LEASES Leases (Notes)

6 Months Ended

Jun. 30, 2019

Leases of Lessee Disclosure [Text Block]

LEASES

The Company leases facilities for office, research and development, and for 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 the Company's direction. Vehicle lease terms vary by country with terms generally between one and four years.

The following table summarizes the components of lease expense:



Dollars in Millions	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost	$	28		$	55
Variable lease cost	4			10
Short-term lease cost	5			10
Sublease income	(2		)	(2		)
Total operating lease expense	$	35		$	73

Operating lease right-of-use assets and liabilities were as follows as of June 30, 2019 and January 1, 2019:



Dollars in Millions	June 30, 2019		January 1, 2019
Other assets	$	509	$	543

Accrued and other current liabilities	67		40
Other non-current liabilities	516		548
Total liabilities	$	583	$	588

Future lease payments for non-cancellable operating leases as of June 30, 2019 were as follows:



Dollars in Millions	Operating Leases
2019 (excluding the six months ended June 30, 2019)	$	46
2020	85
2021	75
2022	70
2023	61
Thereafter	395
Total future lease payments	732

Less imputed interest	149
Total lease liability	$	583

Right-of-use assets obtained in exchange for new operating lease obligations were not material for the three and six months ended June 30, 2019. Cash paid for amounts included in the measurement of operating lease liabilities was $19 million for the six months ended June 30, 2019, net of a $33 million lease incentive received in the second quarter. The weighted-average remaining lease term was 11 years and the discount rate was 4% as of June 30, 2019.