 2023

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. The Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed 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 the third quarter of 2023: (1) 1-2 years, 6.50% (2) 3-4 years, 7.09% (3) 5-9 years, 7.43% and (4) 10+ years, 8.15%.

Right of use assets and lease liabilities at September 30, 2023 and December 31, 2022 are summarized as follows:

Right of use assets	September 30, 2023		December 31, 2022
Operating leases	$	16,066	$	17,094
Finance leases	2,155		2,338
Total	$	18,221	$	19,432

Lease liabilities - current	September 30, 2023		December 31, 2022
Operating leases	$	3,584	$	3,796
Finance leases	274		226
Total	$	3,858	$	4,022

Lease liabilities - non-current	September 30, 2023		December 31, 2022
Operating leases	$	13,244	$	13,806
Finance leases	1,995		2,213
Total	$	15,239	$	16,019

For the three and nine months ended September 30, 2023 and 2022, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Lease Cost
Operating lease cost	$	1,326		$	1,190		$	3,972		$	2,782
Finance lease cost
Amortization of ROU asset	61			53			181			157
Interest on lease liabilities	29			30			87			91
Total finance lease	90			83			268			248
Total lease cost	$	1,416		$	1,273		$	4,240		$	3,030
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,232		$	1,164		$	3,441		$	2,772
Operating cash flows from finance leases	29			30			87			91
Financing cash flows from finance leases	56			42			166			125
	$	1,317		$	1,236		$	3,694		$	2,988
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed	$	1,110		$	2,275		$	3,715		$	7,552
Weighted-average remaining lease term - operating leases	5.49 years			3.83 years			5.49 years			3.83 years
Weighted-average remaining lease term - finance leases	9.29 years			10.65 years			9.29 years			10.65 years
Weighted-average discount rate - operating leases	4.3		%	2.9		%	4.3		%	2.9		%
Weighted-average discount rate - finance leases	5.0		%	5.1		%	5.0		%	5.1		%

Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2023 aggregated to approximately $1,326 and $3,972, respectively, and $1,190 and $2,782 for the three and nine months ended September 30, 2022, respectively.

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at September 30, 2023 are as follows:

Year
October 1, 2023 to December 31, 2023	$	1,301
2024	4,648
2025	3,635
2026	3,120
2027	2,651
2028	2,151
Thereafter	5,304
Total minimum lease payments	$	22,810

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. The Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed 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 the third quarter of 2023: (1) 1-2 years, 6.50% (2) 3-4 years, 7.09% (3) 5-9 years, 7.43% and (4) 10+ years, 8.15%.

Right of use assets and lease liabilities at September 30, 2023 and December 31, 2022 are summarized as follows:

Right of use assets	September 30, 2023		December 31, 2022
Operating leases	$	16,066	$	17,094
Finance leases	2,155		2,338
Total	$	18,221	$	19,432

Lease liabilities - current	September 30, 2023		December 31, 2022
Operating leases	$	3,584	$	3,796
Finance leases	274		226
Total	$	3,858	$	4,022

Lease liabilities - non-current	September 30, 2023		December 31, 2022
Operating leases	$	13,244	$	13,806
Finance leases	1,995		2,213
Total	$	15,239	$	16,019

For the three and nine months ended September 30, 2023 and 2022, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Lease Cost
Operating lease cost	$	1,326		$	1,190		$	3,972		$	2,782
Finance lease cost
Amortization of ROU asset	61			53			181			157
Interest on lease liabilities	29			30			87			91
Total finance lease	90			83			268			248
Total lease cost	$	1,416		$	1,273		$	4,240		$	3,030
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,232		$	1,164		$	3,441		$	2,772
Operating cash flows from finance leases	29			30			87			91
Financing cash flows from finance leases	56			42			166			125
	$	1,317		$	1,236		$	3,694		$	2,988
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed	$	1,110		$	2,275		$	3,715		$	7,552
Weighted-average remaining lease term - operating leases	5.49 years			3.83 years			5.49 years			3.83 years
Weighted-average remaining lease term - finance leases	9.29 years			10.65 years			9.29 years			10.65 years
Weighted-average discount rate - operating leases	4.3		%	2.9		%	4.3		%	2.9		%
Weighted-average discount rate - finance leases	5.0		%	5.1		%	5.0		%	5.1		%

Rent expense charged to operations under operating lease agreements for the three and nine months ended September 30, 2023 aggregated to approximately $1,326 and $3,972, respectively, and $1,190 and $2,782 for the three and nine months ended September 30, 2022, respectively.

Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at September 30, 2023 are as follows:

Year
October 1, 2023 to December 31, 2023	$	1,301
2024	4,648
2025	3,635
2026	3,120
2027	2,651
2028	2,151
Thereafter	5,304
Total minimum lease payments	$	22,810