Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

(a)  Leases and Other Commitments

We adopted a comprehensive new lease accounting standard effective January 1, 2019 using optional modified retrospective transition method; accordingly, the comparative information as of December 31, 2018 and for the years ended December 31, 2018 and 2017 have not been adjusted and continue to be reported under the previous lease standard. See “Recently Adopted Accounting Pronouncements” in Note 1 for details of the significant changes to our accounting policies resulting from the adoption of the new accounting standard.
We determine at inception whether an arrangement that provides us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use ("ROU") asset and lease liability based on the present value of the future lease payments over the lease term. Substantially all of our leases are long-term operating leases for facilities with fixed payment terms between two and 15 years. Our operating lease ROU assets are recorded in operating lease right-of-use assets on our accompanying consolidated balance sheet. The current portion of operating lease liabilities are presented within accrued expenses and other current liabilities, and the non-current portion of operating lease liabilities are presented under long-term operating lease liabilities on our accompanying consolidated balance sheet.
For leases with terms greater than 12 months, we record the related asset and lease liability at the present value of lease payments over the lease term. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the term of the lease.

Our lease cost for the year ended December 31, 2019 included the following components (in thousands):
Year ended
December 31, 2019
Operating lease cost

Short-term lease cost

Less: sublease income
Total lease cost, net

For the years ended December 31, 2018 and 2017, total lease expense on our operating leases under the previous lease standard, net of sublease rentals, were $2.2 million and $3.8 million, respectively.
Certain of our leases include options to extend the term of the lease or to terminate the lease. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining total future lease payments. Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate our incremental borrowing rate based on information available at lease commencement to discount lease payments to present value.
The table below summarizes future minimum lease payments under operating leases, recorded on the balance sheet, as of December 31, 2019 (in thousands):
Operating Leases





After 2024

Minimum lease payments

Less: imputed interest
Present value of minimum lease payments

Less: current maturities of lease liabilities
Long-term lease liabilities

We made cash payments of approximately $5.7 million for operating leases during the year ended December 31, 2019, which are included in cash flows from operating activities in our consolidated statement of cash flows. The weighted average remaining lease term and discount rate for our operating leases were approximately 6.6 years and 6.0%, respectively at December 31, 2019.

(b)  Contingencies

As previously reported, on or about April 19, 2018 Joseph Waggoner, on behalf of himself and all similarly situated individuals, filed a lawsuit against VSE and two of our subcontractors in the United State District Court, Eastern District of Texas, Texarkana Division, alleging overtime compensation entitlement at a rate of one and one-half times their regular rate of pay for all hours worked over 40 hours in a workweek. The plaintiffs worked under VSE’s contract with the United States Army at the Red River Army Depot in Texas. On January 14, 2020, the parties settled the lawsuit. While the settlement amount VSE agreed to pay the defendants was in excess of the amount that VSE had previously accrued as a loss provision in respect of the lawsuit, the difference was not material.

In addition to the above-referenced legal proceeding, we may have certain claims in the normal course of business, including legal proceedings, against us and against other parties. In our opinion, the resolution of these other claims will not have a material adverse effect on our results of operations, financial position or cash flows. However, because the results of any legal proceedings cannot be predicted with certainty, the amount of loss, if any, cannot be reasonably estimated.

Further, from time-to-time, government agencies investigate whether our operations are being conducted in accordance with applicable contractual and regulatory requirements. Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future government contracting. Government investigations often take years to complete and most result in no adverse action against us. We believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our results of operations, financial condition or cash flows.