Contracts are assessed by the Company to determine if the contract conveys the right to control an identified asset in exchange for consideration during a period of time. The Company classifies all identified leases as either operating or finance leases. Contracts that contain leases are assessed to determine if the consideration in the contract is related to a lease component, non-lease component or other components not related to the lease. Lease components are recorded as right-of-use (“ROU”) assets and lease liabilities while any non-lease component is expensed as incurred. The consideration in the contract related to other components not related to the lease is allocated among the lease component and the non-lease component, as applicable, based on the stand-alone selling price of the lease and non-lease components.

Certain lease contracts may contain an option to extend or terminate the lease. The Company considers the economic impact of extension and termination options by contract. If the Company concludes it is reasonably certain an option will be exercised, that option is included in the lease term and impacts the amount recorded as an ROU asset and lease liability at inception of the contract.

ROU assets are calculated as the related lease liability adjusted for lease incentives, any initial direct costs, prepayments and the effect of escalating lease payments on period expense. During the six months ended June 30, 2026, the Company recorded $72 million and $38 million of new ROU assets obtained in exchange for operating lease obligations and financing lease obligations, respectively, of which $53 million of the operating leases and $35 million of the finance leases were acquired in the Acquisition. The Company also acquired a below market lease in the Acquisition, resulting in the recognition of a favorable lease asset of $36 million. During the six months ended June 30, 2025, the Company recorded $1 million of new ROU assets obtained in exchange for operating lease obligations and no financing lease obligations.

The Company's lease liability is determined by discounting the future cash flows over the lease period using incremental borrowing rates. The incremental borrowing rates are determined using rates specific to the term of the lease, the economic environments where lease activity is concentrated and the value of the lease portfolio, and assuming full collateralization of the loans. Lease liabilities are classified between current and non-current liabilities based on the terms of the underlying leases.

The balances for the operating and finance leases where the Company is the lessee are presented as follows within the Company’s Condensed Consolidated Balance Sheets (dollars in millions):

The components of lease expense were as follows within the Company’s Condensed Consolidated Statements of Comprehensive Income (dollars in millions):

Other information related to leases where the Company is the lessee was as follows:

The following table reconciles future undiscounted cash flows for operating leases and financing leases to total lease liabilities as of June 30, 2026 (dollars in millions):