LEASES AND OTHER COMMITMENTS LEASES AND OTHER COMMITMENTS

12 Months Ended

Dec. 31, 2019

LEASES AND OTHER COMMITMENTS

Leases

On January 1, 2019, Eastman adopted ASU 2016-02 Leases and related releases under the modified retrospective optional transition method such that prior period financial statements have not been adjusted to reflect the impact of the new standard. The new standard establishes two types of leases: finance and operating. Both types of leases have associated right-to-use assets and lease liabilities that have been valued at the present value of the lease payments and recognized on the Consolidated Statements of Financial Position which did not result in an impact to retained earnings. The discount rate used in the measurement of a right-to-use asset and lease liability is the rate implicit in the lease whenever that rate is readily determinable. If the rate implicit in the lease is not readily determinable, the collateralized incremental borrowing rate is used.

Upon adoption, the Company elected the practical expedient package wherein: expired or existing contracts were not reassessed as to whether these contracts are or contained a lease; expired or existing contracts were not reassessed for operating or financing classification; and initial direct costs for existing leases were not reassessed. The Company also elected the practical expedient not to assess whether existing or expired land easements that were not previously accounted for under the prior standard are or contain a lease. Lastly, the Company elected the accounting policy not to apply the recognition and measurement requirements to short-term leases with a term of 12 months or less that do not include a bargain purchase option.

The Company has operating leases, as a lessee, with customary terms that do not include: significant variable lease payments; significant reasonably certain extensions or options required to be included in the lease term; restrictions; or other covenants for real property, rolling stock, and machinery and equipment. Real property leases primarily consist of office space and rolling stock leases primarily for railcars and fleet vehicles. At December 31, 2019, operating right-to-use assets of $197 million are included as a part of "Other noncurrent assets" in the Consolidated Statements of Financial Position and includes $8 million of assets previously classified as lease intangibles. Operating lease liabilities are included as a part of "Payables and other current liabilities" and "Other long-term liabilities" in the Consolidated Statements of Financial Position.

As of December 31, 2019, maturities of operating lease liabilities is provided below:



(Dollars in millions)	Operating lease liabilities
2020	$	62
2021	49
2022	38
2023	25
2024	14
2025 and beyond	30
Total lease payments	218
Less: amounts of lease payments representing interest	22
Present value of future lease payments	196
Less: current obligations under leases	55
Long-term lease obligations	$	141

There have been no material changes to the future minimum lease payments as of December 31, 2018 as accounted for under the previous lease standard.

The Company has operating leases, primarily leases for railcars, with terms that require the Company to guarantee a portion of the residual value of the leased assets upon termination of the lease that will expire beginning in first quarter 2020. Residual guarantee payments that become probable and estimable are recognized as rent expense over the remaining life of the applicable lease. Management's current expectation is that the likelihood of material residual guarantee payments is remote.

Lease costs during the period and other information is provided below:



		For year ended
(Dollars in millions)		December 31, 2019
Lease costs:
	Operating lease costs	$	70
	Short-term lease costs	40
	Sublease income	(2		)
	Total	$	108

Other operating lease information:
	Cash paid for amounts included in the measurement of lease liabilities	$	72
	Right-to-use assets obtained in exchange for new lease liabilities	54

	Weighted-average remaining lease term, in years	5
	Weighted-average discount rate	4.0		%

Debt and Other Commitments

Eastman's obligations are summarized in the following table.



(Dollars in millions)	Payments Due for
Period	Debt Securities		Credit Facilities and Other		Interest Payable		Purchase Obligations		Operating Leases		Other Liabilities		Total
2020	$	—	$	171	$	173	$	181	$	62	$	241	$	828
2021	483		—		186		156		49		81		955
2022	741		—		175		102		38		87		1,143
2023	840		—		156		91		25		87		1,199
2024	240		—		137		100		14		89		580
2025 and beyond	3,307		—		1,414		1,967		30		1,106		7,824
Total	$	5,611	$	171	$	2,241	$	2,597	$	218	$	1,691	$	12,529

Estimated future payments of debt securities assumes the repayment of principal upon stated maturity, and actual amounts and the timing of such payments may differ materially due to repayment or other changes in the terms of such debt prior to maturity.

Eastman had various purchase obligations at December 31, 2019 totaling approximately $2.6 billion over a period of approximately 30 years for materials, supplies, and energy incident to the ordinary conduct of business.

Amounts in other liabilities represent the current estimated cash payments required to be made by the Company primarily for pension and other postretirement benefits, environmental loss contingency reserves, accrued compensation benefits, uncertain tax liabilities, and commodity and foreign exchange hedging in the periods indicated. Due to uncertainties in the timing of the effective settlement of tax positions with respect to taxing authorities, management is unable to determine the timing of payments related to uncertain tax liabilities and these amounts are included in the "2025 and beyond" line item.

Guarantees and claims also arise during the ordinary course of business from relationships with customers, suppliers, joint venture partners, and other parties when the Company undertakes an obligation to guarantee the performance of others if specified triggering events occur. Non-performance under a contract could trigger an obligation of the Company. The Company's current other guarantees include guarantees relating to intellectual property, environmental matters, and other indemnifications and have arisen through the normal course of business. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of these claims, if they were to occur. These other guarantees have terms up to 30 years with maximum potential future payments of approximately $35 million in the aggregate, with none of these guarantees being individually significant to the Company's operating results, financial position, or liquidity. Management's current expectation is that future payment or performance related to non-performance under other guarantees is remote.