LEASES

6 Months Ended

Jun. 30, 2022

The Company leases real properties for use in manufacturing and as administrative and sales offices, and also leases automobiles and office equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating. Right-of-use (“ROU”) assets are initially measured at the present value of lease payments over the lease term plus initial direct costs, if any. ROU assets are amortized on a straight-line basis to the Condensed Consolidated Statement of Operations. If a lease does not provide a discount rate and the rate cannot be readily determined, an incremental borrowing rate is used to determine the present value of future lease payments. Lease and non-lease components within the Company’s lease agreements are accounted for together. The Company has no leases in which the Company is the lessor.

Nearly all of the Company’s leasing arrangements are classified as operating leases. ROU asset and lease liability balances were as follows for the periods presented:


	June 30, 2022		December 31, 2021
ROU asset	$	50,030	$	52,219

Current lease liability	6,291		6,126
Long-term lease liability	44,749		47,000
Total lease liability	$	51,040	$	53,126

The ROU asset is reported in “Other assets” while the current lease liability is reported in “Other current liabilities” and the long-term lease liability is reported in “Other long-term liabilities” in the Company’s Condensed Consolidated Balance Sheets. Cash paid for operating lease liabilities are recorded as operating cash flows in the Company’s Condensed Consolidated Statements of Cash Flows.

Arcadia leases certain office, manufacturing, distribution and warehouse facilities from entities affiliated with the redeemable noncontrolling interest holder and the President of Arcadia. There were eight related party leases in effect as of June 30, 2022, with expiration dates ranging from calendar years 2023 to 2031. As of June 30, 2022, the total ROU asset and related lease liability recognized for related party leases was $30,598 and $30,854, respectively. The Company believes that the lease terms for these properties are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for similar types of property. For the three months ended June 30, 2022 and 2021, operating lease expense was $2,774 and $1,039, respectively. For the six months ended June 30, 2022 and 2021, operating lease expense was $5,541 and $2,010, respectively. Related party lease expense for the three and six months ended June 30, 2022 was $1,156 and $2,313, respectively, which is included in overall operating lease expense. There was no related party lease expense recorded through June 30, 2021. Short term and variable lease costs were not material for the three and six months ended June 30, 2022 and 2021.