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

Quarterly report pursuant to Section 13 or 15(d)

DEBT

DEBT

9 Months Ended

Oct. 02, 2016

Debt Disclosure [Abstract]

DEBT

NOTE 8. DEBT

Loans Payable and Commercial Paper

Loans payable, commercial paper and the related weighted-average interest rates were as follows:



	October 2, 2016					December 31, 2015
Dollars in millions	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Loans payable ⁽¹⁾	$	48				$	24
Commercial paper ⁽²⁾	273		0.47	%	⁽³⁾	—		—

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⁽¹⁾ Loans payable consist primarily of notes payable to various domestic and international financial institutions. It is not practical to aggregate these notes and calculate a quarterly weighted-average interest rate.

⁽²⁾ In February 2016, the Board of Directors authorized the issuance of up to $1.75 billion of unsecured short-term promissory notes ("commercial paper") pursuant to a commercial paper program. The program will facilitate the private placement of unsecured short-term debt through third party brokers. We intend to use the net proceeds from the commercial paper program for general corporate purposes.

⁽³⁾ The weighted average interest rate is inclusive of all brokerage fees.

Long-term Debt

A summary of long-term debt was as follows:



In millions	October 2, 2016			December 31, 2015
Long-term debt
Senior notes, 3.65%, due 2023	$	500		$	500
Debentures, 6.75%, due 2027	58			58
Debentures, 7.125%, due 2028	250			250
Senior notes, 4.875%, due 2043	500			500
Debentures, 5.65%, due 2098 (effective interest rate 7.48%)	165			165
Other debt	49			55
Unamortized discount	(56		)	(57		)
Fair value adjustments due to hedge on indebtedness	77			63
Capital leases	85			81
Total long-term debt	1,628			1,615
Less: Current maturities of long-term debt	35			39
Long-term debt	$	1,593		$	1,576

Principal payments required on long-term debt during the next five years are as follows:



	Required Principal Payments
In millions	2016		2017		2018		2019		2020
Principal payments	$	9	$	28	$	31	$	24	$	7

Fair Value of Debt

Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair value and carrying value of total debt, including current maturities, was as follows:



In millions	October 2, 2016		December 31, 2015
Fair value of total debt⁽¹⁾	$	2,292	$	1,821
Carrying value of total debt	1,949		1,639

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⁽¹⁾ The fair value of debt is derived from Level 2 inputs.