Cummins Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LEASES FOOTNOTE DISCLOSURE (Notes)

LEASES FOOTNOTE DISCLOSURE (Notes)

9 Months Ended

Sep. 29, 2019

Leases

Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 30 years and may contain renewal options for periods up to 2 years at our discretion. Our equipment lease portfolio consists primarily of vehicles (including service vehicles), forktrucks and IT equipment. These leases typically range in term from two years to three years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees other than our service vehicle fleet, which has a residual guarantee based on a percentage of the original cost declining over the lease term.

The components of our lease expense were as follows:



	Three months ended		Nine months ended
In millions	September 29, 2019		September 29, 2019
Operating lease cost	$	51	$	155
Finance lease cost
Amortization of right-of-use asset	3		12
Interest expense	1		7
Short-term lease cost	2		4
Variable lease cost	2		4
Total lease cost	$	59	$	182

Supplemental balance sheet information related to leases:



In millions	September 29, 2019		Balance Sheet Location
Assets
Operating lease assets	$	446	Other assets
Finance lease assets⁽¹⁾	124		Property, plant and equipment, net
Total lease assets	$	570

Liabilities
Current
Operating	$	124	Other accrued expenses
Finance	12		Current maturities of long-term debt
Long-term
Operating	333		Other liabilities
Finance	110		Long-term debt
Total lease liabilities	$	579

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⁽¹⁾ Finance lease assets are recorded net of accumulated amortization of $62 million at September 29, 2019.

Supplemental cash flow and other information related to leases:



	Three months ended		Nine months ended
In millions	September 29, 2019		September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	38	$	115
Operating cash flows from finance leases	2		7
Financing cash flows from finance leases	3		10

Right-of-use assets obtained in exchange for lease obligations
Operating leases	51		129
Finance leases	1		7

Additional information related to leases:



	September 29, 2019
Weighted-average remaining lease term (in years)
Operating leases	5.3
Finance leases	13.9

Weighted-average discount rate
Operating leases	3.3	%
Finance leases	7.2	%

Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at September 29, 2019, together with the net present value of the minimum payments due to finance leases:



In millions	Finance Leases			Operating Leases
2019	$	5		$	38
2020	19			129
2021	16			102
2022	15			77
2023	14			51
After 2023	146			110
Total minimum lease payments	215			507
Interest	(93		)	(50		)
Present value of net minimum lease payments	$	122		$	457

Following is a summary of the future minimum lease payments due to capital and operating leases with terms of more than one year at December 31, 2018, together with the net present value of the minimum payments due to capital leases under the previous lease standard:



In millions	Capital Leases			Operating Leases
2019	$	30		$	138
2020	21			109
2021	16			81
2022	14			60
2023	13			39
After 2023	144			81
Total minimum lease payments	$	238		$	508
Interest	(106		)
Present value of net minimum lease payments	$	132