LEASES

12 Months Ended

Dec. 31, 2021

Leases [Abstract]

LEASES

LEASES

Eaton leases certain manufacturing facilities, warehouses, distribution centers, office space, vehicles, and equipment. Most real estate leases contain renewal options. The exercise of lease renewal options is at the Company's sole discretion. The Company's lease agreements typically do not contain any significant guarantees of asset values at the end of a lease or restrictive covenants. Payments within certain lease agreements are adjusted periodically for changes in an index or rate.

The components of lease expense are as follows:

(In millions)	2021		2020		2019
Operating lease cost	$	164	$	184	$	166
Finance lease cost:
Amortization of lease assets	12		6		5
Interest on lease liabilities	2		1		1
Short-term lease cost	15		18		46
Variable lease cost	16		3		22
Sublease income	(2)		(2)		(3)
Total lease cost	$	207	$	210	$	237

There were no sale leaseback transactions for the year ended December 31, 2021. The net gains recorded on sale leaseback transactions were $9 million and $16 million for the years ended December 31, 2020 and 2019.

Supplemental cash flow information related to leases is as follows:

(In millions)	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases	$	(158)	$	(144)	$	(168)
Operating cash outflows - interest payments on finance leases	(2)		(1)		(1)
Financing cash outflows - payments on finance lease obligations	(11)		(8)		(6)
Lease assets obtained in exchange for new lease obligations, including leases acquired:
Operating leases	$	145	$	144	$	114
Finance leases	14		16		24

Supplemental balance sheet information related to leases is as follows:

	December 31
(In millions)	2021		2020
Operating Leases
Operating lease assets	$	442	$	428
Other current liabilities	120		116
Operating lease liabilities	337		326
Total operating lease liabilities	$	457	$	442
Finance Leases
Land and buildings	$	6	$	13
Machinery and equipment	47		38
Accumulated depreciation	(19)		(16)
Net property, plant and equipment	$	34	$	35
Current portion of long-term debt	$	15	$	8
Long-term debt	23		30
Total finance lease liabilities	$	38	$	38

	December 31
	2021		2020
Weighted-average remaining lease term
Operating leases	5.4 years		5.5 years
Finance leases	5.3 years		7.4 years
Weighted-average discount rate
Operating leases	2.6	%	3.3	%
Finance leases	3.3	%	3.5	%

Maturities of lease liabilities at December 31, 2021 are as follows:

(In millions)	Operating Leases		Finance Leases
2022	$	127	$	16
2023	104		7
2024	77		6
2025	49		2
2026	36		2
Thereafter	100		7
Total lease payments	493		40
Less imputed interest	36		2
Total present value of lease liabilities	$	457	$	38

LEASES

LEASES

Eaton leases certain manufacturing facilities, warehouses, distribution centers, office space, vehicles, and equipment. Most real estate leases contain renewal options. The exercise of lease renewal options is at the Company's sole discretion. The Company's lease agreements typically do not contain any significant guarantees of asset values at the end of a lease or restrictive covenants. Payments within certain lease agreements are adjusted periodically for changes in an index or rate.

The components of lease expense are as follows:

(In millions)	2021		2020		2019
Operating lease cost	$	164	$	184	$	166
Finance lease cost:
Amortization of lease assets	12		6		5
Interest on lease liabilities	2		1		1
Short-term lease cost	15		18		46
Variable lease cost	16		3		22
Sublease income	(2)		(2)		(3)
Total lease cost	$	207	$	210	$	237

There were no sale leaseback transactions for the year ended December 31, 2021. The net gains recorded on sale leaseback transactions were $9 million and $16 million for the years ended December 31, 2020 and 2019.

Supplemental cash flow information related to leases is as follows:

(In millions)	2021		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases	$	(158)	$	(144)	$	(168)
Operating cash outflows - interest payments on finance leases	(2)		(1)		(1)
Financing cash outflows - payments on finance lease obligations	(11)		(8)		(6)
Lease assets obtained in exchange for new lease obligations, including leases acquired:
Operating leases	$	145	$	144	$	114
Finance leases	14		16		24

Supplemental balance sheet information related to leases is as follows:

	December 31
(In millions)	2021		2020
Operating Leases
Operating lease assets	$	442	$	428
Other current liabilities	120		116
Operating lease liabilities	337		326
Total operating lease liabilities	$	457	$	442
Finance Leases
Land and buildings	$	6	$	13
Machinery and equipment	47		38
Accumulated depreciation	(19)		(16)
Net property, plant and equipment	$	34	$	35
Current portion of long-term debt	$	15	$	8
Long-term debt	23		30
Total finance lease liabilities	$	38	$	38

	December 31
	2021		2020
Weighted-average remaining lease term
Operating leases	5.4 years		5.5 years
Finance leases	5.3 years		7.4 years
Weighted-average discount rate
Operating leases	2.6	%	3.3	%
Finance leases	3.3	%	3.5	%

Maturities of lease liabilities at December 31, 2021 are as follows:

(In millions)	Operating Leases		Finance Leases
2022	$	127	$	16
2023	104		7
2024	77		6
2025	49		2
2026	36		2
Thereafter	100		7
Total lease payments	493		40
Less imputed interest	36		2
Total present value of lease liabilities	$	457	$	38