LEASES AND OTHER COMMITMENTS

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

LEASES AND OTHER COMMITMENTS

Leases

There are two types of leases: finance and operating. Both types of leases have associated right-to-use assets and lease liabilities that are valued at the present value of the lease payments and recognized on the Unaudited Consolidated Statements of Financial Position. 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. 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 and 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 September 30, 2020 and December 31, 2019, operating right-to-use assets of $174 million and $197 million, respectively, are included as a part of "Other noncurrent assets" in the Unaudited Consolidated Statements of Financial Position and includes $8 million at both periods 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 Unaudited Consolidated Statements of Financial Position.

As of September 30, 2020, reconciliation of lease payments and operating lease liabilities is provided below:


(Dollars in millions)	Operating lease liabilities
Remainder of 2020	$	17
2021	56
2022	42
2023	29
2024	16
2025 and beyond	35
Total lease payments	195
Less: amounts of lease payments representing interest	18
Present value of future lease payments	177
Less: current obligations under leases	54
Long-term lease obligations	$	123

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 2021. 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:


		Third Quarter				First Nine Months
(Dollars in millions)		2020		2019		2020			2019
Lease costs:
	Operating lease costs	$	18	$	17	$	55		$	49
	Short-term lease costs	9		10		28			30
	Sublease income	(1)		—		(3)			(1)
	Total	$	26	$	27	$	80		$	78

Other operating lease information:
	Cash paid for amounts included in the measurement of lease liabilities	$	17	$	17	$	53		$	52
	Right-to-use assets obtained in exchange for new lease liabilities	$	10	$	15	$	40		$	36

	Weighted-average remaining lease term, in years					5			5
	Weighted-average discount rate					3.8		%	4.1		%

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
Remainder of 2020	$	—	$	185	$	52	$	57	$	17	$	129	$	440
2021	483		—		184		165		56		81		969
2022	743		—		174		103		42		88		1,150
2023	876		—		155		91		29		87		1,238
2024	241		—		135		94		16		100		586
2025 and beyond	3,337		—		1,407		1,959		35		1,139		7,877
Total	$	5,680	$	185	$	2,107	$	2,469	$	195	$	1,624	$	12,260

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.

The Company had various purchase obligations at September 30, 2020, totaling approximately $2.5 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 matters, 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.

The amount and timing of pension and other postretirement benefit payments included in other liabilities is dependent upon interest rates, health care cost trends, actual returns on plan assets, retirement and attrition rates of employees, continuation or modification of the benefit plans, and other factors. Such factors can significantly impact the amount and timing of any future contributions by the Company. Excess contributions are periodically made by management in order to keep the plans' funded status above 80 percent under the funding provisions of the Pension Protection Act to avoid partial benefit restrictions on accelerated forms of payment. The Company's U.S. defined benefit pension plans are not currently under any benefit restrictions. See Note 7, "Retirement Plans".

The resolution of uncertainties related to environmental matters included in other liabilities may have a material adverse effect on the Company's consolidated results of operations in the period recognized, however, because of the availability of legal defenses, the Company's preliminary assessment of actions that may be required, and, if applicable, the expected sharing of costs, management does not believe that the Company's liability for these environmental matters, individually or in the aggregate, will be material to the Company's consolidated financial position, results or operations, or cash flows. See Note 1, "Significant Accounting Policies", to the consolidated financial statements in Part II, Item 8 of the Company's 2019 Annual Report on Form 10-K for the Company's accounting policy for environmental costs and see Note 9, "Environmental Matters and Asset Retirement Obligations".

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.