Leases
We have operating leases primarily for real estate, vehicles, and equipment. We have finance leases primarily for equipment. Our leases have remaining lease terms from less than one year to approximately 15 years.
The components of lease expense were (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
Operating lease expense (1) | | $ | 115 | | | $ | 110 | | | $ | 100 | |
Variable lease expense (2) | | 21 | | | 20 | | | 19 | |
| Finance lease expense | | | | | | |
| Amortization of right-of-use assets | | 6 | | | 8 | | | 5 | |
| Interest on lease liabilities | | — | | | — | | | 1 | |
| Total lease expense | | $ | 142 | | | $ | 138 | | | $ | 125 | |
(1) Operating lease expense includes short-term lease expense, which was not material.
(2) Variable lease expense includes sublease income, which was not material.
Supplemental balance sheet information related to leases consists of:
| | | | | | | | | | | |
| 2025 | | 2024 |
| Weighted average remaining lease term | | | |
| Operating leases | 6.0 years | | 6.4 years |
| Finance leases | 3.5 years | | 3.7 years |
| Weighted average discount rate | | | |
| Operating leases | 3.81 | % | | 3.72 | % |
| Finance leases | 3.73 | % | | 2.77 | % |
Undiscounted maturities of lease liabilities as of September 30, 2025, were (in millions):
| | | | | | | | | | | | | | |
| | Finance Leases | | Operating Leases |
| 2026 | | $ | 2 | | | $ | 110 | |
| 2027 | | 2 | | | 94 | |
| 2028 | | 2 | | | 74 | |
| 2029 | | — | | | 53 | |
| 2030 | | — | | | 40 | |
| Thereafter | | — | | | 102 | |
| Total undiscounted lease payments | | $ | 6 | | | $ | 473 | |
| Less: Imputed interest | | — | | | (50) | |
| Total lease liabilities | | $ | 6 | | | $ | 423 | |
As of September 30, 2025, we have additional operating leases for facilities that have not yet commenced with undiscounted lease obligations of approximately $2 million. These leases will commence in fiscal 2026.
Supplemental cash flow information related to leases consists of (in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Cash paid for amounts included in the measurement of lease liabilities | | | | | |
| Operating cash flows from operating leases | $ | 117 | | | $ | 110 | | | $ | 102 | |
| Financing cash flows from finance leases | 6 | | | 10 | | | 6 | |
| Right-of-use assets obtained in exchange for lease obligations | | | | | |
| Operating leases | $ | 68 | | | $ | 163 | | | $ | 93 | |
| Financing leases | — | | | 9 | | | — | |
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.