Leases

9 Months Ended

Sep. 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 10 years, and some of which include options to terminate the leases within 1 month to 2 year(s). As of September 30, 2019, assets recorded under finance leases included in Property, plant and equipment, net 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 nine months ended September 30, 2019 were as follows:

(Dollars in millions)	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	7	$	18
Finance lease cost
Amortization of right-of-use assets	1		2
Interest on lease liabilities	—		1
Total finance lease cost	1		3
Short-term lease cost	—		—
Variable lease cost	—		—
Total lease cost	$	8	$	21

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

Supplemental Cash Flows Information	Nine months ended September 30, 2019
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	16
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	46
Finance leases	33

	As of
(Lease term in years and discount rate)	September 30, 2019
Weighted-average remaining lease term
Operating Leases	8
Finance Leases	11
Weighted-average discount rate
Operating leases	3.9	%
Finance leases	4.9	%

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

(Dollars in millions)	Operating Leases		Finance Leases
2019 (excluding the nine months ended September 30, 2019)	$	6	$	1
2020	21		4
2021	16		15
2022	14		3
2023	13		3
Thereafter	49		37
Total lease payments	119		63
Less imputed interest	20		17
Total lease liabilities	$	99	$	46

Lease obligations reported as of September 30, 2019 were as follows:

(Dollars in millions)	Operating Leases		Finance Leases
Other current liabilities	$	18	$	1
Lease liabilities - non current	81		33
Related party leases	—		12
Total lease liabilities	$	99	$	46

As of September 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 $1 million. These operating leases will commence in 2019 and 2020 with lease terms of 3 years to 5 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 10 years, and some of which include options to terminate the leases within 1 month to 2 year(s). As of September 30, 2019, assets recorded under finance leases included in Property, plant and equipment, net 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 nine months ended September 30, 2019 were as follows:

(Dollars in millions)	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	7	$	18
Finance lease cost
Amortization of right-of-use assets	1		2
Interest on lease liabilities	—		1
Total finance lease cost	1		3
Short-term lease cost	—		—
Variable lease cost	—		—
Total lease cost	$	8	$	21

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

Supplemental Cash Flows Information	Nine months ended September 30, 2019
(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	16
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	46
Finance leases	33

	As of
(Lease term in years and discount rate)	September 30, 2019
Weighted-average remaining lease term
Operating Leases	8
Finance Leases	11
Weighted-average discount rate
Operating leases	3.9	%
Finance leases	4.9	%

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

(Dollars in millions)	Operating Leases		Finance Leases
2019 (excluding the nine months ended September 30, 2019)	$	6	$	1
2020	21		4
2021	16		15
2022	14		3
2023	13		3
Thereafter	49		37
Total lease payments	119		63
Less imputed interest	20		17
Total lease liabilities	$	99	$	46

Lease obligations reported as of September 30, 2019 were as follows:

(Dollars in millions)	Operating Leases		Finance Leases
Other current liabilities	$	18	$	1
Lease liabilities - non current	81		33
Related party leases	—		12
Total lease liabilities	$	99	$	46

As of September 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 $1 million. These operating leases will commence in 2019 and 2020 with lease terms of 3 years to 5 years.