NOTE 8. LEASES
Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of land, office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 50 years and may contain renewal options for periods up to 10 years at our discretion. Our equipment lease portfolio consists primarily of vehicles (including service vehicles), fork trucks and IT equipment. These leases typically range in term from two to four years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees other than our service vehicle fleet, which has a residual guarantee based on a percentage of the original cost declining over the lease term.
The components of our lease cost were as follows:
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| | Years ended December 31, |
| In millions | | 2025 | | 2024 | | 2023 |
| Operating lease cost | | $ | 184 | | | $ | 187 | | | $ | 165 | |
| Finance lease cost | | | | | | |
| Amortization of right-of-use asset | | 29 | | | 26 | | | 20 | |
| Interest expense | | 8 | | | 7 | | | 4 | |
| Short-term lease cost | | 33 | | | 41 | | | 24 | |
| Variable lease cost | | 18 | | | 17 | | | 14 | |
| Total lease cost | | $ | 272 | | | $ | 278 | | | $ | 227 | |
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Supplemental balance sheet information related to leases:
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| | December 31, | | |
| In millions | | 2025 | | 2024 | | Balance Sheet Location |
| Assets | | | | | | |
| Operating lease assets | | $ | 537 | | | $ | 532 | | | Other assets |
Finance lease assets (1) | | 126 | | | 121 | | | Property, plant and equipment, net |
| Total lease assets | | $ | 663 | | | $ | 653 | | | |
| | | | | | |
| Liabilities | | | | | | |
| Current | | | | | | |
| Operating lease liabilities | | $ | 138 | | | $ | 130 | | | Other accrued expenses |
| Finance lease liabilities | | 25 | | | 20 | | | Current maturities of long-term debt |
| Long-term | | | | | | |
| Operating lease liabilities | | 424 | | | 409 | | | Other liabilities |
| Finance lease liabilities | | 111 | | | 105 | | | Long-term debt |
| Total lease liabilities | | $ | 698 | | | $ | 664 | | | |
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(1) Finance lease assets were recorded net of accumulated amortization of $100 million and $80 million at December 31, 2025 and 2024. |
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Supplemental cash flow and other information related to leases:
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| | Years ended December 31, | | |
| In millions | | 2025 | | 2024 | | 2023 | | |
| Cash paid for amounts included in the measurement of lease liabilities | | | | | | | | |
| Operating cash flows from operating leases | | $ | 203 | | | $ | 176 | | | $ | 148 | | | |
| Operating cash flows from finance leases | | 8 | | | 7 | | | 4 | | | |
| Financing cash flows from finance leases | | 28 | | | 23 | | | 35 | | | |
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| Right-of-use assets obtained in exchange for lease obligations | | | | | | | | |
| Operating leases | | $ | 153 | | | $ | 268 | | | $ | 153 | | | |
| Finance leases | | 36 | | | 43 | | | 12 | | | |
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Additional information related to leases:
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| | December 31, |
| | 2025 | | 2024 | | |
| Weighted-average remaining lease term (in years) | | | | | | |
| Operating leases | | 5.6 | | 5.9 | | |
| Finance leases | | 6.6 | | 7.8 | | |
| | | | | | |
| Weighted-average discount rate | | | | | | |
| Operating leases | | 4.8 | % | | 4.6 | % | | |
| Finance leases | | 6.1 | % | | 6.0 | % | | |
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Following is a summary of the future minimum lease payments related to finance and operating leases with terms of more than one year at December 31, 2025, together with the net present value of the minimum payments:
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| In millions | | Finance Leases | | Operating Leases |
| 2026 | | $ | 33 | | | $ | 163 | |
| 2027 | | 29 | | | 133 | |
| 2028 | | 25 | | | 105 | |
| 2029 | | 19 | | | 68 | |
| 2030 | | 16 | | | 48 | |
| After 2030 | | 46 | | | 132 | |
| Total minimum lease payments | | 168 | | | 649 | |
| Interest | | (32) | | | (87) | |
| Present value of net minimum lease payments | | $ | 136 | | | $ | 562 | |
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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.