Whole Earth Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LEASES

LEASES

12 Months Ended

Dec. 31, 2023

NOTE 3: LEASES

The Company’s lease portfolio includes factory buildings, office space, warehouses, material handling equipment, vehicles and office equipment. The Company subleases some of its unused office space to third parties. All leases are classified as operating leases.

Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. For purposes of calculating operating lease liabilities, lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option.

Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The Company’s lease agreements do not contain any residual value guarantees. Some leases include variable payments that are based on the usage and occupancy of the leased asset. The Company has elected not to record leases with an initial term of twelve months or less on the balance sheet.

For real estate and vehicle leases, the Company elected the practical expedient to not separate lease from non-lease components within the contract. Electing this practical expedient means the Company accounts for each lease component and the related non-lease component together as a single component. For equipment leases, the Company has not elected this practical expedient and separates the non-lease components from the lease component.

The right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The components of lease expense were as follows (in thousands):


	Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
Operating lease expense	$	9,221	$	8,370	$	5,658
Variable lease expense	1,645		1,634		1,022
Short-term lease expense	1,717		711		988
Sublease income	(403)		(326)		(508)
Total	$	12,180	$	10,389	$	7,160

The following table presents the future maturities of the Company’s lease obligations as of December 31, 2023 (in thousands):


2024	$	8,215
2025	5,456
2026	3,192
2027	2,802
2028	2,380
Thereafter	2,778
Total lease payments	24,823
Less: imputed interest	(3,117)
Total operating lease liabilities	$	21,706

The weighted-average remaining lease term was 4.2 years and the weighted-average discount rate was 5.99% as of December 31, 2023. The weighted-average remaining lease term was 3.0 years and the weighted-average discount rate was 4.19% as of December 31, 2022.

Cash paid for amounts included in the measurement of the lease liability was $10.2 million, $8.9 million and $5.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Right-of -use assets obtained in exchange for lease liabilities was $10.2 million, $0.7 million and $12.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.