Leases

12 Months Ended

Dec. 31, 2021

As discussed in Note 3, the Company adopted ASU No. 2016-02—Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. Adoption of the new standard resulted in the recognition of operating lease assets and lease liabilities of $20.2 million and $20.5 million, respectively. The difference between the lease assets and lease liabilities, net of the deferred tax impact, and the elimination of historical prepaid or deferred rent, was recorded as an adjustment to retained earnings. The standard did not have a material impact to the Company’s consolidated statements of operations and comprehensive income (loss) or cash flows.

The Company determines if a contractual arrangement qualifies as a lease at inception. The Company’s leases primarily relate to facilities, vehicles, and equipment, and certain contract manufacturing agreements. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used as a discount rate, based on the information available at the commencement date, in determining the present value of lease payments. Lease assets also include the impact of any prepayments made and are reduced by impact of any lease incentives.

The Company does not recognize lease liabilities or lease assets on the balance sheet for short-term (leases with a lease term of twelve months or less as of the commencement date). Rather, any short-term lease payments are recognized as an expense on a straight-line basis over the lease term. The current period short-term lease expense reasonably reflects our short-term lease commitments.

For all classifications of leases, the Company combines lease and nonlease components to account for them as a single lease component. Variable lease payments are excluded from the lease liability and recognized in the period in which the obligation is incurred. Additionally, lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

A summary of the Company’s lease portfolio as of December 31, 2021, and 2020, is presented in the table below:

(U.S. Dollars, in thousands, except lease term and discount rate)	Classification	December 31, 2021			December 31, 2020
Assets
Operating leases	Other long-term assets	$	3,155		$	4,840
Finance leases	Property, plant and equipment, net		18,600			20,552
Total lease assets		$	21,755		$	25,392
Liabilities
Current
Operating leases	Other current liabilities	$	1,834		$	2,092
Finance leases	Current portion of finance lease liability		2,590			510
Long-term
Operating leases	Other long-term liabilities		1,443			2,946
Finance leases	Long-term portion of finance lease liability		19,890			22,338
Total lease liabilities		$	25,757		$	27,886

Weighted Average Remaining Lease Term
Operating leases		3.3 years			3.6 years
Finance leases		17.0 years			18.1 years

Weighted Average Discount Rate
Operating leases			2.6	%		2.4	%
Finance leases			4.2	%		4.2	%

The components of lease costs were as follows:

(U.S. Dollars, in thousands)	For the Year Ended December 31, 2021		For the Year Ended December 31, 2020		For the Year Ended December 31, 2019
Finance lease costs:
Amortization of right-of-use assets	$	2,049	$	1,766	$	972
Interest on finance lease liabilities		933		940		919
Operating lease costs		2,234		2,235		2,161
Short-term lease costs		213		230		255
Variable lease costs		815		673		749
Total lease costs	$	6,244	$	5,844	$	5,056

Supplemental cash flow information related to leases was as follows:

(U.S. Dollars, in thousands)	For the Year Ended December 31, 2021		For the Year Ended December 31, 2020		For the Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,627	$	4,299	$	4,075
Operating cash flows from finance leases		907		689		919
Financing cash flows from finance leases		537		323		365
Right-of-use assets obtained in exchange for lease obligations
Operating leases		589		959		878
Finance leases		149		1,949		21,179

A summary of the Company’s remaining lease liabilities as of December 31, 2021, is included below:

(U.S. Dollars, in thousands)	Operating Leases			Finance Leases
2022	$	1,883		$	3,480
2023		614			1,508
2024		211			1,538
2025		192			1,543
2026		189			1,562
Thereafter		330			22,613
Total undiscounted value of lease liabilities		3,419			32,244
Less: Interest		(142	)		(9,764	)
Present value of lease liabilities	$	3,277		$	22,480

Current portion of lease liabilities	$	1,834		$	2,590
Long-term portion of lease liabilities		1,443			19,890
Total lease liabilities	$	3,277		$	22,480