Leases

12 Months Ended

Dec. 31, 2023

11.

Leases

The lease accounting guidance under ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company's leasing activity is primarily related to buildings used for manufacturing, warehousing, sales, and administrative activities. The Company determines if an arrangement is a lease at inception. Many of the Company's lease agreements contain renewal options; however, the Company does not recognize ROU assets or lease liabilities for renewal periods unless it is determined that lease renewal is reasonably certain at inception or when a triggering event occurs. Some of the Company's lease agreements contain rent escalation clauses, free-rent periods, or other lease concessions. The Company recognizes its minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Variable lease costs represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred. The Company's variable lease costs are not material.

In determining its ROU assets and lease liabilities, the Company applies a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When the Company cannot readily determine the discount rate implicit in the lease agreement, it utilizes its fully collateralized incremental borrowing rate. To estimate its specific incremental borrowing rates the Company considers, among other factors, interest rates on its existing credit facilities, risk-free rates, the types of assets being leased, and the term of the leases.

The components of lease expense were as follows:


	December 31,
(table only in thousands)	2023		2022		2021
Operating lease cost (a)	$	4,643	$	3,558	$	3,232
Finance lease cost:
Amortization of right-of-use assets		232		309		308
Interest on lease liability		289		289		315
Total finance lease cost		521		598		623
Total lease cost	$	5,164	$	4,156	$	3,855
(a) includes variable lease costs which are immaterial

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,567	$	3,637	$	3,171
Operating cash flows from finance leases	$	289	$	289	$	315
Financing cash flows from finance leases	$	907	$	600	$	603
Right of use assets obtained in exchange for lease obligations
Operating leases	$	7,697	$	3,487	$	2,206

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2023		2022
Operating leases
Right-of-use assets from operating leases	$	16,256	$	11,373

Accrued expenses	$	4,278	$	3,228
Operating lease liabilities		11,417		8,453
Total operating lease liabilities	$	15,695	$	11,681

Finance leases
Property, plant and equipment, net	$	2,097	$	2,329

Accrued expenses	$	693	$	645
Other liabilities		4,844		5,537
Total finance lease liabilities	$	5,537	$	6,182

Weighted-average remaining lease term were as follows:


	December 31,
	2023	2022
Operating leases	8 years	10 years
Finance leases	7 years	8 years
Weighted-average discount rate
Operating leases	5.8%	4.7%
Finance leases	4.6%	4.6%

As of December 31, 2023, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2024	$	4,363		$	925
2025		3,845			943
2026		2,527			962
2027		1,578			982
2028		1,145			1,001
Thereafter		3,480			1,596
Total minimum lease payments	$	16,938		$	6,409
Less imputed interest		(1,243	)		(872	)
Lease liability	$	15,695		$	5,537