Redwire Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

9 Months Ended

Sep. 30, 2022

Note K – Leases

The Company is obligated under certain operating leases for its facilities 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 one lease with annual escalations based on the Consumer Price Index (“CPI”). 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.



	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease costs	$	874	$	867	$	2,350	$	2,452
Variable lease costs	—		—		—		—
Short-term lease costs	55		—		227		—
Total lease costs	$	929	$	867	$	2,577	$	2,452

Total lease costs are included in selling, general and administrative expenses and cost of sales on the condensed consolidated statements of operations and comprehensive income (loss).

Supplemental Balance Sheet Information

The following table presents supplemental balance sheet information related to the Company’s operating leases:


	September 30, 2022		December 31, 2021
Right-of-use assets	$	14,783	$	—

Short-term lease liabilities	$	3,484	$	—
Long-term lease liabilities	11,379		—
Total lease liabilities	$	14,863	$	—

Other Supplemental Information

The following table presents other supplemental information related to the Company’s operating leases:


	Three Months Ended			Nine Months Ended
	September 30, 2022			September 30, 2022
Cash paid for operating lease liabilities	$	825		$	2,112
Right-of-use assets obtained in exchange for new lease liabilities	3,739			7,368

Weighted average remaining lease term (in years)	2.9			2.9
Weighted average discount rate	5.2		%	5.2		%

Future Lease Obligations

As of December 31, 2021, the remaining lease obligation for operating leases under ASC 840 was $26.3 million. As of September 30, 2022, the future annual minimum lease payments for operating lease liabilities under ASC 842 are as follows:


Year	Total
Remainder of 2022	$	818
2023	3,713
2024	3,516
2025	2,958
2026	2,339
Thereafter	4,551
Total lease payments	$	17,895
Less: imputed interest	3,032
Present value of operating lease liabilities	$	14,863

As of September 30, 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.