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LEASES | 6 Months Ended
--- | ---
Jun. 30, 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 June 30, 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 second quarter of 2023: (1) 1-2 years, 6.24% (2) 3-4 years, 6.83% (3) 5-9 years, 7.17% and (4) 10+ years, 7.89%. At June 30, 2023 and December 31, 2022, the Company had finance lease liabilities of $2,329 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 June 30, 2023 and December 31, 2022 are summarized as follows:
Right of use assets |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 16,119 |  |  | $ | 17,094 |
Finance leases |  | 2,221 |  |  | 2,338 |
Total |  | $ | 18,340 |  |  | $ | 19,432 |
Lease liabilities - current |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 3,859 |  |  | $ | 3,796 |
Finance leases |  | 232 |  |  | 226 |
Total |  | $ | 4,091 |  |  | $ | 4,022 |
Lease liabilities - non-current |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 13,088 |  |  | $ | 13,806 |
Finance leases |  | 2,097 |  |  | 2,213 |
Total |  | $ | 15,185 |  |  | $ | 16,019 |
For the three and six months ended June 30, 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 June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Lease Cost |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 1,376 |  |  | $ | 811 |  |  | $ | 2,646 |  |  | $ | 1,592 |
Finance lease cost |  |  |  |  |  |  |  |
Amortization of ROU asset |  | 60 |  |  | 52 |  |  | 120 |  |  | 104 |
Interest on lease liabilities |  | 29 |  |  | 30 |  |  | 58 |  |  | 61 |
Total finance lease |  | 89 |  |  | 82 |  |  | 178 |  |  | 165 |
Total lease cost |  | $ | 1,465 |  |  | $ | 893 |  |  | $ | 2,824 |  |  | $ | 1,757 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 1,151 |  |  | $ | 807 |  |  | $ | 2,209 |  |  | $ | 1,608 |
Operating cash flows from finance leases |  | 29 |  |  | 30 |  |  | 58 |  |  | 61 |
Financing cash flows from finance leases |  | 55 |  |  | 42 |  |  | 110 |  |  | 83 |
|  | $ | 1,235 |  |  | $ | 879 |  |  | $ | 2,377 |  |  | $ | 1,752 |
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed |  | $ | 2,148 |  |  | $ | 4,615 |  |  | $ | 2,605 |  |  | $ | 5,277 |
Weighted-average remaining lease term - operating leases |  | 5.41 years |  | 4.10 years |  | 5.41 years |  | 4.10 years
Weighted-average remaining lease term - finance leases |  | 9.51 years |  | 10.91 years |  | 9.51 years |  | 10.91 years
Weighted-average discount rate - operating leases |  | 4.1 | % |  | 3.2 | % |  | 4.1 | % |  | 3.2 | %
Weighted-average discount rate - finance leases |  | 5.0 | % |  | 5.1 | % |  | 5.0 | % |  | 5.1 | %
Rent expense charged to operations under operating lease agreements for the three and six months ended June 30, 2023 aggregated to approximately $1,376 and $2,646, respectively, and $811 and $1,592 for the three and six months ended June 30, 2022, respectively. Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at June 30, 2023 are as follows:
Year |
July 1, 2023 to December 31, 2023 | $ | 3,016 |
2024 | 4,771 |
2025 | 3,739 |
2026 | 3,225 |
2027 | 2,758 |
2028 | 2,273 |
Thereafter | 4,851 |
Total minimum lease payments | $ | 24,633 |
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 June 30, 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 second quarter of 2023: (1) 1-2 years, 6.24% (2) 3-4 years, 6.83% (3) 5-9 years, 7.17% and (4) 10+ years, 7.89%. At June 30, 2023 and December 31, 2022, the Company had finance lease liabilities of $2,329 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 June 30, 2023 and December 31, 2022 are summarized as follows:
Right of use assets |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 16,119 |  |  | $ | 17,094 |
Finance leases |  | 2,221 |  |  | 2,338 |
Total |  | $ | 18,340 |  |  | $ | 19,432 |
Lease liabilities - current |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 3,859 |  |  | $ | 3,796 |
Finance leases |  | 232 |  |  | 226 |
Total |  | $ | 4,091 |  |  | $ | 4,022 |
Lease liabilities - non-current |  | June 30, 2023 |  | December 31, 2022
Operating leases |  | $ | 13,088 |  |  | $ | 13,806 |
Finance leases |  | 2,097 |  |  | 2,213 |
Total |  | $ | 15,185 |  |  | $ | 16,019 |
For the three and six months ended June 30, 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 June 30, |  | Six Months Ended June 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Lease Cost |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 1,376 |  |  | $ | 811 |  |  | $ | 2,646 |  |  | $ | 1,592 |
Finance lease cost |  |  |  |  |  |  |  |
Amortization of ROU asset |  | 60 |  |  | 52 |  |  | 120 |  |  | 104 |
Interest on lease liabilities |  | 29 |  |  | 30 |  |  | 58 |  |  | 61 |
Total finance lease |  | 89 |  |  | 82 |  |  | 178 |  |  | 165 |
Total lease cost |  | $ | 1,465 |  |  | $ | 893 |  |  | $ | 2,824 |  |  | $ | 1,757 |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 1,151 |  |  | $ | 807 |  |  | $ | 2,209 |  |  | $ | 1,608 |
Operating cash flows from finance leases |  | 29 |  |  | 30 |  |  | 58 |  |  | 61 |
Financing cash flows from finance leases |  | 55 |  |  | 42 |  |  | 110 |  |  | 83 |
|  | $ | 1,235 |  |  | $ | 879 |  |  | $ | 2,377 |  |  | $ | 1,752 |
Right-of-use assets obtained in exchange for new operating lease liabilities, net of right-of-use assets disposed |  | $ | 2,148 |  |  | $ | 4,615 |  |  | $ | 2,605 |  |  | $ | 5,277 |
Weighted-average remaining lease term - operating leases |  | 5.41 years |  | 4.10 years |  | 5.41 years |  | 4.10 years
Weighted-average remaining lease term - finance leases |  | 9.51 years |  | 10.91 years |  | 9.51 years |  | 10.91 years
Weighted-average discount rate - operating leases |  | 4.1 | % |  | 3.2 | % |  | 4.1 | % |  | 3.2 | %
Weighted-average discount rate - finance leases |  | 5.0 | % |  | 5.1 | % |  | 5.0 | % |  | 5.1 | %
Rent expense charged to operations under operating lease agreements for the three and six months ended June 30, 2023 aggregated to approximately $1,376 and $2,646, respectively, and $811 and $1,592 for the three and six months ended June 30, 2022, respectively. Aggregate future minimum rental payments required under all non-cancelable operating and finance leases at June 30, 2023 are as follows:
Year |
July 1, 2023 to December 31, 2023 | $ | 3,016 |
2024 | 4,771 |
2025 | 3,739 |
2026 | 3,225 |
2027 | 2,758 |
2028 | 2,273 |
Thereafter | 4,851 |
Total minimum lease payments | $ | 24,633 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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