Leases
We are party to operating leases for the majority of our manufacturing sites, offices, engineering and lab sites, stocking locations, warehouses, automobiles, and certain equipment. Certain real estate leases include variable rental payments which adjust periodically based on inflation. Other variable amounts paid under operating leases, such as taxes and common area maintenance, are charged to selling, general and administrative expenses as incurred. Generally, lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Total operating lease costs were as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| (in millions) | 2025 | | 2024 | | 2023 |
| Operating lease cost: | | | | | |
| Selling, general and administrative expenses | $ | 82 | | | $ | 69 | | | $ | 57 | |
| Cost of goods sold | 19 | | | 16 | | | 20 | |
Total operating lease costs (1) | $ | 101 | | | $ | 85 | | | $ | 77 | |
(1) Total operating lease costs include variable lease costs of $18 million, $17 million, and $22 million for the years ended December 31, 2025, 2024, and 2023, respectively.
The following table summarizes the carrying amounts of our operating leased assets and liabilities along with key inputs used to discount our lease liabilities:
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| | | December 31, |
| (in millions, except weighted-average data) | Financial Statement Line Item | | 2025 | | 2024 |
| Operating lease assets | Other assets | | $ | 327 | | | $ | 248 | |
| Operating lease liabilities - current | Accrued liabilities | | $ | 57 | | | $ | 51 | |
| Operating lease liabilities - non-current | Other liabilities | | $ | 289 | | | $ | 212 | |
| Weighted-average remaining term | | | 6.89 years | | 5.95 years |
| Weighted-average incremental borrowing rate | | | 6.36 | % | | 6.08 | % |
The following table summarizes our future minimum lease payments under our non-cancelable leases as of December 31, 2025:
| | | | | |
| (in millions) | Commitments |
| 2026 | $ | 72 | |
| 2027 | 70 | |
| 2028 | 62 | |
| 2029 | 48 | |
| 2030 | 40 | |
| Thereafter | 137 | |
| Total lease payments | 429 | |
| Less: Imputed interest | (83) | |
| Present value of operating lease liabilities | $ | 346 | |
Supplemental cash flow information related to operating leases follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| (in millions) | 2025 | | 2024 | | 2023 |
| Cash paid for operating lease liabilities | $ | 69 | | | $ | 41 | | | $ | 36 | |
Non-cash activities: operating lease assets obtained in exchange for new operating lease liabilities (1) | $ | 126 | | | $ | 116 | | | $ | 39 | |
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(1) The year ended December 31, 2024 includes $61 million of operating lease assets acquired from the Snap One acquisition.
As of December 31, 2025, we have additional operating leases that have not yet commenced. Obligations under these leases are not material. Additionally, as a lessor, we lease all or a portion of certain owned and subleased properties. Rental income for the years ended December 31, 2025, 2024, and 2023 was not material.