Leases

12 Months Ended

Dec. 31, 2022

13. Leases

The Company determines if an arrangement is a lease at inception. The Company has leases for manufacturing facilities, distribution centers, warehouses, office space and equipment, with remaining lease terms of one to thirteen years. Certain of these leases include options to extend the lease for up to five years, and some include options to terminate the lease early. Leases with an initial term of 12 months or less are not recorded on the Consolidated Statements of Financial Position; the Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. Operating leases with an initial term greater than 12 months are included in Right of use asset – operating leases (“ROU assets”), Operating lease liability – short term, and Operating lease liability – long term and finance leases are included in Property, plant and equipment, Finance lease liability – short term, and Finance lease liability – long term in the Consolidated Statements of Financial Position.

The ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent the obligation to make lease payments. ROU assets and lease liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. When leases do not provide an implicit rate, the Company’s incremental borrowing rate is used, which is then applied at the portfolio level, based on the information available at commencement date in determining the present value of lease payments. The Company has also elected not to separate lease and non-lease components. The lease terms include options to extend or terminate the lease when it is reasonably certain the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.

Amounts included in the Consolidated Statements of Financial Position related to leases were:


		December 31,		December 31,
	Classification	2022		2021
Assets:
Operating lease assets	Right of use asset - operating leases	$	28,908	$	29,285
Finance lease assets	Property, plant and equipment, net		9,075		9,765
Total lease assets		$	37,983	$	39,050

Liabilities:
Current	Operating lease liability - short-term	$	6,177	$	5,341
Long-term	Operating lease liability - long-term		22,786		23,815
Total operating lease liabilities			28,963		29,156
Current	Finance lease liability - short-term		518		500
Long-term	Finance lease liability - long-term		8,919		9,437
Total finance lease liabilities			9,437		9,937
Total lease liabilities		$	38,400	$	39,093

The components of lease expense include:


		For the Year Ended December 31,
Lease Cost	Classification	2022		2021		2020
Operating lease cost (1)	Cost of sales	$	5,673	$	5,095	$	2,008
Operating lease cost (1)	Selling, general and administrative expenses		2,884		2,328		1,729
Finance lease cost
Amortization expense	Cost of sales		689		574		—
Interest expense on lease liabilities	Interest expense, net		340		298		—
Total lease cost		$	9,586	$	8,295	$	3,737

(1) Includes short-term leases and variable lease costs, which are immaterial

Supplemental cash flow information related to leases was as follows:


	For the Year Ended December 31,
Supplemental Cash Flow Information	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,941	$	5,952	$	2,683
Operating cash flows from finance leases	$	340	$	298	$	—
Financing cash flows from finance leases	$	500	$	402	$	—
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	4,371	$	7,438	$	1,116
Finance leases	$	—	$	10,339	$	—


Lease Term and Discount Rate	December 31, 2022			December 31, 2021
Weighted-average remaining lease term (years):
Operating leases		6.44			7.27
Finance leases		13.17			14.17
Weighted-average discount rate:
Operating leases		3.6	%		3.4	%
Finance leases		3.5	%		3.5	%


Maturity of Lease Liabilities - As of December 31, 2022	Operating Leases			Finance Leases			Total
2023	$	6,991		$	840		$	7,831
2024		5,375			861			6,236
2025		4,522			865			5,387
2026		3,885			865			4,750
2027		3,235			887			4,122
After 2027		8,361			7,521			15,882
Total lease payments		32,369			11,839			44,208
Less: interest		(3,406	)		(2,402	)		(5,808	)
Present value of lease liabilities	$	28,963		$	9,437		$	38,400

In March 2021, a 15-year finance lease for a new manufacturing and distribution facility in Bristol, Indiana commenced. As described in Note 6, this lease agreement was in connection with the Ameri-Kart Plan, which includes facility consolidation for this business within the Material Handling Segment.

The Company has operating leases for four facilities within the Material Handling Segment that are with a related party. Total right of use assets related to these related party leases were $4.0 million and $3.6 million at December 31, 2022 and 2021, respectively. Total operating lease liabilities related to these related party leases were $3.9 million and $3.4 million at December 31, 2022 and 2021, respectively. Total lease expense from these related party leases was $1.8 million, $1.8 million and $0.1 million in the years ended December 31, 2022, 2021 and 2020, respectively.