LEASE COMMITMENTSAt the commencement date of a lease, the company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term, including variable lease payments that are determined to be probable. The lease liability includes lease component fees, while non-lease component fees are expensed as incurred for all asset classes. The company includes options to extend or terminate a lease in the lease term when it is reasonably certain that we will exercise that option. When a contract excludes an implicit rate, the company utilizes an incremental borrowing rate based on information available at the lease commencement date including lease term and geographic region. The initial valuation of the right-of-use (“ROU”) asset includes the initial measurement of the lease liability, lease payments made in advance of the lease commencement date and initial direct costs incurred by the company and excludes lease incentives.
Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the Consolidated Balance Sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term.
The company leases warehouse space, office facilities and equipment under operating leases. The company had operating lease costs of $27.7 million, $26.2 million and $24.5 million in fiscal 2025, 2024 and 2023 respectively, including short-term lease expense and variable lease costs, which were not material.
The following table provides information about the company's operating leases (in thousands):
| | | | | | | | | | | |
| Jan 3, 2026 | | Dec 28, 2024 |
| Operating lease right-of-use assets: | | | |
| Other assets | $ | 109,942 | | | $ | 82,377 | |
| | | |
| | | |
| Operating lease liabilities: | | | |
| Accrued expenses | 19,522 | | | 17,829 | |
| Other non-current liabilities | 94,257 | | | 67,478 | |
| Total operating lease liabilities | $ | 113,779 | | | $ | 85,307 | |
Future operating lease payments for each of the next five years is as follows (in thousands):
| | | | | |
| 2026 | $ | 24,010 | |
| 2027 | 21,185 | |
| 2028 | 18,739 | |
| 2029 | 16,035 | |
| 2030 | 12,339 | |
| 2031 and thereafter | 41,289 | |
| Total future lease commitments | 133,597 | |
| Less: Imputed interest | 19,818 | |
| Present value of operating lease liabilities | $ | 113,779 | |
Other information related to the company's operating leases is as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Supplemental cash flow information: | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases | $ | 23,792 | | | $ | 21,328 | | | $ | 20,175 | |
| Right-of-use assets obtained in exchange for lease obligations | 20,608 | | | 15,958 | | | 10,623 | |
| | | | | | | | | | | |
| Jan 3, 2026 | | Dec 28, 2024 |
| Weighted-average remaining lease term | 7.1 years | | 6.2 years |
| Weighted-average discount rate | 4.5 | % | | 4.1 | % |
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.