Leases

12 Months Ended

Dec. 31, 2024

Leases [Abstract]

Leases

Leases

The Company leases various real estate for manufacturing facilities, administrative offices, warehouses and machinery under both finance leases and operating leases. In addition, the Company leases vehicles and office equipment under operating leases. We determine whether our contracts are or contain a lease at the inception of such arrangements. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use (“ROU”) assets and lease liabilities are recorded on the Consolidated Balance Sheets as of the lease commencement based on the present value of the future lease payments over the lease term. As our leases do not generally explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate, which is determined based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as of the lease commencement date. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes lease payments made at or before the commencement date of the lease, less any lease incentives received. The remaining lease cost is amortized over the remaining life of the lease on a straight-line basis. We evaluate ROU assets for impairment consistent with the treatment of other long-lived assets.

Some of our leases include options to extend the lease terms or to terminate the lease early. We include the impact of the option in the determination of the ROU assets and liabilities when it is

reasonably certain that we will exercise the option. Our U.S. and Canadian lease payments are largely fixed, but may include variable payments that do not depend on an index or rate, such as usage-based amounts, and are recorded as a lease expense in the period incurred. The lease payments in Israel are tied to the Consumer Price Index (“CPI”) as published by Israel’s Central Bureau of Statistics. These leases are paid in Israeli New Shekels (“ISL”) but are recorded in U.S. dollars on the general ledger. These leases are recalculated each quarter to recognize the changes in both the CPI and the ISL. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

As of December 31, 2024, the Company has not entered into any significant leases that have not yet commenced. We elected not to recognize a ROU asset and lease liability for leases with an initial term of twelve months or less. These leases are expensed on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components and to instead account for them as a single component. We have elected this practical expedient for all classes of assets.

Lease Cost

The Company’s total lease cost consists of the following:

	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Operating lease cost(1)	$	24	$	26	$	25
Finance lease cost(2):
Amortization of right-of-use assets	12		10		10
Interest on lease liabilities	6		5		5
Total lease cost	$	42	$	41	$	40

________________

(1)Operating lease expense is included within cost of revenues or general and administrative expenses, dependent upon the nature and use of the ROU asset, in the Consolidated Statements of Earnings. Operating lease cost includes short-term leases of approximately $2 million, $3 million, and $2 million and an insignificant amount of variable lease cost for 2024, 2023 and 2022, respectively.

(2)Finance lease expense is recorded as depreciation and amortization expense within cost of revenues or general and administrative expenses, dependent upon the nature and use of the ROU asset, and interest expense in the Consolidated Statements of Earnings.

Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases is as follows:

	December 31,
(Dollars in millions)	2024		2023
ROU assets
Operating leases(1)	$	79	$	82
Finance leases(2)	97		98
Total leased assets	$	176	$	180
Liabilities
Current lease liabilities:
Operating(1)	$	27	$	23
Finance(2)	10		10
Noncurrent lease liabilities:
Operating(1)	66		68
Finance(2)	103		101
Total lease liabilities	$	206	$	202

________________

(1)Operating lease assets are included within other noncurrent assets and operating lease liabilities are included within other current liabilities (current portion) and other noncurrent liabilities (noncurrent portion) in the Consolidated Balance Sheets.

(2)Finance lease assets are included within property, plant and equipment, net and finance lease liabilities are included within short-term borrowings and current portion of long-term debt (current portion) and long-term debt (noncurrent portion) in the Consolidated Balance Sheets.

Supplemental Cash Flow Information

Supplemental cash flow information related to leases is as follows:

	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	26	$	28	$	25
Operating cash flows from finance leases	6		5		8
Financing cash flows from finance leases	9		8		5
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	25		17		11
Finance leases	11		6		8

Weighted Average Lease Term and Discount Rate

Lease terms and discount rates related to leases are as follows:

	December 31,
	2024		2023
Weighted average remaining lease term:
Operating leases	5 years		5 years
Finance leases	14 years		12 years
Weighted average discount rate:
Operating leases	4.6	%	5.3	%
Finance leases	5.2	%	4.6	%

Maturity of Lease Liabilities

As of December 31, 2024, future minimum rental payments on leases with initial non-cancellable lease terms in excess of one year were due as follows:

(Dollars in millions) Year Ending December 31,	Operating Leases		Finance Leases
2025	$	25	$	15
2026	20		14
2027	16		12
2028	14		12
2029	10		11
Thereafter	16		106
Total lease payments	101		170
Less: imputed interest	8		57
Present value of lease liabilities	93		113
Less: current maturities	27		10
Long-term lease obligations	$	66	$	103

