LEASES

The Company leases facilities for office, research and development, and storage and distribution purposes, comprising approximately 90% of the total lease obligation. Lease terms vary based on the nature of operations and the market dynamics in each country; however, all leased facilities are classified as operating leases with remaining lease terms between one and 20 years. Most leases contain specific renewal options for periods ranging between one and 10 years where notice to renew must be provided in advance of lease expiration or automatic renewals where no advance notice is required. Periods covered by an option to extend the lease were included in the non-cancellable lease term when exercise of the option was determined to be reasonably certain. Certain leases also contain termination options that provide the flexibility to terminate the lease ahead of its expiration with sufficient advance notice. Periods covered by an option to terminate the lease were included in the non-cancellable lease term when exercise of the option was determined not to be reasonably certain. Judgment is required in assessing whether renewal and termination options are reasonably certain to be exercised. The Company considers factors such as contractual terms compared to current market rates, leasehold improvements expected to have significant value, costs to terminate a lease and the importance of the facility to the Company’s operations. Costs determined to be variable and not based on an index or rate were not included in the measurement of real estate lease liabilities. As most leases do not provide an implicit rate, the Company's incremental borrowing rate was applied on a portfolio approach to discount its real estate lease liabilities.

The remaining 10% of the Company’s total lease obligation is comprised of vehicles used primarily by the Company’s salesforce, and an R&D facility operated by a third party under BMS direction. Vehicle lease terms vary by country with terms generally between one and four years.

The following table summarizes the components of lease expense for the three months ended March 31, 2019:



Dollars in Millions	2019
Operating lease cost	$	27
Variable lease cost	6
Short-term lease cost	5
Sublease income	—
Total operating lease expense	$	38

Operating lease right-of-use assets and liabilities were as follows as of March 31, 2019 and January 1, 2019:



Dollars in Millions	March 31, 2019		January 1, 2019
Other assets	$	527	$	543

Accrued liabilities	40		40
Pension and other liabilities	529		548
Total liabilities	$	569	$	588

As of December 31, 2018, annual minimum rental commitments for non-cancellable operating leases were approximately $100 million in each of the next five years and an aggregate $200 million thereafter.

Future lease payments for non-cancellable operating leases as of March 31, 2019 were as follow:



Dollars in Millions	Operating Leases
2019 (excluding the three months ended March 31, 2019)	$	35
2020	86
2021	76
2022	70
2023	62
Thereafter	395
Total future lease payments	724

Less imputed interest	155
Total lease liability	$	569

Right-of-use assets obtained in exchange for new operating lease obligations were not material for the three months ended March 31, 2019. Other information related to operating leases for the three months ended March 31, 2019 was as follows:



Dollars in Millions, except lease term and discount rate
Cash paid for amounts included in the measurement of operating lease liabilities	$	29
Weighted-average remaining lease term (in years)	11
Weighted-average discount rate	4		%