APOGEE ENTERPRISES, INC.APOG

APOGEE ENTERPRISES, INC. Leases Disclosure

10-KFiled Apr 24, 20252 min read
Leases
We have operating leases for certain buildings and equipment used in our operations. We determine if an arrangement contains a lease at inception. Under ASU 2016-20, Leases, we have elected the package of practical expedients permitted under the transition guidance in adopting ASC 842, which, among other things, allowed us to carry forward our historical lease classification. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term. Our leases have remaining lease terms of one to seventeen years, some of which include renewal options that can extend the lease for up to an additional ten years, at our sole discretion. We have made an accounting policy election not to record leases with an original term of twelve months or less on our consolidated balance sheet; such leases are expensed on a straight-line basis over the lease term.

In determining lease asset value, we consider fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. We use a discount rate for each lease based upon an estimated incremental borrowing rate over a similar term. We have elected the practical expedient to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease expense were as follows:
(In thousands)20252024
Operating lease cost$14,587 $14,312 
Short-term lease cost688 1,349 
Variable lease cost3,984 2,629 
Sublease income(1,533)(1,479)
Total lease cost$17,726 $16,811 

Other supplemental information related to leases are as follows:
(In thousands)20252024
Cash paid for amounts included in the measurement of operating lease liabilities$16,467 $14,656 
Lease assets obtained in exchange for new operating lease liabilities$21,810 $11,883 
Weighted-average remaining lease term - operating leases5.7 years4.0 years
Weighted-average discount rate - operating leases4.5 %3.2 %

Future maturities of lease liabilities are as follows:
(In thousands)2025
Fiscal 2026$17,669 
Fiscal 202717,123 
Fiscal 202812,818 
Fiscal 20297,856 
Fiscal 20306,615 
Thereafter14,781 
Total lease payments76,862 
Less: Amounts representing interest9,940 
Present value of lease liabilities$66,922 
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About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

Other Available Disclosures

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