Custom Truck One Source, Inc.CTOS

Custom Truck One Source, Inc. Leases Disclosure

10-KFiled Mar 4, 20252 min read
Note 9: Leases as Lessee
The Company’s operating lease agreements primarily consist of real estate property, such as production facilities, warehouses and office buildings, in addition to personal property, such as vehicles and equipment. The majority of the Company’s lease arrangements are comprised of fixed payments and a limited number of these arrangements include a variable payment component based on certain index fluctuations.
During 2024, the Company closed on a sale leaseback transaction with an unrelated third party. Under this transaction, the Company sold eight properties with a combined net book value of $29.0 million for gross proceeds of $53.8 million, which was reduced by transaction costs and other fees of $1.3 million, for net cash proceeds of approximately $52.5 million. Additionally, $3.2 million from
the proceeds were used to repay a note payable. The lease agreement has an initial term of 20 years, with four optional five-year renewal options. The Company recognized a gain of $23.5 million on this transaction, which is included in Gain on sale leaseback transaction in the Consolidated Statements of Operations and Comprehensive Income (Loss). Right-of-use assets and lease liabilities recognized related to this sale leaseback transaction were $43.8 million and $43.5 million, respectively.
Components of Lease Expense
The components of lease expense are as follows:
Year Ended December 31,
(in $000s)202420232022
Operating lease cost$10,718 $10,149 $7,659 
Finance lease cost:
Amortization of lease assets— 1,748 1,820 
Interest on lease liabilities— 300 1,189 
Short-term lease cost— 978 1,472 
Sublease income— (1,365)(1,730)
Total lease cost$10,718 $11,810 $10,410 
Supplemental Cash Flow Information
Supplemental cash flow information related to leases is as follows:
Year Ended December 31,
(in $000s)202420232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases$10,208 $7,891 $7,855 
Operating cash outflows - interest payments on finance leases$— $300 $1,189 
Finance cash outflows - payments on finance lease obligations$— $2,682 $3,955 
Supplemental disclosure of noncash leasing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1)$65,012 $16,077 $3,761 
(1) Includes lease extension and option exercises.
Future Maturities and Payment Information
Maturities of lease liabilities as of December 31, 2024 are as follows:

(in $000s)Operating Leases
2025$14,363 
202614,000 
202712,881 
202812,375 
202911,702 
Thereafter107,405 
Total lease payments172,726 
Less: imputed interest(76,607)
Total present value of lease liabilities$96,119 
As of December 31, 2024, the weighted average discount rate and remaining term under operating leases was 8.4% and 13.3 years, respectively.
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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.

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