Leases
The Company leases certain office space, warehouses, manufacturing facilities, land, and equipment. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets; we recognize lease expense for these short-term leases in Selling and general expense in the Consolidated Statements of Income (Loss) on a straight-line basis over the lease term. For leases without lease terms (e.g., month-to-month leases), lease expense is recognized as incurred and no asset or liability is recorded for these leases.
The Company accounts for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from non-lease components (e.g., common-area maintenance costs). Most leases include one or more options to renew, with renewal terms that can extend the lease term. The exercise of lease renewal options is at our sole discretion. Lease assets and liabilities are determined based on the lease term including those periods for which renewal options are considered reasonably certain to be exercised. Certain leases also include options to purchase the leased property, although we are unlikely to do so in most cases. The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company's leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement.
Components of lease expense incurred by the Company are as follows (in millions):
| | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 |
| Finance lease cost (cost resulting from lease payments): | | | |
| Interest expense on lease liabilities | $ | 1.4 | | | $ | 1.6 | |
| Amortization of right-of-use assets | 1.7 | | | 1.8 | |
| Operating lease cost | 13.4 | | | 13.4 | |
| Short-term lease expense | 2.1 | | | 1.7 | |
| | | |
| Sublease income | — | | | (0.1) | |
| Total lease cost | $ | 18.6 | | | $ | 18.4 | |
The following table represents future contractual lease liabilities for finance and operating leases at December 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | |
| Finance | | Operating | | Total |
| 2026 | $ | 3.1 | | | $ | 11.3 | | | $ | 14.4 | |
| 2027 | 2.6 | | | 9.6 | | | 12.2 | |
| 2028 | 2.0 | | | 8.2 | | | 10.2 | |
| 2029 | 2.0 | | | 7.2 | | | 9.2 | |
| 2030 | 1.9 | | | 4.4 | | | 6.3 | |
| Thereafter | 17.0 | | | 19.4 | | | 36.4 | |
| Total lease payments | 28.6 | | | 60.1 | | | 88.7 | |
| Less: Interest | 10.7 | | | 12.3 | | | 23.0 | |
| Present value of lease liabilities | $ | 17.9 | | | $ | 47.8 | | | $ | 65.7 | |
Weighted-average remaining lease term (in years) and discount rate are as follows:
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Weighted-average remaining lease term: | | | |
| Operating leases | 6.9 | | 6.7 |
| Finance leases | 12.9 | | 13.3 |
| Weighted-average discount rate: | | | |
| Operating leases | 6.39 | % | | 6.65 | % |
| Finance leases | 7.80 | % | | 7.74 | % |
Supplemental cash flow information related to leases are as follows (in millions):
| | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | |
| Operating cash flows from operating leases | $ | 13.6 | | | $ | 14.4 | |
| Operating cash flows from finance leases | 1.3 | | | 1.5 | |
| Leased assets obtained in exchange for new finance lease liabilities | 0.2 | | | 0.5 | |
Leased assets obtained in exchange for new operating lease liabilities | 11.5 | | | 11.3 | |
| | | |
Refer to the Consolidated Statements of Cash Flows for information on payments on financing lease obligations.
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.