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LEASES

9 Months Ended

Sep. 30, 2021

The Company leases identified assets comprising real estate and equipment. Real estate leases consist primarily of office and warehouse space and equipment leases consist of vehicles and warehouse equipment. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately.

Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification (“ASC”) 842. The Company’s operating leases are comprised of real estate and warehouse equipment, and the Company’s finance leases are comprised of vehicles.

Right-of-use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. ROU assets also include any lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Certain of the Company’s real estate leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at the lease commencement date. Additional payments based on the change in an index or rate, or payments based on a change in the Company’s portion of real estate taxes and insurance, are recorded as a period expense when incurred.

Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term and is included in operating expenses in the condensed consolidated statement of income. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and is included in operating expenses in the condensed consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in interest and other expense, net in the condensed consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 12 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. The Company has elected not to recognize ROU assets and lease liabilities for short-term operating leases that have a term of 12 months or less.

The components of lease cost were comprised of the following:


	Three-Months		Three-Months		Nine-Months		Nine-Months
	Ended September 30,		Ended September 30,		Ended September 30,		Ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	1,103	$	1,161	$	3,348	$	3,499

Short-term lease cost		1,235		856		3,370		2,440

Variable lease cost		185		242		532		564

Finance leases:
Amortization of ROU assets		138		177		394		511
Interest on lease liabilities		6		9		15		34
Finance lease cost		144		186		409		545

Total lease cost	$	2,667	$	2,445	$	7,659	$	7,048

Supplemental cash flow information for the following periods:


	Nine-Months		Nine-Months
	Ended September 30,		Ended September 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3,057	$	3,081
Operating cash outflows from finance leases		15		33
Financing cash outflows from finance leases		1,970		2,500

ROU assets obtained in exchange for lease obligations:
Finance leases		2,767		2,231
Operating leases		251		2,117

ROU assets for operating and finance leases recognized in the Company’s condensed consolidated balance sheets were comprised of the following at:


	September 30, 2021
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	19,995	$	196	$	20,191	Other Assets
Finance leases		—		2,719		2,719	Property and Equipment, net


	December 31, 2020
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	22,565	$	189	$	22,754	Other Assets
Finance leases		—		2,120		2,120	Property and Equipment, net

Operating and finance lease liabilities recognized in the Company’s condensed consolidated balance sheets were as follows at:


	September 30, 2021
	Operating Leases		Finance Leases
Accrued liabilities	$	2,849	$	1,571
Other liabilities		15,362		46
Total	$	18,211	$	1,617


	December 31, 2020
	Operating Leases		Finance Leases
Accrued liabilities	$	3,171	$	799
Other liabilities		17,342		24
Total	$	20,513	$	823

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at September 30, 2021 and December 31, 2020 were as follows:


	September 30, 2021
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	9.2		0.7
Weighted-average discount rate	3.6	%	1.2	%


	December 31, 2020
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	9.4		0.6
Weighted-average discount rate	3.6	%	1.9	%

The following table reconciles the undiscounted future lease payments for operating and finance leases to the operating and finance leases recorded in the Company’s condensed consolidated balance sheet at September 30, 2021:


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2021 (excluding the nine-months ended September 30, 2021)	$	892	$	713
2022		3,207		871
2023		2,423		21
2024		1,887		13
2025		1,600		8
2026 and thereafter		11,588		—
Total lease payments		21,597		1,626
Less imputed interest		(3,386)		(9)
Total	$	18,211	$	1,617

As of September 30, 2021, the Company did not have any significant additional operating or finance leases that have not yet commenced.