LEASES AND OTHER COMMITMENTS LEASES AND OTHER COMMITMENTS

12 Months Ended

Dec. 31, 2023

LEASES AND OTHER COMMITMENTS

Leases

There are two types of leases: financing and operating. Both types of leases have associated right-to-use assets and lease liabilities that are valued at the net present value of the lease payments and recognized on the 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 December 31, 2023 and 2022, right-to-use assets for operating leases of $180 million and $211 million, respectively, are included as a part of "Other noncurrent assets" on the Consolidated Statements of Financial Position. At both December 31, 2023 and 2022, the operating right-to-use assets include $3 million of assets previously classified as lease intangibles and $5 million and $6 million of prepaid lease assets, respectively. Operating lease liabilities are included as a part of "Payables and other current liabilities" and "Other long-term liabilities" on the Consolidated Statements of Financial Position. As of December 31, 2023, financing leases were not material to the Company's financial statements.

As of December 31, 2023, reconciliation of lease payments and operating lease liabilities is provided below:


(Dollars in millions)	Operating lease liabilities
2024	$	52
2025	43
2026	32
2027	21
2028	13
2029 and beyond	26
Total lease payments	187
Less: amounts of lease payments representing interest	15
Present value of future lease payments	172
Less: current obligations under leases	52
Long-term lease obligations	$	120

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 second quarter 2024. 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:


(Dollars in millions)		2023		2022		2021
Lease costs:
	Operating lease costs	$	86	$	67	$	71
	Short-term lease costs	23		45		40
	Sublease income	(4)		(13)		(4)
	Total	$	105	$	99	$	107


		December 31,
(Dollars in millions)		2023			2022			2021
Other operating lease information:
	Cash paid for amounts included in the measurement of lease liabilities	$	85		$	67		$	69
	Right-to-use assets obtained in exchange for new lease liabilities	$	28		$	69		$	110

	Weighted-average remaining lease term, in years	6			6			6
	Weighted-average discount rate	3.0		%	3.2		%	2.7		%

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
2024	$	241	$	300	$	205	$	197	$	52	$	251	$	1,246
2025	696		—		172		154		43		75		1,140
2026	550		—		164		143		32		85		974
2027	196		499		125		137		21		85		1,063
2028	495		—		112		111		13		95		826
2029 and beyond	1,869		—		1,126		2,294		26		1,051		6,366
Total	$	4,047	$	799	$	1,904	$	3,036	$	187	$	1,642	$	11,615

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, 2023 totaling approximately $3.0 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, accrued compensation benefits, environmental loss contingency estimates, 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 "2029 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 11, "Retirement Plans", for more information regarding pension and other postretirement benefit obligations.

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 of operations, or cash flows. See "Environmental Costs" in Note 1, "Significant Accounting Policies", and see Note 13, "Environmental Matters and Asset Retirement Obligations", for more information regarding outstanding 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, third-party debt, 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 remaining terms up to 15 years with maximum potential future payments of approximately $170 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. Eastman has letters of credit and surety bonds of approximately $80 million as of December 31, 2023 to support commitments made in the ordinary course of business. The Company does not expect that any claims against or draws on these instruments would have a material adverse effect on the Company.