Vestis CorpVSTS
Vestis Corp Leases Disclosure
LEASES:
The Company has lease arrangements primarily related to real estate, vehicles and equipment, which generally have terms of to 20 years. Finance leases primarily relate to vehicles. The Company assesses whether an arrangement is a lease, or contains a lease, upon inception of the related contract. A right-of-use asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (“short-term leases”).
The Company recognizes operating lease liabilities and operating lease right-of-use assets on its Consolidated Balance Sheets. Operating lease right-of-use assets represent the Company’s right to use the underlying assets for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease liabilities and operating lease right-of-use assets are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term. Deferred rent, tenant improvement allowances and prepaid rent are included in the operating lease right-of-use asset balances. Lease expense is recognized on a straight-line basis over the expected lease term. The Company has lease agreements with lease and non-lease components. Non-lease components are combined with the related lease components and accounted for as lease components for all classes of underlying assets.
Variable lease payments, which primarily consist of real estate taxes, common area maintenance charges, insurance costs and other operating expenses, are not included in the operating lease right-of-use asset or operating lease liability balances and are recognized in the period in which the expenses are incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain they will be exercised or not, respectively. Options to extend lease terms that are reasonably certain of exercise are recognized as part of the operating lease right-of-use asset and operating lease liability balances.
The Company is required to discount its future minimum lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, the incremental borrowing rate. As the Company’s leases typically do not provide an implicit rate, the present value of our lease liability is determined using an incremental borrowing rate based on the information available as of the lease commencement date.
The following table summarizes the location of the operating and finance leases in the Company’s Consolidated Balance Sheets (in thousands), as well as the weighted average remaining lease term and weighted average discount rate:
| Leases | Balance Sheet Location | October 3, 2025 | September 27, 2024 | |||||||||||||||||
| Assets: | ||||||||||||||||||||
| Operating | Operating Lease Right-of-use Assets | $ | 85,108 | $ | 73,530 | |||||||||||||||
| Finance | 144,288 | 131,041 | ||||||||||||||||||
| Total lease assets | $ | 229,396 | $ | 204,571 | ||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | Current operating lease liabilities | $ | 20,189 | $ | 19,886 | |||||||||||||||
| Finance | Current maturities of financing lease obligations | 35,234 | 31,347 | |||||||||||||||||
| Noncurrent | ||||||||||||||||||||
| Operating | Noncurrent Operating Lease Liabilities | 77,032 | 66,111 | |||||||||||||||||
| Finance | Noncurrent Financing Lease Obligations | 131,071 | 115,325 | |||||||||||||||||
| Total lease liabilities | $ | 263,526 | $ | 232,669 | ||||||||||||||||
| Weighted average remaining lease term (in years) | ||||||||||||||||||||
| Operating leases | 5.8 | 6.1 | ||||||||||||||||||
| Finance leases | 5.8 | 5.7 | ||||||||||||||||||
| Weighted average discount rate | ||||||||||||||||||||
| Operating leases | 6.9 | % | 6.1 | % | ||||||||||||||||
| Finance leases | 4.7 | % | 4.6 | % | ||||||||||||||||
The following table summarizes the location of lease related costs in the Consolidated and Combined Statements of Income (in thousands):
| Fiscal Year Ended | ||||||||||||||||||||||||||
| Lease Cost | Income Statement Location | October 3, 2025 | September 27, 2024 | September 29, 2023 | ||||||||||||||||||||||
Operating lease cost: | ||||||||||||||||||||||||||
| Fixed lease costs | Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses | $ | 24,847 | $ | 23,359 | $ | 23,119 | |||||||||||||||||||
| Variable lease costs | Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses | 12,974 | 10,447 | 9,888 | ||||||||||||||||||||||
| Short-term lease costs | Cost of services provided (exclusive of depreciation and amortization) / Selling, general and administrative expenses | 7,171 | 8,698 | 8,175 | ||||||||||||||||||||||
Finance lease cost(1): | ||||||||||||||||||||||||||
| Amortization of right-of-use-assets | Depreciation and amortization | 33,747 | 31,647 | 30,360 | ||||||||||||||||||||||
| Interest on lease liabilities | Interest Expense, net | 7,107 | 5,784 | 4,174 | ||||||||||||||||||||||
| Net lease cost | $ | 85,846 | $ | 79,935 | $ | 75,716 | ||||||||||||||||||||
__________________
(1)Excludes variable lease costs, which are immaterial.
Supplemental cash flow information related to leases for the periods reported is as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| October 3, 2025 | September 27, 2024 | September 29, 2023 | |||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
Operating cash flows from operating leases(1) | $ | 25,224 | $ | 19,871 | $ | 24,208 | |||||||||||
| Operating cash flows from finance leases | 7,107 | 5,784 | 4,174 | ||||||||||||||
| Financing cash flows from finance leases | 34,496 | 30,608 | 27,601 | ||||||||||||||
| Lease assets obtained in exchange for lease obligations: | |||||||||||||||||
| Operating leases | 30,441 | 35,997 | 12,640 | ||||||||||||||
| Finance leases | 55,625 | 44,916 | 42,581 | ||||||||||||||
__________________
(1)For fiscal 2025, excludes cash paid for variable and short-term lease costs of $13.0 million and $7.2 million, respectively, that are not included within the measurement of lease liabilities. For fiscal 2024, excludes cash paid for variable and short-term lease costs of $10.4 million and $8.7 million, respectively, that are not included within the measurement of lease liabilities. For fiscal 2023, excludes cash paid for variable and short-term lease costs of $9.9 million and $8.2 million, respectively, that are not included within the measurement of lease liabilities. Additionally, for fiscal 2025 and 2024, includes $0.1 million and $4.5 million, respectively, of cash received for reimbursements of tenant improvement allowances.
Future minimum lease payments under non-cancelable leases as of October 3, 2025 are as follows (in thousands):
| Operating leases | Finance leases | Total | |||||||||||||||
| 2026 | $ | 27,921 | $ | 42,293 | $ | 70,214 | |||||||||||
| 2027 | 24,505 | 38,710 | 63,215 | ||||||||||||||
| 2028 | 20,733 | 33,196 | 53,929 | ||||||||||||||
| 2029 | 16,118 | 27,875 | 43,993 | ||||||||||||||
| 2030 | 11,266 | 43,643 | 54,909 | ||||||||||||||
| Thereafter | 25,719 | 6,159 | 31,878 | ||||||||||||||
| Total future minimum lease payments | $ | 126,262 | $ | 191,876 | $ | 318,138 | |||||||||||
| Less: Interest | (29,041) | (25,571) | (54,612) | ||||||||||||||
| Present value of lease liabilities | $ | 97,221 | $ | 166,305 | $ | 263,526 | |||||||||||
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.