Leases

9 Months Ended

Sep. 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 fourteen 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:

		September 30,		December 31,
	Classification	2021		2020
Assets:
Operating lease assets	Right of use asset - operating leases	$	30,532	$	18,390
Finance lease assets	Property, plant and equipment, net		9,937		—
Total lease assets		$	40,469	$	18,390

Liabilities:
Current	Operating lease liability - short-term	$	5,369	$	4,359
Long-term	Operating lease liability - long-term		24,989		13,755
Total operating lease liabilities		$	30,358	$	18,114
Current	Finance lease liability - short-term	$	495	$	—
Long-term	Finance lease liability - long-term		9,563		—
Total finance lease liabilities			10,058		—
Total lease liabilities		$	40,416	$	18,114

The components of lease expense include:

		For the Quarter Ended September 30,				For the Nine Months Ended September 30,
Lease Cost	Classification	2021		2020		2021		2020
Operating lease cost ⁽¹⁾	Cost of sales	$	1,374	$	392	$	3,620	$	1,226
Operating lease cost ⁽¹⁾	Selling, general and administrative expenses		618		396		1,713		1,264
Finance lease cost
Amortization expense	Cost of sales		172		—		402		—
Interest expense on lease liabilities	Interest expense, net		90		—		209		—
Total lease cost		$	2,254	$	788	$	5,944	$	2,490

(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	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,201	$	1,877
Operating cash flows from finance leases	$	209	$	—
Financing cash flows from finance leases	$	281	$	—
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	7,146	$	701
Finance leases	$	10,339	$	—

Lease Term and Discount Rate	September 30, 2021			December 31, 2020
Weighted-average remaining lease term (years):
Operating leases		7.42			5.66
Finance leases		14.42			—
Weighted-average discount rate:
Operating leases		3.4	%		3.7	%
Finance leases		3.5	%		—

Maturity of Lease Liabilities - As of September 30, 2021	Operating Leases			Finance Leases			Total
2021⁽¹⁾	$	1,657		$	210		$	1,867
2022		6,092			840			6,932
2023		5,551			840			6,391
2024		4,107			861			4,968
2025		3,317			865			4,182
After 2025		13,629			9,273			22,902
Total lease payments		34,353			12,889			47,242
Less: interest		(3,995	)		(2,831	)		(6,826	)
Present value of lease liabilities	$	30,358		$	10,058		$	40,416

(1)	Represents amounts due in 2021 after September 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 September 30, 2021 to complete it for its full 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.

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 $5.2 million at September 30, 2021 and December 31, 2020, respectively. Total operating lease liabilities related to these related party leases were $3.8 million and $5.0 million at September 30, 2021 and December 31, 2021, respectively. Total lease expense from these related party leases was $0.4 million and $1.3 million in the quarter and nine months ended September 30, 2021.