We lease certain manufacturing facilities, warehouses/distribution centers, office space, land, vehicles, and equipment. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. Leases with an initial term of 12 months or less are not recorded in the Consolidated Balance Sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. The Company had operating lease costs of approximately $224 million, $216 million and $235 million for the years ended December 31, 2025, 2024 and 2023, respectively.

At December 31, 2025 and 2024, we have no material leases classified as financing leases. We have approximately $999 million of non-cancellable operating lease commitments, excluding variable consideration at December 31, 2025 and $1 billion at December 31, 2024, respectively. The undiscounted annual future minimum lease payments are summarized by year in the table below.


Maturity of Lease Liabilities	Operating Leases (in millions)
2026	$	214
2027	192
2028	158
2029	132
2030	105
Thereafter	197
Total lease payments	$	999
Less: interest	$	164
Present value of lease liabilities	$	836

The long-term portion of the lease liabilities included in the amounts above is $669 million as of December 31, 2025. The remainder of our lease liabilities are included in other current liabilities in the Consolidated Balance Sheets.

During the year ended December 31, 2025 the weighted average remaining lease term and weighted average discount rate for operating leases was 6 years and 6%. The weighted average remaining lease term and weighted average discount rate was 6 years and 6% for the year ended December 31, 2024.

During the year ended December 31, 2025 the cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $226 million. The right of use assets obtained in exchange for new liabilities was $127 million for the year ended December 31, 2025.

During the year ended December 31, 2024 the cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $206 million. The right of use assets obtained in exchange for new liabilities was $268 million for the year ended December 31, 2024.

As the Company's lease agreements normally do not provide an implicit interest rate, we apply the Company's incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. Relevant information used in determining the Company's incremental borrowing rate includes the duration of the lease, location of the lease, and the Company's credit risk relative to risk-free market rates.

Many of our leases include renewal options that can extend the lease term. The execution of those renewal options is at our sole discretion and reflected in the lease term when they are reasonably certain to be exercised.

Certain leases also include options to purchase the underlying asset at fair market value. If leased assets have leasehold improvements, typically the depreciable life of those leasehold improvements are limited by the expected lease term. Additionally, certain lease agreements include lease payment adjustments for inflation.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants, except for synthetic leases. For additional information, see Synthetic lease arrangements section below.

We rent or sublease certain real estate to third parties. Our sublease portfolio primarily consists of operating leases within our warehouses, resulting in a nominal amount of sublease income for the years ended December 31, 2025, 2024 and 2023, respectively.

In the fourth quarter of 2025, the Company sold and leased back a non-core property for net proceeds of approximately $35 million. The initial total annual rent for the property is approximately $3 million per year over an initial 15 year lease term and is subject to annual rent increases. Under the terms of the lease agreement, the Company is responsible for all taxes, insurance and utilities and is required to adequately maintain the property for the lease term. The Company has four sequential 5-year renewal options.

recorded the sale of the property, which resulted in a gain of approximately $13 million recorded in selling, general and administrative expense in the Consolidated Statements of Income (Loss) for the twelve months ended December 31, 2025. The related land and building were removed from property, plant and equipment, net and the appropriate right-of-use asset and lease liabilities of approximately $31 million were recorded in the Consolidated Balance Sheets at the time of the transaction in the fourth quarter of 2025.

We have a number of synthetic lease arrangements with financial institutions for non-core properties. The leases contain provisions for options to purchase, extend the original term for additional periods or return the property. As of December 31, 2025, these arrangements include residual value guarantees of up to approximately $504 million that could potentially come due in future periods. We do not believe it is probable that any material amounts will be owed under these guarantees. Therefore, no material amounts related to the residual value guarantees are included in the lease payments used to measure the right-of-use assets and lease liabilities. The residual value guarantee amounted to $405 million as of December 31, 2024.

The majority of these leases are classified as operating leases. We have assessed the reasonable certainty of these provisions to determine the appropriate lease term. The leases were measured using our incremental borrowing rate and are included in our right of use assets and lease liabilities in the Consolidated Balance Sheets. Rental payments are calculated at the applicable reference rate plus a margin. The impact to the Consolidated Balance Sheets and Consolidated Statements of Income (Loss) is nominal.