Leases

6 Months Ended

Jun. 30, 2024

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:


		June 30,		December 31,
	Classification	2024		2023
Assets:
Operating lease assets	Right of use asset - operating leases	$	31,751	$	27,989
Finance lease assets	Property, plant and equipment, net		8,298		8,668
Total lease assets		$	40,049	$	36,657

Liabilities:
Current	Operating lease liability - short-term	$	6,223	$	5,943
Long-term	Operating lease liability - long-term		25,003		22,352
Total operating lease liabilities			31,226		28,295
Current	Finance lease liability - short-term		609		593
Long-term	Finance lease liability - long-term		8,306		8,615
Total finance lease liabilities			8,915		9,208
Total lease liabilities		$	40,141	$	37,503

The components of lease expense include:


		For the Quarter Ended June 30,				For the Six Months Ended June 30,
Lease Cost	Classification	2024		2023		2024		2023
Operating lease cost (1) (2)	Cost of sales	$	3,617	$	1,618	$	5,349	$	3,171
Operating lease cost (1)	Selling, general and administrative expenses		967		782		1,931		1,637
Finance lease cost
Amortization expense	Cost of sales		186		173		371		345
Interest expense on lease liabilities	Interest expense, net		82		81		165		162
Total lease cost		$	4,852	$	2,654	$	7,816	$	5,315

(1)

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

(2)

Operating lease costs included in Cost of sales for the three months ended June 30, 2024, includes a $1.8 million termination charge related to exiting an idled lease facility, as described in Note 4

Supplemental cash flow information related to leases was as follows:


	For the Six Months Ended June 30,
Supplemental Cash Flow Information	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,129	$	3,785
Operating cash flows from finance leases	$	165	$	162
Financing cash flows from finance leases	$	292	$	258
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	4,761	$	1,956
Finance leases	$	—	$	—


Lease Term and Discount Rate	June 30, 2024			December 31, 2023
Weighted-average remaining lease term (years):
Operating leases		5.25			5.67
Finance leases		11.49			11.99
Weighted-average discount rate:
Operating leases		6.1	%		4.7	%
Finance leases		3.7	%		3.7	%


Maturity of Lease Liabilities - As of June 30, 2024	Operating Leases			Finance Leases			Total
2024(1)	$	3,931		$	462		$	4,393
2025		7,821			924			8,745
2026		7,266			924			8,190
2027		6,418			945			7,363
2028		4,510			950			5,460
After 2028		6,025			6,708			12,733
Total lease payments		35,971			10,913			46,884
Less: interest		(4,745	)		(1,998	)		(6,743	)
Present value of lease liabilities	$	31,226		$	8,915		$	40,141

(1)

Represents amounts due in 2024 after June 30, 2024