LEASES

12 Months Ended

Dec. 31, 2023

LEASES

We lease office and retail space, warehouse and distribution facilities, land, vehicles, and equipment. We determine if an agreement is or contains a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are based on the estimated present value of lease payments over the lease term and are recognized at the lease commencement date.

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate in determining the present value of lease payments. The estimated incremental borrowing rate is derived from information available at the lease commencement date.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. A limited number of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements generally do not contain residual value guarantees or material restrictive covenants.

For real estate, equipment and vehicles that support selling, marketing and general administrative activities the Company accounts for the lease and non-lease components as a single lease component. These asset categories comprise the majority of our leases. The lease and non-lease components of real estate and equipment leases supporting production activities are not accounted for as a single lease component. Consideration for such contracts is allocated to the lease component and non-lease components based upon relative standalone prices either observable or estimated if observable prices are not readily available.

The components of lease expense were as follows:


Lease expense	Classification	2023		2022
Operating lease cost	Cost of sales or SM&A (1)	$	48,577	$	48,988
Finance lease cost:
Amortization of ROU assets	Depreciation and amortization (1)	8,140		7,043
Interest on lease liabilities	Interest expense, net	4,593		4,192
Net lease cost (2)		$	61,310	$	60,223

(1)Supply chain-related amounts were included in cost of sales.

(2)Net lease cost does not include short-term leases, variable lease costs or sublease income, all of which are immaterial.

Information regarding our lease terms and discount rates were as follows:


	2023		2022
Weighted-average remaining lease term (years)
Operating leases	14.4		15.0
Finance leases	25.9		27.7

Weighted-average discount rate
Operating leases	3.5	%	3.2	%
Finance leases	6.2	%	6.1	%

Supplemental balance sheet information related to leases were as follows:


Leases	Classification	2023		2022
Assets
Operating lease ROU assets	Other non-current assets	$	307,976	$	326,472

Finance lease ROU assets, at cost	Property, plant and equipment, gross	89,335		86,703
Accumulated amortization	Accumulated depreciation	(19,472)		(14,543)
Finance lease ROU assets, net	Property, plant and equipment, net	69,863		72,160

Total leased assets		$	377,839	$	398,632

Liabilities
Current
Operating	Accrued liabilities	$	34,494	$	31,787
Finance	Current portion of long-term debt	5,900		4,285
Non-current
Operating	Other long-term liabilities	277,089		294,849
Finance	Long-term debt	70,485		69,194
Total lease liabilities		$	387,968	$	400,115

The maturity of our lease liabilities as of December 31, 2023 were as follows:


	Operating leases		Finance leases		Total
2024	$	44,708	$	10,240	$	54,948
2025	31,395		8,651		40,046
2026	26,669		5,442		32,111
2027	26,063		4,288		30,351
2028	25,064		4,189		29,253
Thereafter	243,161		137,877		381,038
Total lease payments	397,060		170,687		567,747
Less: Imputed interest	85,477		94,302		179,779
Total lease liabilities	$	311,583	$	76,385	$	387,968

Supplemental cash flow and other information related to leases were as follows:


	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	45,176	$	45,179
Operating cash flows from finance leases	$	4,593	$	4,192
Financing cash flows from finance leases	$	5,381	$	4,717

ROU assets obtained in exchange for lease liabilities:
Operating leases	$	18,469	$	13,998
Finance leases	$	7,448	$	9,617