Target Hospitality Corp. Leases Disclosure
13. Leases
Lessee Accounting
The Company has both finance and operating leases. The finance leases are solely comprised of the Company’s commercial-use vehicles, maturing in dates ranging from 2025 to 2028, including expected renewal options. Including all renewal options available to the Company, the lease maturity date may extend on a month-to-month basis for an unlimited period of time. Operating leases consist of land, building, office, certain community units, and equipment leases, maturing in dates ranging from 2025 to 2029, including expected renewal options. Including all renewal options available to the Company, the lease maturity date extends to 2118.
Leases were included on the Company’s consolidated balance sheet as follows:
December 31, | December 31, | |||||
Finance Lease: |
| 2024 | 2023 | |||
$ | 3,318 | $ | 2,422 | |||
Current portion of finance lease obligations(2) | $ | 1,860 | $ | 1,369 | ||
Long-term finance lease obligations(3) | 1,451 | 1,024 | ||||
Total lease obligation | $ | 3,311 | $ | 2,393 | ||
Weighted average remaining lease term | 2.2 Years | 2.0 Years | ||||
Weighted average discount rate | 11.82% | 10.31% | ||||
Operating Leases: | ||||||
Right-of-use assets, net | $ | 24,935 | $ | 19,698 | ||
Current portion of operating lease obligations | $ | 8,548 | $ | 11,914 | ||
Long-term operating lease obligations | 17,459 | 8,426 | ||||
Total lease obligations | $ | 26,007 | $ | 20,340 | ||
Weighted average remaining lease term | 3.5 Years | 2.2 Years | ||||
Weighted average discount rate | 9.80% | 8.53% | ||||
| (1) | Finance lease right-of-use assets, net are included in other property, plant and equipment, net on the Company's consolidated balance sheets. |
| (2) | Current portion of finance lease obligations are included in current portion of finance lease and other financing obligations on the Company's consolidated balance sheets. As of December 31, 2024 and 2023, this financial statement line item is solely comprised of the current portion of finance lease obligations given the current portion of other financing obligations is $0. |
| (3) | Long-term finance lease obligations are included in long-term finance lease and other financing obligations on the Company's consolidated balance sheets. As of December 31, 2024 and 2023, this financial statement line item is solely comprised of the long-term finance lease obligations given the long-term other financing obligations is $0. |
The components of lease expense were as follows:
December 31, | December 31, | |||||
2024 | 2023 | |||||
Finance lease cost: | ||||||
Amortization of right-of-use asset | $ | 1,716 | $ | 1,454 | ||
Interest on lease obligations | 301 | 212 | ||||
Total finance lease cost | $ | 2,017 | $ | 1,666 | ||
Operating lease cost | $ | 11,465 | $ | 18,921 | ||
Short-term lease cost | $ | 5 | $ | 222 | ||
Variable lease cost(1) | $ | 1,235 | $ | 2,493 | ||
| (1) | Consists primarily of common area maintenance, real estate taxes, utilities, operating expenses and insurance for real estate leases; insurance and personal property expense for equipment leases; and certain vehicle related charges for finance leases. For 2024, the amount of variable lease costs disclosed above also includes less than $0.1 million of lease costs related to base rent associated with long-term immaterial leases with a present value of total minimum lease payments less than $25,000 with an average remaining lease term of approximately 1.5 years as of December 31, 2024. For 2023, the amount of variable lease costs disclosed above also includes approximately $0.1 million of lease costs related to base rent associated with long-term immaterial leases with a present value of total minimum lease payments less than $25,000 with an average lease term of approximately 1.4 years. |
Supplemental cash flow information related to leases was as follows:
December 31, | December 31, | |||||
2024 | 2023 | |||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash flows from finance leases | $ | 301 | $ | 212 | ||
Operating cash flows from operating leases(1) | $ | 10,958 | $ | 14,602 | ||
Financing cash flows from finance leases | $ | 1,695 | $ | 1,404 | ||
| (1) | For 2024, includes approximately $1.4 million of interest, while 2023 includes approximately $1.1 million of interest. |
Future maturities of the Company’s finance and operating lease obligations at December 31, 2024 were as follows:
Finance Lease | Operating Leases | ||||||
2025 | $ | 1,961 | $ | 8,927 | |||
2026 | 1,201 | 9,325 | |||||
2027 | 563 | 6,181 | |||||
2028 | 3 | 5,467 | |||||
2029 | — | 1,048 | |||||
Total lease payments | 3,728 | 30,948 | |||||
Less: interest(1) | (417) | (4,941) | |||||
Present value of lease obligations | $ | 3,311 | $ | 26,007 | |||
| (1) | Calculated using the appropriate discount rate for each lease. |
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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.