Note 7 – Leases
The Company leases property used for warehousing, distribution centers, office space, branch locations, equipment and vehicles. The components of lease cost were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, |
| Lease Type | | Classification | | 2025 | | 2024 | | 2023 |
Operating lease expense(1) | | Operating expenses | | $ | 28,264 | | | $ | 23,958 | | | $ | 21,131 | |
| | | | | | | | |
| Financing lease amortization | | Operating expenses | | 582 | | | 612 | | | 546 | |
| Financing lease interest | | Interest expense | | 103 | | | 108 | | | 93 | |
| Financing lease expense | | | | 685 | | | 720 | | | 639 | |
Sublease income(2) | | | | (679) | | | (425) | | | — | |
| Net lease cost | | | | $ | 28,270 | | | $ | 24,253 | | | $ | 21,770 | |
(1) Includes short-term lease expense, which is immaterial.
(2) The Company subleases excess property to third-party tenants. Sublease income is recognized on a straight-line basis over the sublease agreement and is recorded as an offset to operating lease expense.
The value of net assets and liabilities related to our operating and finance leases as of December 31, 2025 and December 31, 2024 was as follows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| Lease Type | | 2025 | | 2024 |
| Total right of use operating lease assets | | $ | 111,117 | | | $ | 91,962 | |
| Total right of use financing lease assets | | 1,573 | | | 1,702 | |
| Total lease assets | | $ | 112,690 | | | $ | 93,664 | |
| | | | |
| Total current operating lease obligation | | $ | 20,030 | | | $ | 18,413 | |
| Total current financing lease obligation | | 594 | | | 538 | |
| Total current lease obligation | | $ | 20,624 | | | $ | 18,951 | |
| | | | |
| Total long-term operating lease obligation | | $ | 98,022 | | | $ | 76,759 | |
| Total long-term financing lease obligation | | 799 | | | 999 | |
| Total long-term lease obligation | | $ | 98,821 | | | $ | 77,758 | |
The value of lease liabilities related to our operating and finance leases and sublease income as of December 31, 2025 was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maturity Date of Lease Liabilities | | Operating Leases | | Financing Leases | | Total | | Sublease Income |
| 2026 | | $ | 27,236 | | | $ | 668 | | | $ | 27,904 | | | $ | 368 | |
| 2027 | | 25,990 | | | 418 | | | 26,408 | | | 43 | |
| 2028 | | 23,326 | | | 280 | | | 23,606 | | | 44 | |
| 2029 | | 19,606 | | | 120 | | | 19,726 | | | 45 | |
| 2030 | | 12,939 | | | 47 | | | 12,986 | | | 30 | |
| Thereafter | | 42,793 | | | — | | | 42,793 | | | — | |
| Total lease payments | | 151,890 | | | 1,533 | | | 153,423 | | | 530 | |
| Less: Interest | | (33,838) | | | (140) | | | (33,978) | | | — | |
| Present value of lease liabilities | | $ | 118,052 | | | $ | 1,393 | | | $ | 119,445 | | | $ | 530 | |
The weighted average lease terms and interest rates of leases held as of December 31, 2025 and 2024 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2025 | | 2024 |
| | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
| Weighted average remaining lease term | | 6.0 years | | 3.2 years | | 6.3 years | | 3.7 years |
| Weighted average interest rate | | 7.5% | | 7.1% | | 7.6% | | 7.3% |
The cash outflows of leasing activity for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, |
| Cash Flow Source | | Classification | | 2025 | | 2024 | | 2023 |
| Operating cash flows from operating leases | | Operating activities | | $ | (26,743) | | | $ | (21,980) | | | $ | (15,516) | |
| Operating cash flows from financing leases | | Operating activities | | $ | (104) | | | $ | (111) | | | $ | (242) | |
| Financing cash flows from financing leases | | Financing activities | | $ | (600) | | | $ | (653) | | | $ | (515) | |
Refer to Note 4 – Revenue Recognition for a discussion on the Company’s activities as lessor.
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.