Leases
The components of lease expense are as follows: | | | | | | | | | | | | | | | | | | | | |
| | Years ended June 30, |
| ($ in millions) | | 2025 | | 2024 | | 2023 |
| Operating lease expense (1) | | $ | 167 | | | $ | 135 | | | $ | 127 | |
| Short-term and variable lease expense (2) | | 27 | | | 14 | | | 21 | |
| | | | | | |
| Finance lease expense | | | | | | |
| Amortization of right-of-use assets (2) | | 4 | | | 4 | | | 4 | |
| Interest on lease liabilities (3) | | 1 | | | 1 | | | 2 | |
| | | | | | |
| Total lease expense | | $ | 199 | | | $ | 154 | | | $ | 154 | |
(1)Included in both cost of sales and selling, general, and administrative expenses
(2)Included primarily in cost of sales
(3)Included in interest expense
The Company's leases do not contain any material residual value guarantees or material restrictive covenants. As of June 30, 2025, the Company does not have material lease commitments that have not commenced.
Supplemental balance sheet information related to leases:
| | | | | | | | | | | | | | | | | | | | |
| | | | June 30, |
| ($ in millions) | | Balance Sheet Location | | 2025 | | 2024 |
| Assets | | | | | | |
| Operating lease right-of-use assets, net | | Operating lease assets | | $ | 1,116 | | | $ | 567 | |
| Finance lease assets, net (1) | | Property, plant, and equipment, net | | 75 | | | 57 | |
| Total lease assets, net | | | | $ | 1,191 | | | $ | 624 | |
| | | | | | |
| Liabilities | | | | | | |
| Operating leases: | | | | | | |
| Current operating lease liabilities | | Other current liabilities | | $ | 240 | | | $ | 114 | |
| Non-current operating lease liabilities | | Operating lease liabilities | | 910 | | | 488 | |
| Finance leases: | | | | | | |
| Current finance lease liabilities | | Current portion of long-term debt | | 15 | | | 11 | |
| Non-current finance lease liabilities | | Long-term debt, less current portion | | 41 | | | 32 | |
| Total lease liabilities | | | | $ | 1,206 | | | $ | 645 | |
(1)Finance lease assets are recorded net of accumulated amortization of $15 million and $11 million as of June 30, 2025 and 2024, respectively.
Supplemental cash flow information related to leases:
| | | | | | | | | | | | | | | | | | | | |
| | Years ended June 30, |
| ($ in millions) | | 2025 | | 2024 | | 2023 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
| Operating cash flows from operating leases | | $ | 159 | | | $ | 127 | | | $ | 118 | |
| Operating cash flows from finance leases | | 1 | | | 1 | | | 2 | |
| Financing cash flows from finance leases | | 12 | | | 11 | | | 11 | |
| | | | | | |
| Lease assets obtained in exchange for new lease obligations: | | | | | | |
| Operating leases (1) | | $ | 639 | | | $ | 44 | | | $ | 26 | |
| Finance leases | | 20 | | | 3 | | | — | |
| Other non-cash modifications to lease assets: | | | | | | |
| Operating leases | | 20 | | | 73 | | | 33 | |
(1)Fiscal year 2025 primarily includes operating leases acquired in the Merger.
The following table presents the maturities of the Company's lease liabilities recorded on the consolidated balance sheets as of June 30, 2025:
| | | | | | | | | | | | | | |
| ($ in millions) | | Operating Leases | | Finance Leases |
| Fiscal year 2026 | | $ | 256 | | | $ | 17 | |
| Fiscal year 2027 | | 226 | | | 9 | |
| Fiscal year 2028 | | 194 | | | 5 | |
| Fiscal year 2029 | | 160 | | | 3 | |
| Fiscal year 2030 | | 107 | | | 3 | |
| Thereafter | | 429 | | | 30 | |
| Total lease payments | | 1,372 | | | 67 | |
| Less: imputed interest | | (222) | | | (11) | |
| Total lease liabilities | | $ | 1,150 | | | $ | 56 | |
The weighted-average remaining lease term and discount rate are as follows:
| | | | | | | | | | | | | | |
| | June 30, |
| | 2025 | | 2024 |
| Weighted-average remaining lease term (in years): | | | | |
| Operating leases | | 7.7 | | 7.2 |
| Finance leases | | 9.3 | | 10.5 |
| | | | |
| Weighted-average discount rate: | | | | |
| Operating leases | | 4.6 | % | | 4.1 | % |
| Finance leases | | 3.9 | % | | 3.0 | % |
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.