Qnity Electronics, Inc.Q

Qnity Electronics, Inc. Leases Disclosure

10-KFiled Feb 26, 20262 min read
LEASES
The Company has operating leases for real estate, fleet, and certain machinery and equipment. The Company’s leases have remaining lease terms of approximately 1 year to 19 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise that option. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability.

The components of lease cost for operating leases for the years ended December 31, 2025, 2024 and 2023 were as follows:
In millions202520242023
Operating lease cost$44 $44 $41 
Variable lease cost 1
6 3 4 
Less: Sublease income 2
2 — — 
Total lease cost$48 $47 $45 
1.Variable lease cost excludes costs that have been capitalized into inventory of approximately $15 million in each year presented.
2.Reflects income associated with subleases, not inclusive of all lessor arrangements disclosed below.

Operating cash flows from operating leases were $42 million, $40 million, and $38 million for the year ended December 31, 2025, 2024 and 2023, respectively.

New operating lease assets and liabilities entered into during the year ended December 31, 2025, 2024 and 2023 were $410 million, $11 million and $83 million, respectively. Of the operating leases entered into during the year ended December 31, 2025, approximately $347 million relate to facilities leased from DuPont following the Separation. Supplemental balance sheet information related to leases was as follows:
In millionsDecember 31, 2025December 31, 2024
Operating Leases
 
Operating lease right-of-use assets 1
$493 $127 
Current operating lease liabilities 2
43 30 
Noncurrent operating lease liabilities 3
455 100 
Total operating lease liabilities
$498 $130 
1.Included in "Deferred charges and other assets" in the Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
Lease Term and Discount Rate for Operating LeasesDecember 31, 2025December 31, 2024
Weighted-average remaining lease term (years)12.67.2
Weighted-average discount rate4.60 %4.01 %
Maturities of lease liabilities were as follows:
Maturity of Lease Liabilities at December 31, 2025Operating Leases
In millions
2026$65 
202757 
202849 
202945 
203044 
2031 and thereafter414 
Total lease payments$674 
Less: Interest176 
Present value of lease liabilities$498 
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About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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