Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Leases

Leases

Sale-Leaseback Transaction

In December 2021, we entered into a sale-leaseback transaction for the building and related land for our Gardena performance center located in Carson, California (“Sale-Leaseback Agreement”). The building and related land was sold for $143.1 million and we had no continuing involvement. The carrying value of the building and related land was $9.4 million and we recognized a gain of $132.5 million. As part of the Sale-Leaseback Agreement, we entered into an initial five year lease for the usage of the just sold building and related land, with three options to renew in five year increments. The lease was classified as an operating lease and the future minimum base monthly lease payments during the initial five year period in aggregate total $19.6 million.

All Leases

We elected to utilize the following practical expedients that are permitted under ASC 842:

•As an accounting policy election by class of underlying asset, elected not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and

•As an accounting policy election not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).

We have operating and finance leases for manufacturing facilities, corporate offices, and various equipment. Our leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense consisted of the following:

	(In thousands)
	Years Ended
	December 31, 2022		December 31, 2021
Operating leases expense	$	10,521	4,283
Finance leases expense:
Amortization of right-of-use assets	$	343	356
Interest on lease liabilities	53		62
Total finance lease expense	$	396	$	418

Short term and variable lease expenses for the year ended December 31, 2022 were not material.

Supplemental cash flow information related to leases was as follows:

	(In thousands)
	Years Ended
	December 31, 2022		December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,669	$	5,150
Operating cash flows from finance leases	$	53	$	61
Financing cash flows from finance leases	$	346	$	363
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8,332	$	23,317
Finance leases	$	245	$	401

The weighted average remaining lease terms were as follows:

	(In years)
	December 31, 2022	December 31, 2021
Operating leases	5	5
Finance leases	6	6

When a lease is identified, we recognize a right-of-use asset and a corresponding lease liability based on the present value of the lease payments over the lease term discounted using our incremental borrowing rate, unless an implicit rate is readily determinable. As the discount rate in our leases is usually not readily available, we use our own incremental borrowing rate as the discount rate. Our incremental borrowing rate is based on the interest rate on our term loan, which is a secured rate. After we completed a financing of all our existing debt on July 14, 2022, the interest rate on our term loan was based on Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin. Prior to the refinancing, the interest rate on our term loans were based on London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

The weighted average discount rates were as follows:

	Years Ended
	December 31, 2022	December 31, 2021
Operating leases	3.0%	3.1%
Finance leases	3.6%	3.6%

Maturity of operating and finance lease liabilities are as follows:

	(In thousands)
	Operating Leases		Finance Leases
2023	$	8,081	$	388
2024	7,956		321
2025	7,924		262
2026	7,595		208
2027	2,323		175
Thereafter	5,102		310
Total lease payments	38,981		1,664
Less imputed interest	2,985		161
Total	$	35,996	$	1,503

Operating lease payments related to options to extend lease terms that are reasonably certain of being exercised are $3.3 million. As of December 31, 2022, there are no legally binding minimum lease payments for leases signed but not yet commenced.

Finance lease payments related to options to extend lease terms that are reasonably certain of being exercised are not significant. As of December 31, 2022, there are no legally binding minimum lease payments for leases signed but not yet commenced.

Leases

Leases

Sale-Leaseback Transaction

In December 2021, we entered into a sale-leaseback transaction for the building and related land for our Gardena performance center located in Carson, California (“Sale-Leaseback Agreement”). The building and related land was sold for $143.1 million and we had no continuing involvement. The carrying value of the building and related land was $9.4 million and we recognized a gain of $132.5 million. As part of the Sale-Leaseback Agreement, we entered into an initial five year lease for the usage of the just sold building and related land, with three options to renew in five year increments. The lease was classified as an operating lease and the future minimum base monthly lease payments during the initial five year period in aggregate total $19.6 million.

All Leases

We elected to utilize the following practical expedients that are permitted under ASC 842:

•As an accounting policy election by class of underlying asset, elected not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component; and

•As an accounting policy election not to apply the recognition requirements in ASC 842 to short term leases (a lease at commencement date has a lease term of 12 months or less and does not contain a purchase option that the lessee is reasonably certain to exercise).

We have operating and finance leases for manufacturing facilities, corporate offices, and various equipment. Our leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense consisted of the following:

	(In thousands)
	Years Ended
	December 31, 2022		December 31, 2021
Operating leases expense	$	10,521	4,283
Finance leases expense:
Amortization of right-of-use assets	$	343	356
Interest on lease liabilities	53		62
Total finance lease expense	$	396	$	418

Short term and variable lease expenses for the year ended December 31, 2022 were not material.

Supplemental cash flow information related to leases was as follows:

	(In thousands)
	Years Ended
	December 31, 2022		December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,669	$	5,150
Operating cash flows from finance leases	$	53	$	61
Financing cash flows from finance leases	$	346	$	363
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	8,332	$	23,317
Finance leases	$	245	$	401

The weighted average remaining lease terms were as follows:

	(In years)
	December 31, 2022	December 31, 2021
Operating leases	5	5
Finance leases	6	6

When a lease is identified, we recognize a right-of-use asset and a corresponding lease liability based on the present value of the lease payments over the lease term discounted using our incremental borrowing rate, unless an implicit rate is readily determinable. As the discount rate in our leases is usually not readily available, we use our own incremental borrowing rate as the discount rate. Our incremental borrowing rate is based on the interest rate on our term loan, which is a secured rate. After we completed a financing of all our existing debt on July 14, 2022, the interest rate on our term loan was based on Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin. Prior to the refinancing, the interest rate on our term loans were based on London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

The weighted average discount rates were as follows:

	Years Ended
	December 31, 2022	December 31, 2021
Operating leases	3.0%	3.1%
Finance leases	3.6%	3.6%

Maturity of operating and finance lease liabilities are as follows:

	(In thousands)
	Operating Leases		Finance Leases
2023	$	8,081	$	388
2024	7,956		321
2025	7,924		262
2026	7,595		208
2027	2,323		175
Thereafter	5,102		310
Total lease payments	38,981		1,664
Less imputed interest	2,985		161
Total	$	35,996	$	1,503

Operating lease payments related to options to extend lease terms that are reasonably certain of being exercised are $3.3 million. As of December 31, 2022, there are no legally binding minimum lease payments for leases signed but not yet commenced.

Finance lease payments related to options to extend lease terms that are reasonably certain of being exercised are not significant. As of December 31, 2022, there are no legally binding minimum lease payments for leases signed but not yet commenced.