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Leases | 3 Months Ended
--- | ---
Mar. 31, 2022
Leases [Abstract] |
Leases | Leases The following significant lease accounting policies from our most recent Annual Report on Form 10-K have been updated to reflect the adoption of FASB's new guidance on the recognition and measurement of leases. The majority of our leases are operating leases for our company-operated Outposts. We also lease distribution and warehouse facilities. We do not enter into lease transactions with related parties. We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for all underlying classes of assets. We recognize a right-of-use (“ROU”) asset and lease liability for each operating and finance lease with a contractual term greater than 12 months at the time of lease inception. We do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised. Our lease liability represents the present value of future lease payments over the lease term. We cannot determine the interest rate implicit in each of our leases. Therefore, we use market and term-specific incremental borrowing rates. Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. We considered a combination of factors, including the rates that we currently pay on our lines of credit, lease terms and the effect of adjusting the rate to reflect the term consideration of collateral. Our credit-adjusted risk-free rate takes into consideration the interest rate we pay on our Retail Facility. Total lease costs recorded as rent and other occupancy costs include fixed operating lease costs and short-term lease costs. Our real estate leases may require we pay certain expenses, such as common area maintenance (CAM) costs, real estate taxes and other executory costs, of which the fixed portion is included in operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. A significant majority of our leases are related to our company-operated Outposts, and their related costs are recorded within General and administrative expenses on the statement of operations. The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs, and any tenant improvement allowances received. For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method. For finance leases, ROU assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term. Interest expense on each finance lease liability is recognized utilizing the effective interest method. ROU assets are tested for impairment in the same manner as long-lived assets. Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required. The components of lease costs:
| Three Months Ended
| March 31, 2022
Operating leases costs | $ | 364 |
Short-term lease costs | 12 |
Total lease costs | $ | 376 |
The following table includes supplemental information:
| Three Months Ended
| March 31, 2022
Cash paid related to operating lease liabilities | $ | 263 |
Weighted-average remaining operating lease term | 9 years
Weighted-average operating lease discount rate | 4.64 | %
No new operating lease liabilities were recorded during the three months ended March 31, 2022. Finance lease assets are recorded in property, plant, and equipment, net with the corresponding finance lease liabilities on the consolidated balance sheet. Finance leases were immaterial as of March 31, 2022. Minimum future maturities of operating lease liabilities as of March 31, 2022 were as follows:
Remainder of 2022 | $ | 1,850 |
2023 | 4,398 |
2024 | 4,574 |
2025 | 4,527 |
2026 | 4,550 |
Thereafter | 44,488 |
Total lease payments | 64,387 |
Less imputed interest | (16,932) |
Total | $ | 47,455 |
As of March 31, 2022, we have entered into operating leases that have not yet commenced of $55,129, primarily related to real estate leases. These leases will commence between fiscal year 2022 and fiscal year 2024 with lease terms of 10 years to 20 years. Previous Lease Guidance Disclosures Rent expense for operating lease agreements under the previous lease guidance, which excludes certain amounts required under the new guidance, was $228 for the three months ended March 31, 2021. The minimum future rental payments under non-cancelable operating leases and finance leases under the previous lease guidance as of December 31, 2021:
| Operating Leases |  | Finance Leases
Year ending December 31: |  |  |
2022 | $ | 2,966 |  |  | $ | 106 |
2023 | 3,233 |  |  | 95 |
2024 | 3,381 |  |  | 102 |
2025 | 3,323 |  |  | 50 |
2026 | 3,358 |  |  | 4 |
Total minimum lease payments | $ | 16,261 |  |  | $ | 357 |
Finance Leases: |  |  |
Less: amount representing interest |  |  | $ | 44 |
Present value of net minimum lease payments |  |  | 313 |
Less: current portion |  |  | 85 |
Finance lease obligations, net of current maturities |  |  | $ | 228 |
