APPLIED OPTOELECTRONICS, INC. Leases Disclosure

NOTE D— Leases

 

The Company leases space under non-cancellable operating leases for manufacturing facilities, research and development offices and certain storage facilities and apartments. These leases do not contain contingent rent provisions. The Company also leases certain machinery, office equipment and a vehicle under operating leases. Many of its leases include both lease (e.g. fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g. common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. Several of the leases include one or more options to renew which have been assessed and either included or excluded from the calculation of the lease liability of the ROU asset based on management’s intentions and individual fact patterns. Several warehouses and apartments have non-cancellable lease terms of less than one-year and therefore, the Company has elected the practical expedient to exclude these short-term leases from its ROU asset and lease liabilities.

 

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on the applicable lease terms and current economic environment, the Company applies a location approach for determining the incremental borrowing rate.

 

Lease expense is included under general and administrative expenses and was $1.2 million, $1.2 million, and $1.3 million, respectively, for the years ended December 31, 2023, 2022 and 2021, respectively. The Components of lease expense were as follows for the periods indicated (in thousands):

 

		Year ended December 31,				Year ended December 31,
		2023				2022
Operating lease expense		$	1,146			$	1,161
Financing lease expense			27				32
Short Term lease expense			22				27
Total lease expense		$	1,195			$	1,220

 

Maturities of lease liabilities are as follows for the future one-year periods ending December 31, (in thousands):

 

		Operating				Financing				Total
2024		$	1,330			$	—			$	1,330
2025			1,307				—				1,307
2026			1,106				—				1,106
2027			1,092				—				1,092
2028			1,093				—				1,093
2029 and thereafter			463				—				463
Total lease payments		$	6,391			$	—			$	6,391
Less imputed interest			(516	)			—				(516	)
Present value		$	5,875			$	—			$	5,875

 

The weighted average remaining lease term and discount rate for operating leases were as follows for the periods indicated:

 

		December 31,				December 31,
		2023				2022
Weighted Average Remaining Lease Term (Years) - operating leases			5.10				6.16
Weighted Average Remaining Lease Term (Years) - financing leases			—				0.83
Weighted Average Discount Rate - operating leases			3.30	%			3.21	%
Weighted Average Discount Rate - financing leases			—				5.00	%

 

Supplemental cash flow information related to operating leases was as follows for the periods indicated (in thousands):

 

		Year ended December 31,				Year ended December 31,
		2023				2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			1,250				1,234
Operating cash flows from financing lease			2				4
Financing cash flows from financing lease			63				19
Right-of-use assets obtained in exchange for new operating lease liabilities			-				—