LEASES
Leased facilities for office, research and development, storage and distribution purposes comprise approximately 95% of the total lease obligation. Lease terms vary based on the nature of operations and the market dynamics in each country; however, all leased facilities are classified as operating leases with remaining lease terms between one year and 14 years. Most leases contain specific renewal options for periods ranging between one year and 10 years where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Certain leases also contain termination options that provide the flexibility to terminate the lease ahead of its expiration with sufficient advance notice. Periods covered by an option to terminate the lease were included in the non-cancellable lease term when exercise of the option was determined not to be reasonably certain. Judgment is required in assessing whether renewal and termination options are reasonably certain to be exercised. Factors are considered such as contractual terms compared to current market rates, leasehold improvements expected to have significant value, costs to terminate a lease and the importance of the facility to operations. Costs determined to be variable and not based on an index or rate were not included in the measurement of real estate lease liabilities. These variable costs include real estate taxes, insurance, utilities, common area maintenance and other operating costs. BMS elected the practical expedient to not separate non-lease components from lease components in calculating the amounts of ROU assets and lease liabilities for all underlying asset classes. As the implicit rate on most leases is not readily determinable, an incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.
The remaining lease obligations are comprised of vehicles and a research and development facility operated by a third party under management’s direction. Vehicle lease terms vary by country with terms generally between one year and four years.
The following table summarizes the components of lease expense:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| Dollars in millions | 2025 | | 2024 | | 2023 |
| Operating lease cost | $ | 293 | | | $ | 290 | | | $ | 317 | |
| Variable lease cost | 90 | | | 74 | | | 79 | |
| Short-term lease cost | 18 | | | 23 | | | 20 | |
| Sublease income | (60) | | | (35) | | | (11) | |
| Total operating lease expense | $ | 341 | | | $ | 352 | | | $ | 405 | |
Operating lease right-of-use assets and liabilities were as follows:
| | | | | | | | | | | |
| December 31, |
| Dollars in millions | 2025 | | 2024 |
Other non-current assets(a) | $ | 1,582 | | | $ | 1,224 | |
| | | |
| Other current liabilities | 202 | | | 181 | |
| Other non-current liabilities | 1,826 | | | 1,370 | |
Total liabilities(a) | $ | 2,028 | | | $ | 1,551 | |
(a) Operating lease right-of-use assets and liabilities as of December 31, 2025 include the commencement of the San Diego lease for approximately $370 million.
Future lease payments for non-cancellable operating leases as of December 31, 2025 were as follows:
| | | | | |
| Dollars in millions | |
| 2026 | $ | 271 | |
| 2027 | 285 | |
| 2028 | 266 | |
| 2029 | 265 | |
| 2030 | 238 | |
| Thereafter | 1,245 | |
| Total future lease payments | 2,569 | |
| |
| Less imputed interest | (542) | |
| Total lease liability | $ | 2,028 | |
Right-of-use assets obtained in exchange for operating lease obligations were $518 million in 2025. Cash paid for amounts included in the measurement of operating lease liabilities was $282 million in 2025, $240 million in 2024 and $195 million in 2023.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Weighted average remaining lease term | 10 years | | 9 years |
| Weighted average discount rate | 5 | % | | 5 | % |