Note 20 – Leases
The Company has operating lease agreements for offices, branches, factories, distribution and service facilities and certain personal property. Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. Finance leases are not material to the Company's consolidated financial statements.
The Company determines if an arrangement is a lease at lease inception. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's lease contracts do not include an implicit rate, the Company uses its incremental borrowing rate, based on information available at commencement date, in determining the present value of future payments. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The operating lease asset also includes any initial direct costs and lease payments made prior to lease commencement and excludes lease incentives incurred.
Several 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 our sole discretion. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Certain of our lease agreements include rental payments that vary based on changes in volume activity, storage activity or changes in the Consumer Price Index or other indices. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has certain lease agreements that contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes.
A summary of the Company's lease assets and lease liabilities as of December 31, 2025 and December 31, 2024 is as follows:
| | | | | | | | | | | | | | | | | |
| (in millions) | Classification | | 2025 | | 2024 |
| Lease Assets | | | | | |
| Operating lease assets | Operating lease assets | | $ | 170.2 | | | $ | 161.8 | |
| | | | | |
| Lease Liabilities | | | | | |
| Current operating lease liabilities | Accrued expenses | | 28.9 | | | 26.0 | |
| Non-current operating lease liabilities | Operating lease liabilities | | 151.7 | | | 145.1 | |
| Total lease liabilities | | | $ | 180.6 | | | $ | 171.1 | |
A summary of the Company's total lease cost for the years ended December 31, 2025, December 31, 2024 and December 31, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Classification | | 2025 | | 2024 | | 2023 |
| Operating lease cost | Selling, general and administrative expense | | $ | 18.1 | | | $ | 17.7 | | | $ | 20.1 | |
| Cost of sales | | 44.5 | | | 45.4 | | | 39.3 | |
| Variable lease cost | Selling, general and administrative expense | | 1.0 | | | 0.8 | | | 1.6 | |
| Cost of sales | | 6.7 | | | 6.3 | | | 6.2 | |
Total lease cost (A) | | | $ | 70.3 | | | $ | 70.2 | | | $ | 67.2 | |
| | | | | | | |
| Other Information: | | | | | | | |
| Cash paid for amounts included in the measurement of operating lease liabilities | | $ | 37.5 | | | $ | 39.3 | | | $ | 30.0 | |
(A) Includes total short-term lease cost which is immaterial.
The Company's maturity analysis of its operating lease liabilities as of December 31, 2025 is as follows:
| | | | | |
| (in millions) | |
| 2026 | $ | 38.8 | |
| 2027 | 32.6 | |
| 2028 | 28.8 | |
| 2029 | 24.6 | |
| 2030 | 19.6 | |
| Thereafter | 95.4 | |
| Total lease payments | 239.8 | |
| Less: Imputed interest | (59.2) | |
| Present value of lease liabilities | $ | 180.6 | |
The total weighted-average discount rate and remaining lease term for the Company's operating leases were 6.5 percent and 6.5 years, respectively, as of December 31, 2025. Total operating lease payments reflected in operating cash flows were $37.5 million for the year ended December 31, 2025.