Zurn Elkay Water Solutions CorpZWS
Zurn Elkay Water Solutions Corp Leases Disclosure
Leases
The Company determines if a contract is (or contains) a lease at inception by evaluating whether the contract conveys the right to control the use of an identified asset. The Company has operating and finance leases primarily associated with real estate, automobiles and manufacturing and office equipment.
The Company has lease agreements that include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of the underlying assets. The term of the Company’s leases generally reflects the non-cancellable period of the lease. Some of the Company’s lease agreements include options to extend or terminate the lease, which are excluded from the minimum lease terms unless the Company is reasonably certain the option will be exercised. Lease expense for operating leases and amortization expense for finance leases is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets and are instead recognized on a straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company rents or subleases certain real estate to third parties, primarily related to exited facilities, with income offsetting restructuring expense. The sublease income related to these arrangements is not material to the consolidated financial statements.
Right-of-use (“ROU”) assets and liabilities are recognized in the consolidated balance sheets based on the present value of remaining lease payments over the lease term. Additionally, ROU assets include any lease payments made at or before the lease commencement date, any initial direct costs incurred, and are reduced by lease incentives received. As most of the Company’s leases do not provide an implicit rate, the present value of lease payments is determined using the Company’s incremental borrowing rate at the commencement date of the lease. Lease payments included in the measurement of the lease liabilities are comprised of fixed payments, variable payments that depend on an index or rate, and amounts probable to be paid if an option is reasonably certain to be exercised. Variable lease payments, typically based on usage of the asset or changes in an index or rate, are excluded from the lease liabilities and are recognized in the period in which the obligation for those payments is incurred.
ROU assets and lease liability balances recorded on the consolidated balance sheets are summarized as follows (in millions):
| Leases | Classification | December 31, 2025 | December 31, 2024 | |||||||||||||||||
| Assets: | ||||||||||||||||||||
| Operating ROU assets | $ | 52.4 | $ | 51.2 | ||||||||||||||||
| Finance ROU assets | 17.8 | 19.0 | ||||||||||||||||||
| Total ROU assets | $ | 70.2 | $ | 70.2 | ||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | $ | 14.7 | $ | 12.7 | ||||||||||||||||
| Finance | 0.9 | 0.8 | ||||||||||||||||||
| Non-current | ||||||||||||||||||||
| Operating | Operating lease liability | 42.0 | 43.3 | |||||||||||||||||
| Finance | 19.2 | 19.8 | ||||||||||||||||||
| Total lease liabilities | $ | 76.8 | $ | 76.6 | ||||||||||||||||
____________________
(1)Finance lease assets are recorded net of accumulated amortization of $4.4 million and $3.2 million as of December 31, 2025 and December 31, 2024, respectively.
The components of lease expense reported in the consolidated statements of operations are as follows (in millions):
| Year Ended | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Operating lease expenses (1) | $ | 17.0 | $ | 14.9 | $ | 13.8 | ||||||||||||||
| Finance lease expenses: | ||||||||||||||||||||
| Depreciation of finance ROU assets (1) | 1.5 | 1.6 | 1.7 | |||||||||||||||||
| Interest on lease liabilities (2) | 1.4 | 1.5 | 1.5 | |||||||||||||||||
| Total finance lease expense | 2.9 | 3.1 | 3.2 | |||||||||||||||||
| Variable and short-term lease expense (1) | 7.8 | 7.6 | 7.0 | |||||||||||||||||
| Total lease expense | $ | 27.7 | $ | 25.6 | $ | 24.0 | ||||||||||||||
____________________
(1)Included in cost of sales, selling, general and administrative expenses, and restructuring and other similar charges.
(2)Included in interest expense, net.
Future minimum lease payments under operating and finance leases as of December 31, 2025 are as follows (in millions):
| Years ending December 31, | Operating Leases | Finance Leases | ||||||||||||
| 2026 | $ | 17.8 | $ | 2.3 | ||||||||||
| 2027 | 17.6 | 2.4 | ||||||||||||
| 2028 | 11.2 | 2.4 | ||||||||||||
| 2029 | 7.4 | 2.4 | ||||||||||||
| 2030 | 3.9 | 2.5 | ||||||||||||
| Thereafter | 7.4 | 18.2 | ||||||||||||
| Total future minimum lease payments | 65.3 | 30.2 | ||||||||||||
| Less: Imputed interest | (8.6) | (10.1) | ||||||||||||
| Total lease liabilities | $ | 56.7 | $ | 20.1 | ||||||||||
The weighted-average remaining lease terms and discount rates for leases are as follows:
| Year Ended | ||||||||||||||||||||
| Lease Term and Discount Rate | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Weighted-average remaining lease terms (years): | ||||||||||||||||||||
| Operating leases | 4.4 | 5.0 | 5.9 | |||||||||||||||||
| Finance leases | 11.9 | 13.0 | 13.8 | |||||||||||||||||
| Weighted-average discount rate: | ||||||||||||||||||||
| Operating leases | 6.3 | % | 6.4 | % | 6.4 | % | ||||||||||||||
| Finance leases | 7.1 | % | 7.1 | % | 7.1 | % | ||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities are as follows (in millions):
| Year Ended | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Operating cash flows from operating leases | $ | 17.5 | $ | 14.1 | $ | 13.2 | ||||||||||||||
| Operating cash flows from finance leases | 1.4 | 1.5 | 1.5 | |||||||||||||||||
| Financing cash flows from finance leases | 0.8 | 0.8 | 0.8 | |||||||||||||||||
ROU assets obtained (disposed) in exchange for lease liabilities are as follows (in millions):
| Year Ended | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Operating leases | $ | 12.8 | $ | 18.9 | $ | 14.4 | ||||||||||||||
| Finance leases | 0.4 | (0.2) | 21.8 | |||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 6, 2024 | |
| 2022 | Feb 14, 2023 | |
| 2021 | Feb 9, 2022 | |
| 2020 | May 12, 2020 | |
| 2019 | May 14, 2019 | |
| 2018 | May 14, 2018 | |
| 2017 | May 17, 2017 | |
| 2016 | May 19, 2016 | |
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.