Lease Commitments

12 Months Ended

Jan. 03, 2026

The Company has operating and finance leases for certain of its distribution facilities, office space, land, mobile fleet, and equipment. Many of these leases are non-cancelable and typically have a defined initial lease term, and some provide options to renew at the Company’s election for specified periods of time. The majority of these leases have remaining lease terms of one to 15 years, some of which include one or more options to extend the leases for five years. Certain leases include provisions for escalating rent based on, among other things, contractually defined increases and/or changes in the Consumer Price Index (“CPI”). The known changes to lease payments are included in the lease liability at lease commencement. Unknown changes related to CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. In addition, a subset of vehicle lease cost is considered variable. Some leases require the Company to pay taxes, insurance, and maintenance expenses associated with the leased assets. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is a lease at inception and assesses lease classification as either operating or finance at lease inception or modification. Operating lease right-of use (“ROU”) assets and liabilities are presented separately on the consolidated balance sheets. Finance lease ROU assets are included in property and equipment, and the finance lease obligations are presented separately in the consolidated balance sheets. When a lease does not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company has also made an accounting policy election to not separate lease components from non-lease components related to its mobile fleet asset class.

The Company’s finance lease liabilities consist of leases related to real estate, equipment and vehicles. A majority of the Company’s finance leases relate to real estate. During fiscal 2017 and fiscal 2018, the Company entered into real estate financing transactions on certain of its warehouse facilities. These transactions were completed pursuant to sale-leaseback arrangements, and upon their completion, the Company entered into long-term leases on the properties having renewal options. The Company accounted for these transactions in accordance with the ASC 840, Leases, which was the lease accounting standard in effect for the Company at the inception of these arrangements. The Company recorded these transactions as finance lease liabilities on its consolidated balance sheet. Gains on these sale-leaseback transactions were deferred and are being recognized in earnings. As of January 3, 2026 and December 28, 2024, the remaining unrecognized deferred gains related to these transactions were $63.3 million and $67.2 million, respectively, and these deferred gains are being recognized in earnings on a straight-line basis. During fiscal 2025, 2024 and 2023, the Company recognized $3.9 million, $3.9 million, $3.9 million, respectively, of these deferred gains.

The following table presents the assets and liabilities related to the Company’s finance and operating leases as of January 3, 2026 and December 28, 2024:


		As of
Lease assets and liabilities		January 3, 2026		December 28, 2024
		(In thousands)
Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets	$	54,608	$	47,221
Finance lease right-of-use assets (1) (2)	Property and equipment, net	162,869		134,319
Total lease right-of-use assets		$	217,477	$	181,540

Liabilities
Current portion
Operating lease liabilities	Operating lease liabilities - current	$	8,969	$	8,478
Finance lease liabilities	Finance lease liabilities - current	22,348		12,541
Non-current portion
Operating lease liabilities	Operating lease liabilities - less current portion	47,075		40,114
Finance lease liabilities	Finance lease liabilities - less current portion	298,931		280,002
Total lease liabilities		$	377,323	$	341,135

(1) Finance lease right-of-use assets are presented net of accumulated amortization of $116.3 million and $112.3 million as of January 3, 2026 and December 28, 2024, respectively.

(2) During fiscal 2025, 2024 and 2023, the Company added fleet assets under finance leases of $44.6 million, $19.4 million and $19.9 million, respectively. These additions did not involve cash outlays and therefore are not included in “Property and equipment investments” within cash flows from investing activities on the Company’s consolidated statements of cash flows.

The components of lease expense were as follows:


(in thousands)	Fiscal Year Ended January 3, 2026		Fiscal Year Ended December 28, 2024		Fiscal Year Ended December 30, 2023

	(53 weeks)		(52 weeks)		(52 weeks)
Operating lease cost:
Operating lease cost	$	12,732	$	10,898	$	11,485
Sublease income	(3,766)		(3,582)		(3,334)
Total operating lease costs	$	8,966	$	7,316	$	8,151

Finance lease cost:
Amortization of right-of-use assets	$	19,755	$	18,692	$	16,493
Interest on lease liabilities	27,907		25,653		24,380
Total finance lease costs	$	47,662	$	44,345	$	40,873

Cash flow information related to leases was as follows:


(in thousands)	Fiscal Year Ended January 3, 2026		Fiscal Year Ended December 28, 2024		Fiscal Year Ended December 30, 2023

	(53 weeks)		(52 weeks)		(52 weeks)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	12,994	$	11,064	$	11,671
Operating cash flows from finance leases	27,907		25,653		24,380
Financing cash flows from finance leases	16,317		13,427		9,208

Non-cash supplemental cash flow information related to leases was as follows:


(in thousands)	Fiscal Year Ended January 3, 2026		Fiscal Year Ended December 28, 2024		Fiscal Year Ended December 30, 2023

	(53 weeks)		(52 weeks)		(52 weeks)
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	13,908	$	18,097	$	1,883
Finance leases	44,564		19,373		19,861

Supplemental balance sheet information for right-of-use assets related to leases was as follows:


	As of
Balance sheet information	January 3, 2026			December 28, 2024
	($ amounts in thousands)
Finance leases
Property and equipment, at cost	$	279,131		$	246,635
Accumulated depreciation	(116,262)			(112,316)
Property and equipment, net	$	162,869		$	134,319
Weighted Average Remaining Lease Term (in years)
Operating leases	7.27			8.34
Finance leases	15.83			17.68
Weighted Average Discount Rate
Operating leases	7.71		%	8.15		%
Finance leases	9.16		%	8.88		%

The major categories of the Company’s finance lease liabilities as of January 3, 2026 and December 28, 2024 are as follows:


	As of
Category	January 3, 2026		December 28, 2024
	(In thousands)
Equipment and vehicles	$	80,635	$	49,785
Real estate (1)	240,644		242,758
Total finance leases	$	321,279	$	292,543

(1) Amounts include $124.1 million and $125.1 million as of January 3, 2026 and December 28, 2024, respectively, for sale-leasebacks of real estate in fiscal 2019 and 2020 that did not qualify for sale treatment for accounting purposes.

Under the short-term lease exception provided within ASC 842, the Company does not record a lease liability or right-of-use asset for any lease that has a lease term of 12 months or less at commencement. Below is a summary of undiscounted finance and operating lease liabilities that have initial terms in excess of one year as of January 3, 2026. The table also includes a reconciliation of the future undiscounted cash flows to the present value of the finance and operating lease liabilities included in the consolidated balance sheets, including options to extend lease terms that are reasonably certain of being exercised.


	Operating leases		Finance leases
	(In thousands)
2026	$	12,852	$	49,138
2027	11,741		43,555
2028	10,945		43,822
2029	9,410		40,493
2030	7,454		36,478
Thereafter	22,932		441,493
Total lease payments	75,334		654,979
Less: imputed interest	(19,290)		(333,700)
Total	$	56,044	$	321,279

Lease Commitments

BlueLinx Holdings Inc. 10-K