The Company leases office space, warehouses, vehicles, and equipment. Leases have remaining lease terms of 1 year to 15 years, some of which have renewal and termination options. Termination options are exercisable at the Company’s option. The lease terms used to recognize ROU assets and lease liabilities include periods covered by options to extend the lease where the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.

The Company determines if an arrangement meets the definition of a lease at inception. For both operating and financing lease ROU assets, any initial direct costs and prepayments less lease incentives are included in the initial measurement. Lease terms include options to renew or terminate the lease when it is reasonably certain the Company will exercise such options. As most of the leases do not include an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or SG&A, depending on the underlying nature of the leased assets. Finance lease expense consists of amortization of ROU assets and interest expense on lease liabilities. Amortization expense related to finance lease ROU assets is included in cost of goods sold or SG&A, depending on the nature of the leased assets, while interest expense is included in interest expense, net

Prior to fiscal 2026, the Company did not have finance leases that were considered material to the consolidated and combined financial statements. During fiscal 2026, the Company assumed finance leases as part of the acquisition of the Sitem Group, resulting in material finance lease assets and liabilities presented on the face of the consolidated and combined financial statements beginning in fiscal 2026.

The Company leases certain property and equipment from third parties under non-cancellable operating lease agreements. Certain lease agreements require the Company to pay property taxes, maintenance and insurance. Under Topic 842, the Company elected the practical expedient to account for lease and non-lease components as a single component for all asset classes. Certain leases include variable lease payments based on usage, an index, or a rate.

The components of lease expense for fiscal 2026, fiscal 2025, and fiscal 2024 were as follows:


(In millions)	2026		2025		2024
Operating lease cost	$	14.3	$	11.4	$	10.1
Finance lease cost:
Amortization of right-of-use asset		2.5		-		-
Interest expense		0.2		-		-
Short-term lease cost		1.3		3.0		2.6
Variable lease cost		3.7		3.7		2.3
Total lease cost	$	22.0	$	18.1	$	15.0

Supplemental cash flow and other information related to the Company’s leases as of and for the fiscal years ended May 31, 2026, May 31, 2025, and May 31, 2024 is provided below:


	2026						2025						2024
(Dollars in millions)	Operating Leases			Finance Leases			Operating Leases			Finance Leases			Operating Leases			Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	10.7		$	0.2		$	7.9		$	-		$	6.7		$	-
Financing cash flows	$	-		$	2.6		$	-		$	-		$	-		$	-
ROU assets obtained in exchange for lease liabilities	$	19.9		$	8.2		$	8.0		$	-		$	4.4		$	-
Weighted-average remaining lease term (in years)		10.82			3.25			12.53			-			13.53			-
Weighted-average discount rate		3.49	%		2.11	%		3.58	%		0.00	%		3.48	%		0.00	%

Future minimum lease payments for non-cancelable leases having an initial or remaining term in excess of one year at May 31, 2026, were as follows:


(In millions)	Operating Leases			Finance Leases
2027	$	13.2		$	3.0
2028		12.2			2.8
2029		11.1			1.6
2030		10.0			0.8
2031		8.7			0.5
Thereafter		51.6			-
Total	$	106.8		$	8.7
Less: imputed interest		(17.7	)		(0.3	)
Present value of lease liabilities	$	89.1		$	8.4