Workhorse Group Inc.WKHS
Workhorse Group Inc. Leases Disclosure
LEASES
We have entered into various operating lease agreements for offices, manufacturing and warehouse facilities. We determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease commencement, which is the date when the underlying asset is made available for our use by the lessor.
We have elected not to recognize in the Consolidated Balance Sheets leases with a lease term of 12 months or less at lease inception that do not contain a purchase option or renewal term provision we are reasonably certain to exercise. All other lease right-of-use assets (“ROU”) and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of our leases do not provide an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.
Our leases may include options to extend the lease term for up to 5 years. Some of our leases also include options to terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as cost of sales or operating expenses depending on the nature of the lease right-of-use asset.
In connection with the Merger, we recognized operating lease ROU assets of approximately $21.7 million and corresponding operating lease liabilities of approximately $22.1 million, consisting of $3.0 million classified as current and $19.1 million classified as noncurrent, related to acquired leases from Workhorse. The leases primarily relate to offices, manufacturing and warehouse facilities. The lease liabilities were measured at the present value of the remaining lease payments as of the merger date using an appropriate incremental borrowing rate. The ROU assets were initially measured at an amount equal to the lease liabilities, adjusted for any prepaid or accrued lease payments and any favorable or unfavorable lease terms identified as of the acquisition date. Subsequent to the Merger, these leases are accounted for in accordance with ASC 842 and are included in our consolidated lease disclosures.
We assess the carrying value of our ROU assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such indicators may include, but are not limited to, significant underperformance relative to historical or projected future operating results, changes in the business climate or legal factors, and changes in the expected use of the leased asset. The assessment of whether a ROU asset is impaired involves management's judgment, including considerations of future cash flows, market conditions, and other relevant factors.
If impairment indicators are identified, we estimate the future cash flows expected to result from the use and eventual disposition of the leased asset. These estimates consider factors such as anticipated future operating results, market conditions, and other relevant factors. If the sum of the expected future cash flows is less than the carrying amount of the ROU asset, an impairment loss is recognized for the difference between the carrying amount and the fair value of the ROU asset. The fair value is determined based on various valuation techniques, including discounted cash flow analysis, market comparable transactions, and other appropriate methods.
Impairment losses are recognized in the Consolidated Statements of Operations. We determine the level at which the impairment loss is recognized based on whether we expect to retain or dispose of the ROU asset. If we expect to retain the ROU asset, the impairment loss is recognized as an adjustment to the carrying amount of the ROU asset, with a corresponding adjustment to accumulated depreciation and amortization. If we expect to dispose of the ROU asset, the impairment loss is recognized in Selling, general and administrative expense in the Consolidated Statements of Operations. During the years ended December 31, 2025 and 2024, we did not identify any indicators of impairment, and no impairment losses were recognized during the periods.
The components of lease expense are as follows in our Consolidated Statements of Operations:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Short-term lease expense | $ | 59 | $ | 139 | |||||||
| Operating lease expense | 1,344 | 786 | |||||||||
| Total lease expense | $ | 1,403 | $ | 926 | |||||||
Lease right-of-use assets consisted of the following:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Operating lease right-of-use assets | $ | 21,872 | $ | 974 | |||||||
Lease liabilities consisted of the following:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Current portion operating lease liabilities | $ | 3,616 | $ | 888 | |||||||
| Long-term operating lease liabilities | 18,777 | 86 | |||||||||
| Operating lease liabilities | $ | 22,393 | $ | 974 | |||||||
Other information related to leases is as follows:
| As of December 31, | |||||||||||
2025 | 2024 | ||||||||||
| Weighted-average remaining lease term | |||||||||||
| Operating leases | 16.31 years | 1.11 years | |||||||||
| Weighted-average interest rate | |||||||||||
| Operating leases | 12.4 | % | 12.5 | % | |||||||
Supplemental cash flow information related to leases where we are the lessee is as follows:
| Years Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash outflows from operating leases | $ | 949 | $ | 1,055 | |||||||
As of December 31, 2025, the maturities of our operating lease liabilities (excluding short-term leases) are as follows:
| (in thousands) | Operating Leases | |||||||
| 2026 | $ | 3,669 | ||||||
| 2027 | 3,506 | |||||||
| 2028 | 3,486 | |||||||
| 2029 | 3,349 | |||||||
| 2030 | 2,440 | |||||||
| Thereafter | 44,580 | |||||||
| Total minimum lease payments | 61,030 | |||||||
| Less: Interest | 38,637 | |||||||
| Present value of lease obligations | 22,393 | |||||||
| Less: Current portion | 3,616 | |||||||
| Long-term portion of lease obligations | $ | 18,777 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Mar 14, 2017 | |
| 2015 | Mar 25, 2016 | |
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.