Leases

12 Months Ended

Dec. 31, 2024

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)	2024		2023		2022
Operating lease cost (1)	$	6,146	$	4,643	$	3,558
Finance lease cost:
Amortization of right-of-use assets		309		232		309
Interest on lease liability		232		289		289
Total finance lease cost		541		521		598
Total lease cost	$	6,687	$	5,164	$	4,156

(1) Includes variable lease costs which are immaterial.

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,594	$	4,567	$	3,637
Operating cash flows from finance leases	$	232	$	289	$	289
Financing cash flows from finance leases	$	925	$	907	$	600
Right of use assets obtained in exchange for lease obligations
Operating leases	$	13,669	$	7,697	$	3,487

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2024		2023
Operating leases
Right-of-use assets from operating leases	$	25,102	$	16,256

Accrued expenses	$	4,262	$	4,278
Operating lease liabilities		20,230		11,417
Total operating lease liabilities	$	24,492	$	15,695

Finance leases
Property, plant and equipment, net	$	1,711	$	2,097

Accrued expenses	$	743	$	693
Other liabilities		4,101		4,844
Total finance lease liabilities	$	4,844	$	5,537

Weighted-average remaining lease term were as follows:


	December 31,
	2024	2023
Operating leases	9 years	8 years
Finance leases	7 years	7 years
Weighted-average discount rate
Operating leases	6.4%	5.8%
Finance leases	4.6%	4.6%

As of December 31, 2024, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2025	$	5,810		$	943
2026		4,886			962
2027		4,026			982
2028		3,641			1,001
2029		3,089			1,021
Thereafter		9,709			575
Total minimum lease payments	$	31,161		$	5,484
Less imputed interest		(6,669	)		(640	)
Lease liability	$	24,492		$	4,844