LEASE COMMITMENTS
The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms of one to 14 years, inclusive of renewal options that the Company is reasonably certain to exercise. Taxes, insurance and maintenance expenses relating to all leases are obligations of the Company.
On October 15, 2025, the Company entered into a new Lease Agreement (the "Lease") in Glendale, Arizona. The Lease is expected to commence on or about February 1, 2026 with initial monthly base rent of $103 and annual fixed escalators of 3.5%. The Company is responsible for its pro rata share of other periodic payments under the Lease, including real property taxes, utilities, and insurance expenses. The Lease has an initial term of 122 calendar months with two three-year extension options.
The following table summarizes operating lease assets and obligations and provides information associated with the measurement of operating lease obligations:
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Assets: | | | |
| Operating right of use assets | 33,415 | | 35,974 |
| Liabilities: | | | |
| Current operating lease liabilities - Accrued liabilities | 5,841 | | 5,324 |
| Long-term operating lease liabilities - Other noncurrent liabilities | 28,686 | | 31,876 |
| Total lease liabilities | 34,527 | | 37,200 |
| Lease term and discount rate | | | |
| Weighted average remaining lease term (in years) | 5.6 | | 6.6 |
| Weighted average discount rate | 6.51 | % | | 5.91 | % |
The following summarizes the components of operating lease expense and provides supplemental cash flow information for operating leases:
| | | | | | | | | | | |
| For the years ended December 31, |
| 2025 | | 2024 |
| Components of lease expense: | | | |
| Operating lease expense | $ | 7,816 | | | $ | 7,201 | |
| Variable lease expense | 546 | | | 345 | |
| Short-term lease expense | 703 | | | 1,572 | |
| Total lease expense | $ | 9,065 | | | $ | 9,118 | |
| Supplemental cash flow information related to leases: | | | |
| Cash paid for amounts included in measurement of operating lease liabilities | $ | 7,721 | | | $ | 7,159 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | 3,343 | | | 13,572 | |
| Decapitalization of right-of-use assets upon lease termination or modification | 704 | | | 1,374 | |
The following table summarizes the maturities of the Company's operating lease liabilities on December 31, 2025:
| | | | | |
| 2026 | $ | 7,867 | |
| 2027 | 7,892 | |
| 2028 | 7,297 | |
| 2029 | 6,302 | |
| 2030 | 5,466 | |
| Thereafter | 6,626 | |
| Total lease payments | 41,450 | |
| Less imputed interest | (6,923) | |
| Present value of lease liabilities | $ | 34,527 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.