Leases

6 Months Ended

Jun. 30, 2021

15. 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 fifteen 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 property, plant and equipment, finance lease liability – short term, and finance lease liability – long term in the Condensed Consolidated Statement 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 Statement of Financial Position (Unaudited) related to leases include:

		June 30,		December 31,
	Classification	2021		2020
Assets:
Operating lease assets	Right of use asset - operating leases	$	22,834	$	18,390
Finance lease assets	Property, plant and equipment, net		10,109		—
Total lease assets		$	32,943	$	18,390

Liabilities:
Current	Operating lease liability - short-term	$	4,833	$	4,359
Long-term	Operating lease liability - long-term		17,778		13,755
Total operating lease liabilities		$	22,611	$	18,114
Current	Finance lease liability - short-term	$	491	$	—
Long-term	Finance lease liability - long-term		9,688		—
Total finance lease liabilities			10,179		—
Total lease liabilities		$	32,790	$	18,114

The components of lease expense include:

		For the Quarter Ended June 30,				For the Six Months Ended June 30,
Lease Cost	Classification	2021		2020		2021		2020
Operating lease cost ⁽¹⁾	Cost of sales	$	1,176	$	435	$	2,246	$	834
Operating lease cost ⁽¹⁾	Selling, general and administrative expenses		544		427		1,095		868
Finance lease cost
Depreciation expense	Cost of sales		173		—		230		—
Interest expense on lease liabilities	Interest expense, net		89		—		119		—
Total lease cost		$	1,982	$	862	$	3,690	$	1,702

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

Supplemental cash flow information related to leases was as follows:

	For the Six Months Ended June 30,
Supplemental Cash Flow Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,627	$	1,244
Operating cash flows from finance leases	$	119	$	—
Financing cash flows from finance leases	$	161	$	—
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	6,753	$	—
Finance leases	$	10,339	$	—

Lease Term and Discount Rate	June 30, 2021			December 31, 2020
Weighted-average remaining lease term (years):
Operating leases		6.19			5.66
Finance leases		14.68			—
Weighted-average discount rate:
Operating leases		3.6	%		3.7	%
Finance leases		3.5	%		—

Maturity of Lease Liabilities - As of June 30, 2021	Operating Leases			Finance Leases			Total
2021⁽¹⁾	$	2,853		$	420		$	3,273
2022		5,138			840			5,978
2023		4,539			840			5,379
2024		3,158			861			4,019
2025		2,351			865			3,216
After 2025		7,071			9,273			16,344
Total lease payments		25,110			13,099			38,209
Less: interest		(2,499	)		(2,920	)		(5,419	)
Present value of lease liabilities	$	22,611		$	10,179		$	32,790

(1)	Represents amounts due in 2021 after June 30, 2021

In March 2021, a 15-year finance lease for a new manufacturing and distribution facility in Bristol, Indiana commenced. While the Company has taken possession of the new Bristol facility, construction remains in process as of June 30, 2021 to complete it for its intended use. As described in Note 5, this lease agreement was in connection with the Ameri-Kart Plan, which includes facility consolidation for this business within the Material Handling Segment.