LEASES
We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use (‘ROU’) assets”, “current portion of operating lease obligations” and “operating lease obligations” on our consolidated balance sheets. Finance leases are included in “property, plant and equipment, net”, “current portion of long-term debt and finance lease obligations” and “long-term debt and finance lease obligations” on our consolidated balance sheets.
Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments and short-term lease payments (leases with initial terms less than twelve months) are expensed as incurred.
We have lease agreements with lease and non-lease components for certain equipment, office, and vehicle leases. We have elected the practical expedient to not separate lease and non-lease components and account for both as a single lease component.
We have operating and finance leases primarily for equipment, real estate, and vehicles. Some of our leases include options to extend the leases for up to 10 years, and some may include options to terminate the leases within 14 months.
The components of lease expense are as follows (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Operating lease costs | $ | 24,512 | | | $ | 24,605 | |
| Variable lease costs | 5,345 | | | 5,198 | |
| Finance lease costs: | | | |
| Amortization of right-of-use assets | 1,099 | | | 1,182 | |
| Interest on lease liabilities | 435 | | | 462 | |
| Total lease cost | $ | 31,391 | | | $ | 31,447 | |
Other information related to leases is as follows (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Supplemental cash flow information: | | | |
| Cash paid for amounts included in the measurement of lease liabilities | | | |
| Operating cash flows from operating leases | $ | 19,486 | | | $ | 18,823 | |
| Operating cash flows from finance leases | 444 | | | 446 | |
| Financing cash flows from finance leases | 907 | | | 1,039 | |
| Right-of-use assets obtained in exchange for lease obligations | | | |
| Operating leases | $ | 7,519 | | | $ | 3,402 | |
| Finance leases | $ | 1,022 | | | $ | 1,371 | |
Amounts recognized in the consolidated balance sheet are as follows (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Operating Leases: | | | |
| Operating lease right-of-use assets | $ | 40,407 | | | $ | 40,498 | |
| Current portion of operating lease obligations | 14,790 | | | 14,232 | |
| Operating lease obligations (non-current) | 28,631 | | | 29,962 | |
| | | |
| Finance Leases: | | | |
| Property, plant and equipment, net | $ | 4,507 | | | $ | 5,258 | |
| Current portion of long-term debt and finance lease obligations | 819 | | | 945 | |
| Long-term debt and finance lease obligations | 4,324 | | | 4,811 | |
| | | |
| Weighted average remaining lease term | | | |
| Operating leases | 5 years | | 5 years |
| Finance leases | 7 years | | 8 years |
| Weighted average discount rate | | | |
| Operating leases | 9.0 | % | | 8.1 | % |
| Finance lease | 8.0 | % | | 8.0 | % |
As of December 31, 2024, we have no material additional operating and finance leases that have not yet commenced.
As of December 31, 2024, future minimum lease payments under non-cancellable (excluding short-term leases) are as follows (in thousands):
| | | | | | | | | | | |
| Twelve Months Ended December 31, | Operating Leases | | Finance Leases |
| 2025 | $ | 17,409 | | | $ | 1,161 | |
| 2026 | 11,740 | | | 1,041 | |
| 2027 | 8,644 | | | 838 | |
| 2028 | 4,886 | | | 670 | |
| 2029 | 2,655 | | | 612 | |
| Thereafter | 7,282 | | | 2,255 | |
| Total future minimum lease payments | $ | 52,616 | | | $ | 6,577 | |
| Less: Interest | 9,195 | | | 1,434 | |
| Present value of lease liabilities | $ | 43,421 | | | $ | 5,143 | |
Total rent expense resulting from operating leases, including short-term leases, for the years ended December 31, 2024 and 2023 was $36.9 million and $36.4 million, respectively.