LEASES

9 Months Ended

Sep. 30, 2022

Effective at the start of fiscal 2020, the Company adopted the provisions and expanded disclosure requirements described in Accounting Standards Codification (ASC) Topic 842, Leases. The Company adopted the standard using the prospective method. The Company has operating leases for real estate and equipment with an option to renew the leases for up to one month to five years. Some of the leases include the option to terminate the leases upon 30-days notice with a penalty. The Company’s leases have various remaining lease terms ranging from November 2022 to January 2027. The Company’s lease agreements may include renewal or termination options for varying periods that are generally at the Company's discretion. The Company’s lease terms only include those periods related to renewal options the Company believes are reasonably certain to exercise. The Company generally does not include these renewal options as it is not reasonably certain to renew at the lease commencement date. This determination is based on consideration of certain economic, strategic and other factors that the Company evaluates at lease commencement date and reevaluates throughout the lease term. Some leases also include options to terminate the leases and the Company only includes those periods beyond the termination date if it is reasonably certain not to exercise the termination option.

The Company uses a discount rate to calculate the right of use (“ROU”) asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. The variable portion of lease payments is not included in the Company’s ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income.

The Company has lease agreements with both lease and non-lease components that are treated as a single lease component for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

The Company has elected to apply the short-term lease exception for all underlying asset classes. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. The Company’s leases do not include significant restrictions or covenants, and residual value guarantees are generally not included within its operating leases. As of September 30, 2022, the Company did not have any material additional operating leases that have not yet commenced.

The components of lease expense and supplemental balance sheet information were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease expense related to ROU assets and liabilities	$	1,360	$	1,526	$	4,140	$	4,626
Other lease expense	229		204		633		496
Total lease expense	$	1,589	$	1,730	$	4,773	$	5,122

Other information related to leases was as follows (in thousands):


Supplemental Balance Sheet Information	September 30, 2022		December 31, 2021
Operating lease right-of-use assets, noncurrent	$	10,843	$	12,722

	September 30, 2022		December 31, 2021
Operating lease liabilities, current	$	4,123	$	4,227
Operating lease liabilities, noncurrent	9,987		12,511
Total operating lease liabilities	$	14,110	$	16,738


Weighted Average Remaining Lease Term	Years
Operating leases	3.64
Weighted Average Discount Rate
Operating leases	10.3	%

Maturities of operating lease liabilities as of September 30, 2022 were as follows (in thousands):


Year ending September 30:
2023	$	5,336
2024	4,666
2025	3,546
2026	2,428
2027	832
Thereafter	—
Total future undiscounted lease payments	16,808
Less imputed interest	(2,698)
Total	$	14,110

For the three months ended September 30, 2022 and 2021, the Company paid $1.4 million and $1.5 million, respectively, for operating lease liabilities. For the nine months ended September 30, 2022 and 2021, the Company paid $4.1 million and $4.6 million, respectively, for operating lease liabilities.