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LEASES

3 Months Ended

Mar. 31, 2023

NOTE (12) LEASES

The Company categorize leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases.

The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 4.01% for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 9.40% which was used to measure its finance lease liability. The weighted average remaining lease term was 4.64 years and 2.42 years for operating and finance leases, respectively, as of March 31, 2023.

As of March 31, 2023, the maturities of the Company’s future minimum lease payments were as follows (in thousands):


	Operating Lease Liability		Finance Lease Liability
April 1, 2023 through December 31, 2023		1,672		114
2024		3,571		116
2025		3,586		76
2026		3,362		15
2027		3,149		—
2028		1,064		—
Total undiscounted future minimum lease payments	$	16,404	$	321
Less: Difference between undiscounted lease payments and discounted lease liabilities:		(1,613)		(35)
Total lease liabilities	$	14,791	$	286

The components of lease expenses were as follows:


	Three Months Ended
	March 31,
	2023		2022
Lease cost:
Operating lease cost:
Total operating lease expense	$	1,121	$	1,105
Finance lease cost:
Total amortization of leased assets		30		30
Interest on lease liabilities		7		10
Total net lease cost	$	1,158	$	1,145

For the three months ended March 31, 2023 and 2022, $0.1 million of operating lease costs were incurred at the Company’s manufacturing and warehouse facility and were included in cost of sales. For the three months ended March 31, 2023 and 2022, $1.0 million of operating lease costs were included in selling, general and administrative expenses on the condensed consolidated statement of income.