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LEASES

3 Months Ended

Mar. 31, 2023

The Company leases identified assets comprised of 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 ASC 842, “Leases”. 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 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 consolidated statement of income. Interest expense on finance leases is calculated using the amortized cost basis and is included in other income (expense), net in the consolidated statement of income.

The Company’s leases have remaining lease terms of less than one year to 11 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
	Ended		Ended
	March 31,		March 31,
	2023		2022
Operating lease cost	$	2,467	$	1,694

Short-term lease cost		979		929

Variable lease cost		215		183

Finance leases:
Amortization of ROU assets		123		127
Interest on lease liabilities		14		3
Finance lease cost		137		130

Total lease cost	$	3,798	$	2,936

Supplemental cash flow information for the following periods:


	Three-Months		Three-Months
	Ended March 31,		Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	2,391	$	1,652
Operating cash outflows from finance leases		14		3
Financing cash outflows from finance leases		598		592

ROU assets obtained in exchange for lease obligations:
Finance leases		2,227		832
Operating leases		313		13,197

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


	March 31, 2023
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	35,953	$	256	$	36,209	Other Assets
Finance leases		—		3,694		3,694	Property and Equipment, net


	December 31, 2022
	Real Estate		Equipment		Total		Balance Sheet Location
Operating leases	$	37,682	$	330	$	38,012	Other Assets
Finance leases		—		1,598		1,598	Property and Equipment, net

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


	March 31, 2023
	Operating Leases		Finance Leases
Accrued liabilities	$	7,642	$	2,393
Other liabilities		27,958		33
Total	$	35,600	$	2,426


	December 31, 2022
	Operating Leases		Finance Leases
Accrued liabilities	$	7,747	$	757
Other liabilities		29,586		41
Total	$	37,333	$	798

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases at March 31, 2023 and December 31, 2022 were as follows:


	March 31, 2023
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	6.6		0.9
Weighted-average discount rate	3.5	%	5.7	%


	December 31, 2022
	Operating Leases		Finance Leases
Weighted-average remaining lease term (years)	6.7		0.8
Weighted-average discount rate	3.4	%	3.6	%

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 March 31, 2023:


	Undiscounted Future Lease Payments
	Operating Leases		Finance Leases
2023 (from April 1, 2023 to December 31, 2023)	$	6,626	$	2,051
2024		7,469		423
2025		5,318		17
2026		4,181		2
2027		4,059		—
2028 and thereafter		12,352		—
Total lease payments		40,005		2,493
Less imputed interest		(4,405)		(67)
Total	$	35,600	$	2,426

As of March 31, 2023, the Company had an additional operating lease for office and warehouse space that had not yet commenced of $1.1 million in aggregate. This operating lease will commence in June 2023 with a term of four years. As of March 31, 2023, the Company did not have any significant additional finance leases that had not yet commenced.