Leases | Leases The following significant lease accounting policies from our most recent Annual Report on Form 10-K have been updated to reflect the adoption of FASB's new guidance on the recognition and measurement of leases. The majority of our leases are operating leases for our company-operated Outposts. We also lease distribution and warehouse facilities. We do not enter into lease transactions with related parties. We categorize leases as either operating or finance leases at the commencement date of the lease. Operating lease agreements may contain tenant improvement allowances, rent holidays, rent escalation clauses and/or contingent rent provisions. We have lease agreements with lease and non-lease components, which are accounted for together as a single lease component for all underlying classes of assets. We recognize a right-of-use (“ROU”) asset and lease liability for each operating and finance lease with a contractual term greater than 12 months at the time of lease inception. We do not record leases with an initial term of 12 months or less on our consolidated balance sheet but continue to record rent expense on a straight-line basis over the lease term. Our leases often include options to extend or terminate at our sole discretion, which are included in the determination of lease term when they are reasonably certain to be exercised. Our lease liability represents the present value of future lease payments over the lease term. We cannot determine the interest rate implicit in each of our leases. Therefore, we use market and term-specific incremental borrowing rates. Our incremental borrowing rate for a lease is the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. We considered a combination of factors, including the rates that we currently pay on our lines of credit, lease terms and the effect of adjusting the rate to reflect the term consideration of collateral. Our credit-adjusted risk-free rate takes into consideration the interest rate we pay on our Retail Facility. Total lease costs recorded as rent and other occupancy costs include fixed operating lease costs and short-term lease costs. Our real estate leases may require we pay certain expenses, such as common area maintenance (CAM) costs, real estate taxes and other executory costs, of which the fixed portion is included in operating lease costs. We recognize operating lease costs on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. A significant majority of our leases are related to our company-operated Outposts, and their related costs are recorded within General and administrative expenses on the statement of operations. The ROU asset is measured at the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, initial direct costs, and any tenant improvement allowances received. For operating leases, ROU assets are reduced over the lease term by the recognized straight-line lease expense less the amount of accretion of the lease liability determined using the effective interest method. For finance leases, ROU assets are amortized on a straight-line basis over the shorter of the useful life of the leased asset or the lease term. Interest expense on each finance lease liability is recognized utilizing the effective interest method. ROU assets are tested for impairment in the same manner as long-lived assets. Additionally, we monitor for events or changes in circumstances that may require a reassessment of one of our leases and determine if a remeasurement is required. The components of lease costs:
| Three Months Ended
| March 31, 2022
Operating leases costs | $ | 364 |
Short-term lease costs | 12 |
Total lease costs | $ | 376 |
The following table includes supplemental information:
| Three Months Ended
| March 31, 2022
Cash paid related to operating lease liabilities | $ | 263 |
Weighted-average remaining operating lease term | 9 years
Weighted-average operating lease discount rate | 4.64 | %
No new operating lease liabilities were recorded during the three months ended March 31, 2022. Finance lease assets are recorded in property, plant, and equipment, net with the corresponding finance lease liabilities on the consolidated balance sheet. Finance leases were immaterial as of March 31, 2022. Minimum future maturities of operating lease liabilities as of March 31, 2022 were as follows:
Remainder of 2022 | $ | 1,850 |
2023 | 4,398 |
2024 | 4,574 |
2025 | 4,527 |
2026 | 4,550 |
Thereafter | 44,488 |
Total lease payments | 64,387 |
Less imputed interest | (16,932) |
Total | $ | 47,455 |
As of March 31, 2022, we have entered into operating leases that have not yet commenced of $55,129, primarily related to real estate leases. These leases will commence between fiscal year 2022 and fiscal year 2024 with lease terms of 10 years to 20 years. Previous Lease Guidance Disclosures Rent expense for operating lease agreements under the previous lease guidance, which excludes certain amounts required under the new guidance, was $228 for the three months ended March 31, 2021. The minimum future rental payments under non-cancelable operating leases and finance leases under the previous lease guidance as of December 31, 2021:
| Operating Leases |  | Finance Leases
Year ending December 31: |  |  |
2022 | $ | 2,966 |  |  | $ | 106 |
2023 | 3,233 |  |  | 95 |
2024 | 3,381 |  |  | 102 |
2025 | 3,323 |  |  | 50 |
2026 | 3,358 |  |  | 4 |
Total minimum lease payments | $ | 16,261 |  |  | $ | 357 |
Finance Leases: |  |  |
Less: amount representing interest |  |  | $ | 44 |
Present value of net minimum lease payments |  |  | 313 |
Less: current portion |  |  | 85 |
Finance lease obligations, net of current maturities |  |  | $ | 228 |

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