Leases

12 Months Ended

Dec. 31, 2023

Note 3 – Leases

The Company determines if an arrangement is a lease at inception of a contract. The Company’s lease portfolio includes a manufacturing site, component warehouse and corporate offices. The remaining lease terms on the majority of the Company’s leases are between 5.0 and 16.8 years, some of which include options to extend the lease terms. Leases with initial term of 12 months or less are not recorded on the consolidated balance sheet.

In 2022, the Company and the lessors of the Castaños Facility amended the original lease to incorporate additional square footage into the lease. This modification resulted in a lease classification modification from operating to finance in 2022. In 2023, the Company took possession of additional square footage at the Castaños Facility. The Castaños Facility lease continues to be a finance lease in 2023 while substantially all other leases are operating leases.

Operating and finance lease right of use assets are presented separately in long-term assets, the current portion of operating and finance lease liabilities are presented within other current liabilities, and the non-current portion of operating and finance lease liabilities are presented separately within long-term liabilities on the consolidated balance sheet.

Right of use assets represent the Company’s right to use an underlying asset during the lease term and the lease liabilities represent the Company’s obligation to make the lease payments arising during the lease. Right of use assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company revalued the incremental borrowing rate used in determining the present value of lease payment for the Castaños Facility lease as a result of the lease modification in 2023. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease right of use asset amortization expense is recognized on a straight-line basis over the lease term, while interest expense on finance lease liabilities is recognized using the interest method.

The components of the lease costs were as follows:


	Year Ended December 31, 2023		Year Ended December 31, 2022
Operating lease costs:
Fixed	$	737	$	1,735
Short-term		2,202		505
Total operating lease costs	$	2,939	$	2,240
Finance lease costs:
Amortization of leased assets	$	2,168	$	1,182
Interest on lease liabilities		2,759		1,355
Total finance lease costs	$	4,927	$	2,537
Total lease cost	$	7,866	$	4,777


Supplemental balance sheet information related to leases were as follows:
	December 31, 2023		December 31, 2022
Right of use assets:
Right of use asset operating lease	$	2,826	$	1,596
Right of use asset finance lease		40,277		33,093
Total	$	43,103	$	34,689

Lease liabilities:
Operating lease liabilities:
Current	$	470	$	897
Long-term		3,164		1,780
Total operating lease liabilities	$	3,634	$	2,677

Finance lease liabilities:
Current		1,378	$	605
Long-term		41,273		33,245
Total finance lease liabilities	$	42,651	$	33,850
Total	$	46,285	$	36,527


Supplemental cash flow information is as follows:
	Year Ended December 31, 2023		Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	992	$	2,630
Operating cash flows from finance leases		2,759		1,355
Financing cash flows from finance leases		1,007		738
Total	$	4,758	$	4,723

Right of use assets obtained in exchange for new lease obligations:
Operating leases	$	1,805	$	-
Finance leases		9,352		20,344
Total	$	11,157	$	20,344

The aggregate future lease payments for leases as of December 31, 2023 are as follows:


	Operating leases			Finance leases
2024	$	685		$	5,120
2025		700			4,524
2026		716			4,744
2027		732			4,744
2028		749			4,744
Thereafter		806			60,074
Total lease payments		4,388			83,950
Less: interest		(754	)		(41,299	)
Total	$	3,634		$	42,651


Weighted-average remaining lease term (years)
Operating leases	7.6
Finance leases	16.8
Weighted-average discount rate
Operating leases	6.3	%
Finance leases	9.0	%