LEASES
The Company determines whether a contract contains a lease at the inception of a contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We lease certain real estate, machinery, equipment, vehicles and office equipment for varying periods. Many of these leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that the Company will exercise such options. The incremental borrowing rate utilized to calculate our lease liabilities is based on the information available at commencement date, as most of the leases do not provide an implicit borrowing rate. Our operating lease agreements do not contain any material guarantees or restrictive covenants. The Company does not have any material finance leases or sublease activities. Short-term leases, defined as leases with initial terms of 12 months or less, are not reflected on the Consolidated Balance Sheets. Lease expense for such short-term leases is not material. The most significant assets in our leasing portfolio relate to real estate and vehicles. For purposes of calculating lease liabilities for such leases, we have combined lease and non-lease components.
The components of the Company’s total operating lease cost for the fiscal years ended June 30, 2025, 2024 and 2023, were as follows:
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| Fiscal years ended June 30 | 2025 | | 2024 | | 2023 |
| Operating lease cost | $ | 276 | | | $ | 252 | | | $ | 229 | |
Variable lease cost (1) | 81 | | | 91 | | | 79 | |
| Total lease cost | $ | 357 | | | $ | 343 | | | $ | 308 | |
(1)Includes primarily costs for utilities, common area maintenance, property taxes and other operating costs associated with operating leases that are not included in the lease liability and are recognized in the period in which they are incurred.
Supplemental balance sheet and other information related to leases is as follows:
| | | | | | | | | | | |
| As of June 30 | 2025 | | 2024 |
| Operating leases: | | | |
| Right-of-use assets (Other noncurrent assets) | $ | 925 | | $ | 875 |
| | | |
| Current lease liabilities (Accrued and other liabilities) | 255 | | 243 |
| Noncurrent lease liabilities (Other noncurrent liabilities) | 701 | | 666 |
| Total operating lease liabilities | $ | 956 | | $ | 909 |
| | | |
| Weighted average remaining lease term: |
| Operating leases | 6.0 years | | 6.0 years |
| | | |
| Weighted average discount rate: |
| Operating leases | 4.6 | % | | 4.5 | % |
At June 30, 2025, future payments of operating lease liabilities were as follows:
| | | | | |
| June 30, 2025 |
| 1 year | $ | 255 | |
| 2 years | 216 | |
| 3 years | 170 | |
| 4 years | 143 | |
| 5 years | 97 | |
| Over 5 years | 198 | |
| Total lease payments | 1,079 | |
| Less: Interest | (123) | |
| Present value of lease liabilities | $ | 956 | |
Total cash paid for amounts included in the measurement of lease liabilities was $280 and $255 for the fiscal years ended June 30, 2025 and 2024, respectively.
The right-of-use assets obtained in exchange for lease liabilities were $261 and $357 for the fiscal years ended June 30, 2025 and 2024, respectively.