Leases

3 Months Ended

Mar. 31, 2023

LEASES

The Company has operating leases with fixed payment terms for certain buildings and warehouses. The Company's leases have remaining lease terms of less than one year to four years, some of which include options to extend the lease for five years. Operating leases are included in operating lease right-of-use ("ROU") assets, accrued other liabilities and other non-current liabilities in the Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

The Company used the applicable incremental borrowing rate at implementation date to measure lease liabilities and ROU assets. The incremental borrowing rate used by the Company was based on baseline rates and adjusted by the credit spreads commensurate with the Company’s secured borrowing rate. At each reporting period when there is a new lease initiated, the Company will utilize its incremental borrowing rate to perform lease classification tests on lease components and to measure ROU assets and lease liabilities.

The components of lease expense were as follows (in thousands):


	Three months ended March 31,
	2023		2022
Operating lease cost	$	427	$	475
Short-term lease cost	$	470	$	385
Total net lease cost	$	897	$	860

Other supplemental balance sheet information related to leases was as follows (in thousands):


	March 31, 2023		December 31, 2022
Operating lease right of use assets	$	5,037	$	5,114

Current operating lease liabilities(A)	$	1,958	$	1,626
Noncurrent operating lease liabilities(B)	3,027		3,516
Total operating lease liabilities	$	4,985	$	5,142

(A)Current operating lease liabilities are included in accrued other liabilities in the Consolidated Balance Sheets.

(B)Noncurrent operating lease liabilities are included in other non-current liabilities in the Consolidated Balance Sheets.

The following table presents certain information related to lease terms and discount rates for leases:


Operating leases	March 31, 2023		December 31, 2022
Weighted average remaining lease term (in years):	3.0		3.6

Weighted average discount rate:	5.5	%	4.1	%

For the three months ended March 31, 2023 and 2022, cash payments on amounts included in the measurement of lease liabilities were $568,000 and $475,000, respectively. During the three months ended March 31, 2023, the Company terminated a lease for the secondary warehouse in Monterrey, Mexico. As a result, the Company wrote off approximately $1,548,000 and $1,660,000 of lease assets and lease liabilities, respectively, related to this lease. The Company then entered into a new lease related to the secondary warehouse in Monterrey, Mexico, which resulted in right of use assets obtained in exchange for new operating lease liabilities of $641,000 at March 31, 2023. The Company also entered into a new lease related to a warehouse in Matamoros, Mexico, which resulted in additional right of use assets obtained in exchange for new operating lease liabilities of $1,172,000 at March 31, 2023. At March 31, 2022, there were no right of use assets obtained in exchange for new operating lease liabilities.

Maturities of operating lease liabilities were as follows (in thousands):


	March 31, 2023		December 31, 2022
2023 (remainder of year)	$	1,573	$	1,716
2024	2,102		1,722
2025	1,129		1,065
2026	599		979
2027	189		189
Total lease payments	5,592		5,671
Less: imputed interest	(607)		(529)
Total lease obligations	4,985		5,142
Less: current obligations	(1,958)		(1,626)
Long-term lease obligations	$	3,027	$	3,516