Annual report pursuant to Section 13 and 15(d)

Leases

v3.23.1
Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases
Note K – Leases
The Company has entered into and acquired long-term leasing arrangements for the right to use various classes of underlying assets including facilities, vehicles and office equipment. Certain facility leases contain predetermined fixed escalation of minimum rents at stated rates ranging from 1.96% to 4.00% per annum and three leases with annual escalations based on certain price indices. In addition, certain facility leases include renewal options that could extend the lease term for up to an additional nine years. The office equipment lease contains a renewal option that could extend the lease to consecutive 60-day terms and a purchase option.

Total Lease Costs
The following table summarizes total lease costs for the period. As the Company adopted ASC 842 as of January 1, 2022, rent expense recognized in accordance with ASC 840 is reported as operating lease cost for the comparative period in 2021.
Year Ended
December 31, 2022 December 31, 2021
Finance lease cost:
Amortization of ROU assets $ 54  $ — 
Interest on lease liabilities 6  — 
Operating lease costs 3,339  3,424 
Variable lease costs —  — 
Short-term lease costs 251  — 
Total lease costs $ 3,650  $ 3,424 
Total lease costs are included in selling, general and administrative expenses and cost of sales on the consolidated statements of operations and comprehensive income (loss).

During the year ended December 31, 2022, the Company recognized impairment expense of $96.6 million, of which $2.7 million related to right-of-use assets on certain asset groups within the Mission Solutions reporting unit. Please refer to Note T for additional information related to this impairment.
Supplemental Balance Sheet Information
The following table presents supplemental balance sheet information related to the Company’s operating and finance leases:
December 31, 2022 December 31, 2021
Operating Leases Finance Leases Operating Leases Finance Leases
Right-of-use assets, net reflected in the following balance sheet line items:
Property, plant and equipment, net $ —  $ 889  $ —  $ — 
Right-of-use assets 13,103  —  —  — 
Total ROU assets $ 13,103  $ 889  $ —  $ — 
Current lease balance reflected in the following balance sheet line items:
Short-term operating lease liabilities $ 3,214  $ —  $ —  $ — 
Short-term finance lease liabilities —  299  —  — 
Noncurrent lease balance reflected in the following balance sheet line items:
Long-term operating lease liabilities 12,670  —  —  — 
Long-term finance lease liabilities —  579  $ —  — 
Total lease liabilities $ 15,884  $ 878  $ —  $ — 

Other Supplemental Information
The following table presents other supplemental information related to the Company’s leases:
Year Ended
December 31, 2022
Operating Leases Finance Leases
Cash paid for lease liabilities $ 3,076  $ 61 
Right-of-use assets obtained in exchange for new lease liabilities 8,615  944 
Weighted average remaining lease term (in years) 4.8 3.1
Weighted average discount rate 5.6  % 9.3  %

Future Lease Obligations
As of December 31, 2021, the remaining lease obligation for operating leases under ASC 840 was $26.3 million. As of December 31, 2022, the future annual minimum lease payments for lease liabilities under ASC 842 are as follows:
Year Operating Leases Finance Leases
2023 $ 4,026  $ 368 
2024 3,823  310 
2025 3,261  222 
2026 2,644  95 
2027 2,553  25 
Thereafter
 2,260  — 
Total lease payments
 $ 18,567  $ 1,020 
Less: imputed interest 2,683  142 
Present value of operating lease liabilities $ 15,884  $ 878 

As of December 31, 2022, the Company had one facility lease that had not yet commenced but created significant future lease obligations in the amount of $1.5 million. The contract was determined to be an operating lease, whereby the Company is not required to make rent payments prior to the lease commencement date while construction is completed on the underlying asset. Due to the
nature of the work and the amount of the Company’s contribution to construction period costs, the Company was determined not to be the accounting owner of the asset under construction as the landlord had substantially all of the construction period risks.
Leases
Note K – Leases
The Company has entered into and acquired long-term leasing arrangements for the right to use various classes of underlying assets including facilities, vehicles and office equipment. Certain facility leases contain predetermined fixed escalation of minimum rents at stated rates ranging from 1.96% to 4.00% per annum and three leases with annual escalations based on certain price indices. In addition, certain facility leases include renewal options that could extend the lease term for up to an additional nine years. The office equipment lease contains a renewal option that could extend the lease to consecutive 60-day terms and a purchase option.

Total Lease Costs
The following table summarizes total lease costs for the period. As the Company adopted ASC 842 as of January 1, 2022, rent expense recognized in accordance with ASC 840 is reported as operating lease cost for the comparative period in 2021.
Year Ended
December 31, 2022 December 31, 2021
Finance lease cost:
Amortization of ROU assets $ 54  $ — 
Interest on lease liabilities 6  — 
Operating lease costs 3,339  3,424 
Variable lease costs —  — 
Short-term lease costs 251  — 
Total lease costs $ 3,650  $ 3,424 
Total lease costs are included in selling, general and administrative expenses and cost of sales on the consolidated statements of operations and comprehensive income (loss).

During the year ended December 31, 2022, the Company recognized impairment expense of $96.6 million, of which $2.7 million related to right-of-use assets on certain asset groups within the Mission Solutions reporting unit. Please refer to Note T for additional information related to this impairment.
Supplemental Balance Sheet Information
The following table presents supplemental balance sheet information related to the Company’s operating and finance leases:
December 31, 2022 December 31, 2021
Operating Leases Finance Leases Operating Leases Finance Leases
Right-of-use assets, net reflected in the following balance sheet line items:
Property, plant and equipment, net $ —  $ 889  $ —  $ — 
Right-of-use assets 13,103  —  —  — 
Total ROU assets $ 13,103  $ 889  $ —  $ — 
Current lease balance reflected in the following balance sheet line items:
Short-term operating lease liabilities $ 3,214  $ —  $ —  $ — 
Short-term finance lease liabilities —  299  —  — 
Noncurrent lease balance reflected in the following balance sheet line items:
Long-term operating lease liabilities 12,670  —  —  — 
Long-term finance lease liabilities —  579  $ —  — 
Total lease liabilities $ 15,884  $ 878  $ —  $ — 

Other Supplemental Information
The following table presents other supplemental information related to the Company’s leases:
Year Ended
December 31, 2022
Operating Leases Finance Leases
Cash paid for lease liabilities $ 3,076  $ 61 
Right-of-use assets obtained in exchange for new lease liabilities 8,615  944 
Weighted average remaining lease term (in years) 4.8 3.1
Weighted average discount rate 5.6  % 9.3  %

Future Lease Obligations
As of December 31, 2021, the remaining lease obligation for operating leases under ASC 840 was $26.3 million. As of December 31, 2022, the future annual minimum lease payments for lease liabilities under ASC 842 are as follows:
Year Operating Leases Finance Leases
2023 $ 4,026  $ 368 
2024 3,823  310 
2025 3,261  222 
2026 2,644  95 
2027 2,553  25 
Thereafter
 2,260  — 
Total lease payments
 $ 18,567  $ 1,020 
Less: imputed interest 2,683  142 
Present value of operating lease liabilities $ 15,884  $ 878 

As of December 31, 2022, the Company had one facility lease that had not yet commenced but created significant future lease obligations in the amount of $1.5 million. The contract was determined to be an operating lease, whereby the Company is not required to make rent payments prior to the lease commencement date while construction is completed on the underlying asset. Due to the
nature of the work and the amount of the Company’s contribution to construction period costs, the Company was determined not to be the accounting owner of the asset under construction as the landlord had substantially all of the construction period risks.