Leases

9 Months Ended

Sep. 30, 2023

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 twelve 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 statement 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 Condensed Consolidated Statements of Financial Position (Unaudited).

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 Condensed Consolidated Statements of Financial Position (Unaudited) related to leases include:


		September 30,		December 31,
	Classification	2023		2022
Assets:
Operating lease assets	Right of use asset - operating leases	$	27,384	$	28,908
Finance lease assets	Property, plant and equipment, net		8,854		9,075
Total lease assets		$	36,238	$	37,983

Liabilities:
Current	Operating lease liability - short-term	$	5,604	$	6,177
Long-term	Operating lease liability - long-term		22,023		22,786
Total operating lease liabilities			27,627		28,963
Current	Finance lease liability - short-term		581		518
Long-term	Finance lease liability - long-term		8,766		8,919
Total finance lease liabilities			9,347		9,437
Total lease liabilities		$	36,974	$	38,400

The components of lease expense include:


		For the Quarter Ended September 30,				For the Nine Months Ended September 30,
Lease Cost	Classification	2023		2022		2023		2022
Operating lease cost (1)	Cost of sales	$	1,493	$	1,440	$	4,664	$	4,172
Operating lease cost (1)	Selling, general and administrative expenses		856		803		2,493		2,081
Finance lease cost
Amortization expense	Cost of sales		190		172		535		517
Interest expense on lease liabilities	Interest expense, net		89		85		251		256
Total lease cost		$	2,628	$	2,500	$	7,943	$	7,026

(1)

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

Supplemental cash flow information related to leases was as follows:


	For the Nine Months Ended September 30,
Supplemental Cash Flow Information	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,649	$	5,074
Operating cash flows from finance leases	$	251	$	256
Financing cash flows from finance leases	$	403	$	374
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,756	$	3,638
Finance leases	$	313	$	—


Lease Term and Discount Rate	September 30, 2023			December 31, 2022
Weighted-average remaining lease term (years):
Operating leases		5.93			6.44
Finance leases		12.24			13.17
Weighted-average discount rate:
Operating leases		4.4	%		3.6	%
Finance leases		3.7	%		3.5	%


Maturity of Lease Liabilities - As of September 30, 2023	Operating Leases			Finance Leases			Total
2023(1)	$	1,783		$	225		$	2,008
2024		6,415			920			7,335
2025		5,506			924			6,430
2026		4,838			924			5,762
2027		3,948			945			4,893
After 2027		8,749			7,658			16,407
Total lease payments		31,239			11,596			42,835
Less: interest		(3,612	)		(2,249	)		(5,861	)
Present value of lease liabilities	$	27,627		$	9,347		$	36,974

(1)

Represents amounts due in 2023 after September 30, 2023