LEASES
The Company leases real properties for use in manufacturing and as administrative and sales offices, and leases automobiles and office equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating. Right-of-use (“ROU”) assets are initially measured at the present value of lease payments over the lease term plus initial direct costs, if any. If a lease does not provide a discount rate and the implicit rate cannot be readily determined, an incremental borrowing rate is used to determine the present value of future lease payments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term within the Consolidated Statements of Operations. Lease and non-lease components within the Company’s lease agreements are accounted for together. Variable lease payments are recognized in the period in which the obligation is incurred.
Nearly all of the Company’s leasing arrangements are classified as operating leases. ROU asset and lease liability balances were as follows for the periods presented:
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| ROU asset | $ | 36,018 | | | $ | 42,164 | |
| | | |
| Current lease liability | 8,337 | | | 8,297 | |
| Long-term lease liability | 31,805 | | | 37,150 | |
| Total lease liability | $ | 40,142 | | | $ | 45,447 | |
The ROU asset is reported in “Other assets” while the current lease liability is reported in “Other current liabilities”, and the long-term lease liability is reported in “Other long-term liabilities” in the Company’s Consolidated Balance Sheets. Cash paid for operating lease liabilities is recorded as operating cash outflows in the Company’s Consolidated Statements of Cash Flows.
Arcadia Products leases certain office, manufacturing, distribution and warehouse facilities from entities affiliated with the redeemable noncontrolling interest holder and president of Arcadia Products. There were eight such leases in effect as of December 31, 2025, with expiration dates ranging from calendar years 2027 to 2031, inclusive of the assumed exercise of applicable renewal options. As of December 31, 2025, the total ROU asset and related lease liability recognized for these leases was $18,932 and $20,127, respectively. During the years ended December 31, 2025, and 2024, associated lease expense was $4,666 and $4,625, respectively, and is included in total operating lease expense.
Total operating lease expense included in the Company’s Consolidated Statements of Operations was $13,099, $13,678, and $12,822 for the years ended December 31, 2025, 2024, and 2023, respectively. Short term and variable lease costs were not significant for any period presented.
Certain of the Company’s leases contain renewal options and options to extend the lease term for up to ten years, and a majority of these options are reflected in the calculation of the ROU assets and related lease liability due to the likelihood of renewal.
The following table summarizes the weighted average lease terms and discount rates for operating lease liabilities:
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
Weighted average remaining lease term | 8.4 years | | 8.7 years |
Weighted average discount rate | 5.7 | % | | 5.4 | % |
The following table represents maturities of operating lease liabilities as of December 31, 2025:
| | | | | | | |
| 2026 | $ | 10,171 | | | |
| 2027 | 9,316 | | | |
| 2028 | 7,342 | | | |
| 2029 | 4,436 | | | |
| 2030 | 3,945 | | | |
| Thereafter | 18,778 | | | |
| Total future minimum lease payments | 53,988 | | | |
| Less imputed interest | (13,846) | | | |
| Total | $ | 40,142 | | | |