Operating Leases |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Leases | Operating leases The Company has entered into various operating lease agreements for office and manufacturing spaces. Michigan Lease
On October 20, 2021, the Company entered into a real estate lease for office space ("Michigan office lease") and research and development space ("Michigan R&D lease") located in Auburn Hills, Michigan (collectively the “Michigan lease”). The Michigan lease contains one option to extend the term for an additional five years. At the inception of the lease, it was not reasonably certain we would exercise the option to extend the term of the lease.
The Company gained control of the underlying assets under the Michigan lease in 2022. The Michigan lease expires on January 31, 2033 and is classified as an operating lease.
Arkansas Facility Lease
On January 21, 2022, the Company entered into a real estate lease for its industrialization facility in Bentonville, Arkansas ("Bentonville lease"). The original lease term is 10 years and commenced on February 1, 2022. The Bentonville lease contains an option to extend the term for 10 years and is classified as an operating lease. At the inception of the lease, it was not reasonably certain we would exercise any of the options to extend the term of the leases.
Oklahoma Battery Manufacturing Facility Lease
On November 1, 2022, the Company entered into a commercial lease of an approximately 100,000 square foot manufacturing facility located in the MidAmerica Industrial Park in Pryor, Oklahoma with the Oklahoma Ordnance Works Authority for the assembly of its proprietary battery modules. The lease term is approximately 10 years with lessee's right to terminate after 5 years.
Justin Texas Lease
On January 31, 2023, Canoo Technologies Inc. entered into a real estate lease for an approximately 8,000 square foot facility in Justin, Texas with an entity owned by the Executive Chair and Chief Executive Officer of the Company. The initial lease term is three years, five months, commencing on November 1, 2022 and terminating on March 31, 2026, with one option to extend the term of the lease for an additional five years. Prior to execution, the contract was a month-to-month arrangement. The total minimum lease payments over the initial lease term is $0.3 million.
Lease Portfolio
The Company uses an estimated incremental borrowing rate based on information available at lease commencement to determine the present value of lease payments when the rate implicit in the lease is not readily determinable. The weighted average discount rate used was 6.70%. As of March 31, 2023, the remaining operating lease ROU asset and operating lease liability were approximately $38.8 million and $40.7 million, respectively. As of December 31, 2022, the operating lease ROU asset and operating lease liability were approximately $39.3 million and $40.8 million, respectively. As of March 31, 2023 and December 31, 2022, $2.6 million and $2.2 million, respectively, of the lease liability was determined to be short term and was included in and other current liabilities within the condensed consolidated balance sheets.
Related party lease expense related to the Company's leases in Justin, Texas was $0.1 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.
Certain lease agreements also provide the Company with the option to renew for additional periods. These renewal options are not considered in the remaining lease term unless its reasonably certain that the Company will exercise such options. The weighted average remaining lease term as of March 31, 2023 and December 31, 2022 was 9.4 years and 9.7 years, respectively.
Throughout the term of the lease agreements, the Company is responsible for paying certain operating costs, in addition to rent, such as common area maintenance, taxes, utilities, and insurance. These additional charges are considered variable lease costs and are recognized in the period in which costs are incurred.
Maturities of the Company’s operating lease liabilities at March 31, 2023 were as follows (in thousands):
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(1)Calculated using the incremental borrowing rate
(2)Included within Accrued expenses and other current liabilities line item on the Condensed Consolidated Balance Sheet.
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