LEASES
The Company leases retail stores, manufacturing and distribution facilities, office space and equipment under operating and finance lease agreements. Operating leases are included in Operating lease right-of-use (ROU) assets, Current portion of operating lease liabilities and Long-term operating lease liabilities and finance leases are included in Other assets, Other accruals and Other long-term liabilities on the Consolidated Balance Sheets. The majority of the operating lease ROU asset and lease liability balances are related to the retail operations of the Paint Stores Group. The majority of the finance lease ROU asset and lease liability balances are related to a distribution facility within the Consumer Brands Group. Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s discretion and is not reasonably certain at lease commencement.
Operating and finance lease ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term. Most leases do not contain an incremental borrowing rate which is readily determinable from their associated contract. Therefore, the Company uses its estimated incremental borrowing rate on a collateralized basis which is derived from information available at the lease commencement date, giving consideration to publicly available credit rating data, other risk characteristics and the term of the lease in determining the present value of lease payments.
The Company does not account for lease and non-lease components of contracts separately for any underlying asset class. Some leases have variable payments, however, because they are not based on an index or rate, they are excluded from ROU assets and lease liabilities. Variable payments for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties. Variable payments for equipment leases relate primarily to hours, miles or other quantifiable usage factors which are not determinable at the time the lease agreement is entered into by the Company. The Company has made an accounting policy election by underlying asset class to not apply the recognition requirements of ASC 842 to short-term leases. As a result, certain leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheets and expense is recognized on a straight-line basis over the lease term.
Additional lease information is summarized below:
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| 2025 | | 2024 | | 2023 |
| Components of Lease Expense | | | | | |
Operating lease cost | $ | 591.7 | | | $ | 562.4 | | | $ | 528.5 | |
| | | | | |
| Finance lease cost: | | | | | |
| Amortization of right-of-use assets | $ | 4.4 | | | $ | 0.7 | | | $ | — | |
| Interest on lease liabilities | 10.8 | | | 1.5 | | | — | |
| Total | $ | 15.2 | | | $ | 2.2 | | | $ | — | |
| | | | | |
| Short-term lease cost | $ | 80.2 | | | $ | 69.6 | | | $ | 58.5 | |
| | | | | |
| Variable lease cost | $ | 120.4 | | | $ | 132.1 | | | $ | 104.1 | |
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| | | | | |
| Supplemental Cash Flow Information | | | | | |
| Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
| Operating cash outflows from operating leases | $ | 576.9 | | | $ | 545.5 | | | $ | 513.8 | |
| Operating cash outflows from finance leases | 6.0 | | | 0.2 | | | — | |
| Financing cash outflows from finance leases | 0.6 | | | 0.2 | | | — | |
| | | | | |
| Leased assets obtained in exchange for new lease liabilities: | | | | | |
| Operating leases | $ | 550.0 | | | $ | 526.9 | | | $ | 473.3 | |
| Finance leases | 1.5 | | | 188.2 | | | — | |
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Supplemental Balance Sheet Information | | | | | |
| Operating Leases: | | | | | |
| Operating lease right-of-use assets | $ | 1,995.2 | | | $ | 1,953.8 | | | $ | 1,887.4 | |
| Current portion of operating lease liabilities | 479.8 | | | 466.6 | | | 449.3 | |
| Long-term operating lease liabilities | 1,591.5 | | | 1,558.3 | | | 1,509.5 | |
| | | | | |
| Finance Leases: | | | | | |
| Other assets | $ | 184.5 | | | $ | 187.5 | | | $ | — | |
| Other accruals | 0.7 | | | 3.7 | | | — | |
| Other long-term liabilities | 194.7 | | | 185.6 | | | — | |
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| Other Supplemental Information | | | | | |
| Weighted average remaining lease term: | | | | | |
| Operating leases | 5.6 years | | 5.5 years | | 5.5 years |
| Finance leases | 43.0 years | | 43.4 years | | |
| | | | | |
| Weighted average discount rate: | | | | | |
| Operating leases | 4.5 | % | | 4.2 | % | | 3.8 | % |
| Finance leases | 5.7 | % | | 5.5 | % | | |
The following table reconciles the undiscounted cash flows for each of the next five years and thereafter related to the operating and finance lease liabilities recognized on the Consolidated Balance Sheets as of December 31, 2025. The reconciliation excludes short-term leases that are not recorded on the Consolidated Balance Sheets.
| | | | | | | | | | | |
| Operating Leases | | Finance Leases |
| 2026 | $ | 558.9 | | | $ | 11.9 | |
| 2027 | 473.9 | | | 8.7 | |
| 2028 | 382.1 | | | 8.9 | |
| 2029 | 290.0 | | | 9.1 | |
| 2030 | 202.9 | | | 9.4 | |
| Thereafter | 434.2 | | | 600.7 | |
| Total lease payments | 2,342.0 | | | 648.7 | |
| Amount representing interest | (270.7) | | | (453.3) | |
| Present value of lease liabilities | $ | 2,071.3 | | | $ | 195.4 | |
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.