Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

Leases

The Company has operating and finance leases for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 12 years, and some of which include options to terminate the leases within 1 month to 2 year(s). As of June 30, 2019, assets recorded under finance leases were $49 million, and accumulated depreciation associated with finance leases was $4 million.

The Company has elected the practical expedient not to separate lease components from non-lease components for all its underlying assets.

If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.

The components of lease expense for the six months ended June 30, 2019 were as follows:

(Dollars in millions)	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	$	6	$	11
Finance lease cost
Amortization of right-of-use assets	—		1
Interest on lease liabilities	1		1
Total finance lease cost	1		2
Short-term lease cost	—		—
Variable lease cost	—		—
Total lease cost	$	7	$	13

Other information related to leases for the six months ended June 30, 2019 was as follows:

Supplemental Cash Flows Information	Six months ended June 30, 2019
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	10
Operating cash flows used for finance leases	1
Financing cash flows used for finance leases	1
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	32
Finance leases	33

	As of
(Lease term and discount rate)	June 30, 2019
Weighted-average remaining lease term
Operating Leases	8
Finance Leases	11
Weighted-average discount rate
Operating leases	3.7	%
Finance leases	4.9	%

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

(Dollars in millions)	Operating Leases		Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	11	$	2
2020	20		4
2021	15		15
2022	13		3
2023	12		3
Thereafter	38		37
Total lease payments	109		64
Less imputed interest	16		18
Total lease liabilities	$	93	$	46

Leases obligations reported as of June 30, 2019 were as follows:

(Dollars in millions)	Operating Leases		Finance Leases
Other current liabilities	$	17	$	1
Lease liabilities - non current	75		33
Related party leases	1		12
Total lease liabilities	$	93	$	46

As of June 30, 2019, the Company has additional obligations relating to operating leases, primarily for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment, that have not yet commenced of $35 million. These operating leases will commence during 2019 with lease terms of 2 years to 15 years.

Leases

Leases

The Company has operating and finance leases for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment. The leases have remaining lease terms of 1 year to 15 years, some of which include options to extend the leases for up to 12 years, and some of which include options to terminate the leases within 1 month to 2 year(s). As of June 30, 2019, assets recorded under finance leases were $49 million, and accumulated depreciation associated with finance leases was $4 million.

The Company has elected the practical expedient not to separate lease components from non-lease components for all its underlying assets.

If the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate as the discount rate. The Company uses its best judgment when determining the incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term to the lease payments in a similar currency.

The components of lease expense for the six months ended June 30, 2019 were as follows:

(Dollars in millions)	Three months ended June 30, 2019		Six months ended June 30, 2019
Operating lease cost	$	6	$	11
Finance lease cost
Amortization of right-of-use assets	—		1
Interest on lease liabilities	1		1
Total finance lease cost	1		2
Short-term lease cost	—		—
Variable lease cost	—		—
Total lease cost	$	7	$	13

Other information related to leases for the six months ended June 30, 2019 was as follows:

Supplemental Cash Flows Information	Six months ended June 30, 2019
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	10
Operating cash flows used for finance leases	1
Financing cash flows used for finance leases	1
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	32
Finance leases	33

	As of
(Lease term and discount rate)	June 30, 2019
Weighted-average remaining lease term
Operating Leases	8
Finance Leases	11
Weighted-average discount rate
Operating leases	3.7	%
Finance leases	4.9	%

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

(Dollars in millions)	Operating Leases		Finance Leases
2019 (excluding the six months ended June 30, 2019)	$	11	$	2
2020	20		4
2021	15		15
2022	13		3
2023	12		3
Thereafter	38		37
Total lease payments	109		64
Less imputed interest	16		18
Total lease liabilities	$	93	$	46

Leases obligations reported as of June 30, 2019 were as follows:

(Dollars in millions)	Operating Leases		Finance Leases
Other current liabilities	$	17	$	1
Lease liabilities - non current	75		33
Related party leases	1		12
Total lease liabilities	$	93	$	46

As of June 30, 2019, the Company has additional obligations relating to operating leases, primarily for offices, manufacturing and research buildings, machinery, automobiles, data processing and other equipment, that have not yet commenced of $35 million. These operating leases will commence during 2019 with lease terms of 2 years to 15 years.