Leases

Leases

The Company leases various real estate for manufacturing facilities, administrative offices, warehouses and machinery under both finance leases and operating leases. In addition, the Company leases vehicles and office equipment under operating leases. We determine whether our contracts are or contain a lease at the inception of such arrangements. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use (“ROU”) assets and lease liabilities are recorded on the Consolidated Balance Sheets as of the lease commencement based on the present value of the future lease payments over the lease term. As our leases do not generally explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate, which is determined based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term as of the lease commencement date. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes lease payments made at or before the commencement date of the lease, less any lease incentives received. The remaining lease cost is amortized over the remaining life of the lease on a straight-line basis. We evaluate ROU assets for impairment consistent with the treatment of other long-lived assets.

Some of our leases include options to extend the lease terms or to terminate the lease early. We include the impact of the option in the determination of the ROU assets and liabilities when it is

reasonably certain that we will exercise the option. Our U.S. and Canadian lease payments are largely fixed, but may include variable payments that do not depend on an index or rate, such as usage-based amounts, and are recorded as a lease expense in the period incurred. The lease payments in Israel are tied to the Consumer Price Index (“CPI”) as published by Israel’s Central Bureau of Statistics. These leases are paid in Israeli New Shekels (“ISL”) but are recorded in U.S. dollars on the general ledger. These leases are recalculated each quarter to recognize the changes in both the CPI and the ISL. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants.

As of December 31, 2024, the Company has not entered into any significant leases that have not yet commenced. We elected not to recognize a ROU asset and lease liability for leases with an initial term of twelve months or less. These leases are expensed on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components and to instead account for them as a single component. We have elected this practical expedient for all classes of assets.

Lease Cost

The Company’s total lease cost consists of the following:

	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Operating lease cost(1)	$	24	$	26	$	25
Finance lease cost(2):
Amortization of right-of-use assets	12		10		10
Interest on lease liabilities	6		5		5
Total lease cost	$	42	$	41	$	40

________________

(1)Operating lease expense is included within cost of revenues or general and administrative expenses, dependent upon the nature and use of the ROU asset, in the Consolidated Statements of Earnings. Operating lease cost includes short-term leases of approximately $2 million, $3 million, and $2 million and an insignificant amount of variable lease cost for 2024, 2023 and 2022, respectively.

(2)Finance lease expense is recorded as depreciation and amortization expense within cost of revenues or general and administrative expenses, dependent upon the nature and use of the ROU asset, and interest expense in the Consolidated Statements of Earnings.

Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases is as follows:

	December 31,
(Dollars in millions)	2024		2023
ROU assets
Operating leases(1)	$	79	$	82
Finance leases(2)	97		98
Total leased assets	$	176	$	180
Liabilities
Current lease liabilities:
Operating(1)	$	27	$	23
Finance(2)	10		10
Noncurrent lease liabilities:
Operating(1)	66		68
Finance(2)	103		101
Total lease liabilities	$	206	$	202

________________

(1)Operating lease assets are included within other noncurrent assets and operating lease liabilities are included within other current liabilities (current portion) and other noncurrent liabilities (noncurrent portion) in the Consolidated Balance Sheets.

(2)Finance lease assets are included within property, plant and equipment, net and finance lease liabilities are included within short-term borrowings and current portion of long-term debt (current portion) and long-term debt (noncurrent portion) in the Consolidated Balance Sheets.

Supplemental Cash Flow Information

Supplemental cash flow information related to leases is as follows:

	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	26	$	28	$	25
Operating cash flows from finance leases	6		5		8
Financing cash flows from finance leases	9		8		5
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	25		17		11
Finance leases	11		6		8

Weighted Average Lease Term and Discount Rate

Lease terms and discount rates related to leases are as follows:

	December 31,
	2024		2023
Weighted average remaining lease term:
Operating leases	5 years		5 years
Finance leases	14 years		12 years
Weighted average discount rate:
Operating leases	4.6	%	5.3	%
Finance leases	5.2	%	4.6	%

Maturity of Lease Liabilities

As of December 31, 2024, future minimum rental payments on leases with initial non-cancellable lease terms in excess of one year were due as follows:

(Dollars in millions) Year Ending December 31,	Operating Leases		Finance Leases
2025	$	25	$	15
2026	20		14
2027	16		12
2028	14		12
2029	10		11
Thereafter	16		106
Total lease payments	101		170
Less: imputed interest	8		57
Present value of lease liabilities	93		113
Less: current maturities	27		10
Long-term lease obligations	$	66	$	103