Leases

12 Months Ended

Dec. 31, 2024

Note L: Leases

The Company has leases, primarily for equipment, railcars, fleet vehicles, office space, land, information technology equipment and software. The Company’s leases have remaining lease terms, inclusive of options to renew that the Company is reasonably certain to exercise, ranging from less than one year to 46 years. Some of the Company's leases include options to terminate the leases within one year.

Certain of the Company’s lease agreements include payments based upon variable rates, including, but not limited to, hours used, tonnage processed and factors related to indices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease cost are as follows:


years ended December 31 (in millions)	2024		2023		2022
Operating lease cost	$	76	$	77	$	73
Finance lease cost:
Amortization of right-of-use assets		26		21		18
Interest on lease liabilities		6		5		4
Variable lease cost		14		18		17
Short-term lease cost		46		46		45
Total lease cost	$	168	$	167	$	157

The Company has royalty agreements that are prescriptively excluded from the scope of ASC 842 and generally require royalty payments based on tons produced, tons sold or total sales dollars and also contain minimum payments. Royalty expense was $92 million, $86 million and $78 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The balance sheet classifications of operating and finance leases are as follows:


December 31 (in millions)	2024			2023
Operating leases:
Operating lease right-of-use assets	$	376		$	372

Current operating lease liabilities	$	56		$	53
Noncurrent operating lease liabilities		335			327
Total operating lease liabilities	$	391		$	380

Finance leases:
Property, plant and equipment	$	295		$	254
Accumulated depreciation		(83	)		(59	)
Property, plant and equipment, net	$	212		$	195

Other current liabilities	$	19		$	20
Other noncurrent liabilities		202			180
Total finance lease liabilities	$	221		$	200

The incremental borrowing rate ranged from 0.4% to 6.0% for the years ended December 31, 2024 and 2023. Weighted-average remaining lease terms and discount rates are as follows:


December 31		2024		2023
Weighted-average remaining lease terms (years):
Operating leases	11.0		11.7
Finance leases	18.1		18.3

Weighted-average discount rates:
Operating leases	4.6%		4.3%
Finance leases	3.3%		2.6%

Future lease payments as of December 31, 2024 are as follows:


	Operating			Finance
(in millions)	Leases			Leases
2025	$	72		$	26
2026		65			19
2027		53			18
2028		43			16
2029		38			15
Thereafter		234			202
Total lease payments		505			296
Less: imputed interest		(114	)		(75	)
Present value of lease payments		391			221
Less: current lease obligations		(56	)		(19	)
Total long-term lease obligations	$	335		$	202