VSE Corporation Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Leases

Leases

12 Months Ended

Dec. 31, 2024

Our operating lease cost was as follows for the years ended December 31, (in thousands):


	2024		2023		2022
Operating lease cost (a)	$	9,327	$	6,480	$	2,714
(a) Excludes short-term lease expense, which is not material.

Our lease arrangements do not contain any material residual guarantees, variable payment provisions, or restrictive covenants.

The table below summarizes future minimum lease payments under operating leases, recorded on the balance sheet, as of December 31, 2024 (in thousands):


Year ending December 31,
2025	$	10,178
2026	9,807
2027	9,620
2028	8,713
2029	7,558
Thereafter	27,520
Minimum lease payments	73,396
Less: imputed interest	(18,363)
Present value of minimum lease payments	55,033
Less: current portion of lease liabilities (a)	(6,889)
Long-term lease liabilities	$	48,144

(a) The current portion of lease liabilities are presented within accrued expenses and other current liabilities on our consolidated balance sheets. Refer to Note (9) "Accrued Expenses and Other Current Liabilities."

Other supplemental operating lease information for the year ended December 31, was as follows (in thousands):


	2024		2023		2022
Cash paid for amounts included in the measurement of operating lease liabilities	$	9,818	$	5,045	$	2,441
Right-of-use assets obtained in exchange for new operating lease liabilities	$	30,314	$	11,812	$	11,876

The weighted-average discount rate was 6.5% and 5.9% and the weighted-average remaining lease term was 8.6 years and 5.7 years as of December 31, 2024, and 2023, respectively.

Lease Abandonment and Termination

In connection with the FDS sale as described in Note (3) "Discontinued Operations", we implemented changes that resulted in one-time charges primarily related to the lease abandonment and termination of our headquarters office space.

On June 28, 2024, we ceased use of our 95,000 sq. ft. leased office space in Alexandria, VA. We relocated our VA-based corporate staff to a 4,000 sq. ft. office space in Vienna, VA under a new short-term lease. We recognized one-time lease abandonment costs of $12.9 million, which comprised of a reduction in our operating lease right-of-use assets of $6.7 million, exit costs of $3.7 million, and a non-cash write-off of certain property and equipment of $2.5 million. These one-time costs are included within lease abandonment and termination costs on our consolidated statements of income.

On September 4, 2024, we entered into an agreement to immediately terminate the Alexandria, VA, office space lease in exchange for $12.0 million, payable in two equal installments due in January 2025 and January 2026. As a result, we recognized a lease termination gain of $0.7 million, which comprised of a $1.1 million net liability reduction, partially offset by a $0.4 million decrease in our remaining operating lease right-of-use asset. The lease termination gain is included within lease abandonment and termination costs on our consolidated statements of income. As of December 31, 2024, $6.0 million of the $12.0 million due as a result of the lease termination is classified within accrued expenses and other current liabilities, while the remaining $6.0 million is classified within other long-term liabilities.