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LEASES
3 Months Ended
Mar. 31, 2023
Leases [Abstract]  
LEASES LEASES
The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from March 31, 2023. In addition, the Company has historically not been exercising purchase options under the equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with new leases. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.

On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility. The sublease commenced in the fourth quarter of 2022 and the Company recognized a right of use asset and lease liability as of the commencement date in accordance with ASC 842, Lease Accounting.

The Company has not identified any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during the first quarter of 2023: (1) 1-2 years, 5.45% (2) 3-4 years, 6.04% (3) 5-9 years, 6.38% and (4) 10+ years, 7.10%.

In connection with its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033 and an option to purchase at a pre-determined price. At March 31, 2023 and December 31, 2022, the Company had finance lease liabilities of $2,385 and $2,439, respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.

Right of use assets and lease liabilities at March 31, 2023 and December 31, 2022 are summarized as follows:
Right of use assetsMarch 31, 2023December 31, 2022
Operating leases$15,232 $17,094 
Finance leases2,281 2,338 
Total$17,513 $19,432 
Lease liabilities - currentMarch 31, 2023December 31, 2022
Operating leases$2,831 $3,796 
Finance leases229 226 
Total$3,060 $4,022 
Lease liabilities - non-currentMarch 31, 2023December 31, 2022
Operating leases$13,091 $13,806 
Finance leases2,156 2,213 
Total$15,247 $16,019 
For the three months ended March 31, 2023 and 2022, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:
Three Months Ended
March 31,
20232022
Lease Cost
Operating lease cost$1,270 $781 
Finance lease cost
Amortization of ROU asset60 52 
Interest on lease liabilities29 31 
Total finance lease89 83 
Total lease cost$1,359 $864 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,058 $801 
Operating cash flows from finance leases29 31 
Financing cash flows from finance leases55 41 
$1,142 $873 
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed$457 $662 
Weighted-average remaining lease term - operating leases5.42 years4.03 years
Weighted-average remaining lease term - finance leases9.73 years11.16 years
Weighted-average discount rate - operating leases3.7 %3.3 %
Weighted-average discount rate - finance leases5.0 %5.1 %
Rent expense charged to operations under operating lease agreements for the three months ended March 31, 2023 and 2022 aggregated to approximately $1,270 and $781, respectively.
Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at March 31, 2023 are as follows:
Year 
April 1, 2023 to December 31, 2023$4,192 
20244,320 
20253,286 
20262,774 
20272,309 
20282,024 
Thereafter4,859 
Total minimum lease payments$23,764 
LEASES LEASES
The Company has both real estate leases and equipment leases. The main types of equipment leases include forklifts, trailers, printers and copiers, railcars, and trucks. Leases are categorized as both operating leases and finance leases. As a result of electing the practical expedient within ASU 2016-02, variable lease payments are combined and recognized on the balance sheet in the event that those charges and any related increases are explicitly stated in the lease. Such payments include common area maintenance charges, property taxes, and insurance charges and are recorded in the right of use asset and corresponding liability when the payments are stated in the lease with (a) fixed or in-substance fixed amounts, or (b) a variable payment based on an index or rate. Due to the acquisitive nature of the Company and the potential for synergies upon integration of acquired entities, the Company determined that the reasonably certain criterion could not be met for any renewal periods beginning two years from March 31, 2023. In addition, the Company has historically not been exercising purchase options under the equipment leases as it does not make economic sense to buy the equipment. Instead, the Company has historically replaced the equipment with new leases. Therefore, the Company determined that the reasonably certain criterion could not be met as it relates to purchase options. The Company has no residual value guarantees in lease transactions.

On June 22, 2022, the Company signed a ten-year real estate sublease for approximately 40,000 square feet of office space, which will serve as the Company's corporate headquarters and a laboratory facility. The sublease commenced in the fourth quarter of 2022 and the Company recognized a right of use asset and lease liability as of the commencement date in accordance with ASC 842, Lease Accounting.

The Company has not identified any embedded leases. As indicated above, the Company elected the practical expedient to combine lease and non-lease components and recognizes the combined amount on the condensed consolidated balance sheet. Management determined that since the Company has a centralized treasury function, the parent company would either fund or guarantee a subsidiary's loan for borrowing over a similar term. As such, the Company's management determined it is appropriate to utilize a corporate based borrowing rate for all locations. The Company developed four tranches of leases based on lease terms and these tranches reflect the composition of the current lease portfolio. The Company's borrowing history shows that interest rates of a term loan or a line of credit depend on the duration of the loan rather than the nature of the assets purchased by those funds. Based on this understanding, the Company elected to use a portfolio approach to discount rates, applying corporate rates to the tranches of leases based on lease terms. Based on the Company's risk rating, the company applied the following discount rates for new leases entered into during the first quarter of 2023: (1) 1-2 years, 5.45% (2) 3-4 years, 6.04% (3) 5-9 years, 6.38% and (4) 10+ years, 7.10%.

In connection with its December 2019 acquisition of Zumbro River Brand, Inc., the Company assumed the finance lease commitment for a warehouse, with an expiration date of March 31, 2033 and an option to purchase at a pre-determined price. At March 31, 2023 and December 31, 2022, the Company had finance lease liabilities of $2,385 and $2,439, respectively, which were recorded under "Lease liabilities" (current and non-current) on the condensed consolidated balance sheets.

Right of use assets and lease liabilities at March 31, 2023 and December 31, 2022 are summarized as follows:
Right of use assetsMarch 31, 2023December 31, 2022
Operating leases$15,232 $17,094 
Finance leases2,281 2,338 
Total$17,513 $19,432 
Lease liabilities - currentMarch 31, 2023December 31, 2022
Operating leases$2,831 $3,796 
Finance leases229 226 
Total$3,060 $4,022 
Lease liabilities - non-currentMarch 31, 2023December 31, 2022
Operating leases$13,091 $13,806 
Finance leases2,156 2,213 
Total$15,247 $16,019 
For the three months ended March 31, 2023 and 2022, the Company's total lease costs were as follows, which included amounts recognized in earnings, amounts capitalized on the balance sheets, and the cash flows arising from lease transactions:
Three Months Ended
March 31,
20232022
Lease Cost
Operating lease cost$1,270 $781 
Finance lease cost
Amortization of ROU asset60 52 
Interest on lease liabilities29 31 
Total finance lease89 83 
Total lease cost$1,359 $864 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$1,058 $801 
Operating cash flows from finance leases29 31 
Financing cash flows from finance leases55 41 
$1,142 $873 
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed$457 $662 
Weighted-average remaining lease term - operating leases5.42 years4.03 years
Weighted-average remaining lease term - finance leases9.73 years11.16 years
Weighted-average discount rate - operating leases3.7 %3.3 %
Weighted-average discount rate - finance leases5.0 %5.1 %
Rent expense charged to operations under operating lease agreements for the three months ended March 31, 2023 and 2022 aggregated to approximately $1,270 and $781, respectively.
Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at March 31, 2023 are as follows:
Year 
April 1, 2023 to December 31, 2023$4,192 
20244,320 
20253,286 
20262,774 
20272,309 
20282,024 
Thereafter4,859 
Total minimum lease payments$23,764