Tailwind Two Acquisition Corp. 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 15 Leases

As part of normal operations, the Company leases real estate and equipment from various counterparties with lease terms and maturities extending through 2032. The Company applies the practical expedient to not separate the lease and non-lease components and accounts for the combined component as a lease. Additionally, the Company’s right-of-use assets and lease liabilities include leases with lease terms of 12 months or less.

The Company’s right-of-use assets and lease liabilities primarily represent lease payments that are fixed at the commencement of a lease and variable lease payments that depend on an index or rate. Lease incentives that are probable and within the Company’s control are estimated and included in lease payments at the commencement of a lease. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, including periods in which termination options are reasonably certain of not being exercised and periods in which renewal options are reasonably certain of being exercised. The discount rate for a lease is determined using the Company’s incremental borrowing rate that coincides with the lease term at the commencement of a lease. The incremental borrowing rate is estimated based on the Company's recent financing transactions.

Lease payments that are neither fixed nor dependent on an index or rate and vary because of changes in usage or other factors are included in variable lease costs. Variable lease costs are recorded in the period in which the obligation is incurred and primarily relate to utilities, maintenance, and repair costs.

The Company’s leases do not contain material residual value guarantees or restrictive covenants. The Company is not a lessor in any leases and does not sublease.

The following table presents the amounts reported in the Company’s consolidated balance sheets related to operating and finance leases as of the dates presented:


		December 31,
(in thousands)	Classification	2023		2022
Right-of-use assets:
Operating	Other assets	$	12,098	$	12,736
Finance	Property, plant, and equipment, net		5,873		420
Total right-of-use assets		$	17,971	$	13,156

Lease liabilities
Operating	Accrued expenses and other current liabilities	$	1,505	$	971
Finance	Current portion of long-term debt		1,929		90
Operating	Other liabilities		17,964		19,426
Finance	Long-term debt		3,059		321
Total lease liabilities		$	24,457	$	20,808

The following is a summary of the Company’s lease cost for the presented period:


	Years Ended December 31,
Lease cost (in thousands)	2023		2022
Operating lease cost	$	7,157	$	6,463
Finance lease cost
Amortization of right-of-use assets		1,468		49
Interest on lease liabilities		389		16
Variable lease costs		1,575		915
Total lease cost	$	10,589	$	7,443

The following is a summary of the cash flows and supplemental information associated with the Company’s leases for the period presented:


	Years Ended December 31,
Other information (in thousands)	2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	7,442	$	391
Operating cash flows from finance leases		389		16
Financing cash flows from finance leases		1,070		44
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases		363		6,614
Finance leases		5,647		402

Lease payments prior to lease commencement are classified in the consolidated statements of cash flows based on the expected classification of the lease upon commencement and are excluded from the table above. During 2023, lease payments prior to the commencement of finance leases totaled $1.8 million.

The following is a summary of the weighted-average lease term and discount rate for operating and finance leases as of the date presented:


	Years Ended December 31,
Lease term and discount rate	2023			2022
Weighted-average remaining lease term (years)
Operating leases		6.0			6.8
Finance leases		2.5			4.4
Weighted-average discount rate
Operating leases		30.07	%		30.27	%
Finance leases		12.42	%		6.61	%

The following is a maturity analysis related to the Company’s operating and finance leases as of December 31, 2023:


Maturity of lease liabilities (in thousands)	Operating Leases		Finance Leases
2024	$	6,935	$	2,418
2025		7,217		2,285
2026		7,252		984
2027		7,260		54
2028		3,392		-
Thereafter		12,415		-
Total lease payments		44,471		5,741
Less interest		25,002		753
Total lease liabilities	$	19,469	$	4,988

In February 2023, the Company executed an operating lease for manufacturing and assembly space with an original lease term of 124 months, which is expected to commence in the second quarter of 2024. The total future minimum lease payments under this lease are approximately $34.5 million.