Cummins Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LEASES FOOTNOTE DISCLOSURE LEASES FOOTNOTE DISCLOSURE (Notes)

LEASES FOOTNOTE DISCLOSURE LEASES FOOTNOTE DISCLOSURE (Notes)

12 Months Ended

Dec. 31, 2019

NOTE 9. LEASES

Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of land, office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 50 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 cost were as follows:



In millions	Year Ended December 31, 2019
Operating lease cost	$	208
Finance lease cost
Amortization of right-of-use asset	18
Interest expense	9
Short-term lease cost	5
Variable lease cost	7
Total lease cost	$	247

Supplemental balance sheet information related to leases:



In millions	December 31, 2019		Balance Sheet Location
Assets
Operating lease assets	$	496	Other assets
Finance lease assets⁽¹⁾	90		Property, plant and equipment, net
Total lease assets	$	586

Liabilities
Current
Operating	$	131	Other accrued expenses
Finance	12		Current maturities of long-term debt
Long-term
Operating	370		Other liabilities
Finance	78		Long-term debt
Total lease liabilities	$	591

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⁽¹⁾Finance lease assets were recorded net of accumulated amortization of$62 million at December 31, 2019.

Supplemental cash flow and other information related to leases:



In millions	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	163
Operating cash flows from finance leases	47
Financing cash flows from finance leases	9

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	214
Finance leases	5

Additional information related to leases:



	December 31, 2019
Weighted-average remaining lease term (in years)
Operating leases	5.3
Finance leases	12.1

Weighted-average discount rate
Operating leases	3.3	%
Finance leases	4.4	%

Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at December 31, 2019, together with the net present value of the minimum payments:



In millions	Finance Leases			Operating Leases
2020	$	15		$	143
2021	11			117
2022	10			90
2023	9			60
2024	7			47
After 2024	65			95
Total minimum lease payments	117			552
Interest	(27		)	(51		)
Present value of net minimum lease payments	$	90		$	501

Following is a summary of the future minimum lease payments due under 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 under capital leases:



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