Leases

12 Months Ended

Dec. 31, 2021

11.

Leases

On January 1, 2019, we adopted the new lease accounting guidance, ASC 842. The Lease accounting guidance under ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Our leasing activity is primarily related to buildings used for manufacturing, warehousing, sales, and administrative activities. We determine if an arrangement is a lease at inception. Many of our lease agreements contain renewal options; however, we do not recognize ROU assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses, free-rent periods, or other lease concessions. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Variable lease costs represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred. Our variable lease costs are not material.

In determining our ROU assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our fully collateralized incremental borrowing rate. To estimate our specific incremental borrowing rates we consider, among other factors, interest rates on our existing credit facilities, risk-free rates, the types of assets being leased, and the term of the leases.

The components of lease expense were as follows:


	December 31,
(table only in thousands)	2021		2020		2019
Operating lease cost (a)	$	3,232	$	3,450	$	3,612
Finance lease cost:
Amortization of right-of-use assets		308		308		309
Interest on lease liability		315		338		360
Total finance lease cost		623		646		669
Total lease cost	$	3,855	$	4,096	$	4,281
(a) includes variable lease costs which are immaterial

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,171	$	3,338	$	3,453
Operating cash flows from finance leases	$	315	$	338	$	360
Financing cash flows from finance leases	$	603	$	467	$	478
Right of use assets obtained in exchange for lease obligations
Operating leases	$	2,206	$	545	$	3,547

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2021		2020
Operating leases
Right-of-use assets from operating leases	$	10,893	$	11,376

Accounts payable and accrued expenses	$	2,414	$	2,274
Operating lease liabilities		8,762		9,310
Total operating lease liabilities	$	11,176	$	11,584

Finance leases
Property, plant and equipment, net	$	2,619	$	2,947

Accounts payable and accrued expenses	$	600	$	557
Other liabilities		6,183		6,783
Total finance lease liabilities	$	6,783	$	7,340


Weighted-average remaining lease term as of December 31, 2021 were as follows:
Operating leases		11 years
Finance leases		10 years
Weighted-average discount rate
Operating leases		4.8%
Finance leases		4.5%

As of December 31, 2021, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2022		2,922			889
2023		2,498			907
2024		2,168			925
2025		1,813			943
2026		1,169			962
Thereafter		2,411			3,579
Total minimum lease payments	$	12,981		$	8,205
Less imputed interest		(1,805	)		(1,422	)
Lease liability	$	11,176		$	6,783