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LEASES | 3 Months Ended
--- | ---
Mar. 31, 2023
Leases [Abstract] |
LEASES | LEASES The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. During the three months ended March 31, 2023, leased assets obtained in exchange for new operating lease liabilities totaled approximately $0.3 million. During the three months ended March 31, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $1.3 million. As of March 31, 2023, obligations related to operating leases that the Company has executed but have not yet commenced were insignificant. Subsequent to March 31, 2023, the Company executed operating leases and obligations related to these leases totaling approximately $0.4 million on a non-discounted basis, which the Company generally expects to be recognized over the next five years. As described in the Company Annual Report on Form 10-K for the year ended December, 31, 2022, during 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for the three months ended March 31, 2023 and 2022. In addition, certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. As of March 31, 2023, the Company has no other significant lease agreements in place for which the Company is a lessor or sublessor. Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):
|  | Classification |  | March 31, 2023 |  | December 31, 2022
Right-of-Use Assets |  |  |  |  |  |
Operating |  | Other assets |  | $ | 21,747 |  |  | $ | 23,003 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other accrued liabilities |  | $ | 5,994 |  |  | $ | 6,120 |
Noncurrent |  |  |  |  |  |
Operating |  | Other non-current liabilities |  | 15,753 |  |  | 16,883 |
Total lease liabilities |  |  |  | $ | 21,747 |  |  | $ | 23,003 |
Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):
|  | Classification |  | Three Months Ended March 31, 2023 |  | Three Months Ended March 31, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 1,871 |  |  | $ | 1,109 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | 36 |
Interest on lease liabilities |  | Interest expense |  | — |  |  | 1 |
Net lease cost |  |  |  | $ | 1,871 |  |  | $ | 1,146 |
Maturity of the Company’s lease liabilities as of March 31, 2023 is as follows (in thousands):
|  | Operating Leases |  | Finance Leases |  | Total
2023 (remainder) |  | $ | 5,301 |  |  | $ | — |  |  | $ | 5,301 |
2024 |  | 6,083 |  |  | — |  |  | 6,083 |
2025 |  | 5,019 |  |  | — |  |  | 5,019 |
2026 |  | 4,463 |  |  | — |  |  | 4,463 |
2027 |  | 2,364 |  |  | — |  |  | 2,364 |
Thereafter |  | 794 |  |  | — |  |  | 794 |
Total lease payments |  | $ | 24,024 |  |  | $ | — |  |  | $ | 24,024 |
Less: interest |  | 2,277 |  |  | — |  |  |
Present value of lease payments |  | $ | 21,747 |  |  | $ | — |  |  |
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:
|  | March 31, 2023 |  | December 31, 2022
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  | 4.1 |  | 4.3
Weighted average discount rate |  |  |  |
Operating leases |  | 4.91 | % |  | 4.92 | %
Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):
|  | Three Months Ended March 31, 2023 |  | Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 1,895 |  |  | $ | 1,120 |
Operating cash flows from finance leases |  | $ | — |  |  | $ | 1 |
Financing cash flows from finance leases |  | $ | — |  |  | $ | 59 |
LEASES | LEASES The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with Accounting Standards Codification (“ASC”) 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no significant lease agreements in place for which the Company is a lessor. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company leases certain industrial spaces, office spaces, land, and equipment. Some leases include one or more options to renew, with renewal terms that can extend the lease term from generally 1 to 5 years. The exercise of lease renewal options is at the Company’s sole discretion, and are included in the lease term only to the extent such renewal options are reasonably certain of being exercised at lease commencement. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. During the three months ended March 31, 2023, leased assets obtained in exchange for new operating lease liabilities totaled approximately $0.3 million. During the three months ended March 31, 2022, leased assets obtained in exchange for new operating lease liabilities totaled approximately $1.3 million. As of March 31, 2023, obligations related to operating leases that the Company has executed but have not yet commenced were insignificant. Subsequent to March 31, 2023, the Company executed operating leases and obligations related to these leases totaling approximately $0.4 million on a non-discounted basis, which the Company generally expects to be recognized over the next five years. As described in the Company Annual Report on Form 10-K for the year ended December, 31, 2022, during 2022, the Company entered into sale-leaseback-sublease transactions. Such contracts were entered into in contemplation of each other and are thus recorded on a net basis. The net revenue from these contracts was insignificant for the three months ended March 31, 2023 and 2022. In addition, certain of the transactions occurred with a related party—such transactions were at market value and arm’s length. As of March 31, 2023, the Company has no other significant lease agreements in place for which the Company is a lessor or sublessor. Leased assets and liabilities included within the Condensed Consolidated Balance Sheets consist of the following (in thousands):
|  | Classification |  | March 31, 2023 |  | December 31, 2022
Right-of-Use Assets |  |  |  |  |  |
Operating |  | Other assets |  | $ | 21,747 |  |  | $ | 23,003 |
Liabilities |  |  |  |  |  |
Current |  |  |  |  |  |
Operating |  | Other accrued liabilities |  | $ | 5,994 |  |  | $ | 6,120 |
Noncurrent |  |  |  |  |  |
Operating |  | Other non-current liabilities |  | 15,753 |  |  | 16,883 |
Total lease liabilities |  |  |  | $ | 21,747 |  |  | $ | 23,003 |
Lease costs included in the Condensed Consolidated Statements of Operations consist of the following (in thousands):
|  | Classification |  | Three Months Ended March 31, 2023 |  | Three Months Ended March 31, 2022
Operating lease cost |  | Cost of sales, selling expenses and general and administrative expense |  | $ | 1,871 |  |  | $ | 1,109 |
Finance lease cost |  |  |  |  |  |
Amortization of ROU leased assets |  | Depreciation and amortization within Cost of sales |  | — |  |  | 36 |
Interest on lease liabilities |  | Interest expense |  | — |  |  | 1 |
Net lease cost |  |  |  | $ | 1,871 |  |  | $ | 1,146 |
Maturity of the Company’s lease liabilities as of March 31, 2023 is as follows (in thousands):
|  | Operating Leases |  | Finance Leases |  | Total
2023 (remainder) |  | $ | 5,301 |  |  | $ | — |  |  | $ | 5,301 |
2024 |  | 6,083 |  |  | — |  |  | 6,083 |
2025 |  | 5,019 |  |  | — |  |  | 5,019 |
2026 |  | 4,463 |  |  | — |  |  | 4,463 |
2027 |  | 2,364 |  |  | — |  |  | 2,364 |
Thereafter |  | 794 |  |  | — |  |  | 794 |
Total lease payments |  | $ | 24,024 |  |  | $ | — |  |  | $ | 24,024 |
Less: interest |  | 2,277 |  |  | — |  |  |
Present value of lease payments |  | $ | 21,747 |  |  | $ | — |  |  |
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Remaining lease term and discount rates are as follows:
|  | March 31, 2023 |  | December 31, 2022
Weighted average remaining lease term (years) |  |  |  |
Operating leases |  | 4.1 |  | 4.3
Weighted average discount rate |  |  |  |
Operating leases |  | 4.91 | % |  | 4.92 | %
Lease costs included in the Condensed Consolidated Statements of Cash Flows are as follows (in thousands):
|  | Three Months Ended March 31, 2023 |  | Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases |  | $ | 1,895 |  |  | $ | 1,120 |
Operating cash flows from finance leases |  | $ | — |  |  | $ | 1 |
Financing cash flows from finance leases |  | $ | — |  |  | $ | 59 |

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=77888251 + 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 -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=77888251 + Details
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