v3.26.3
LEASES
 12 Months Ended
Dec. 31, 2025
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, with the exception of the non-cancellable synthetic lease discussed below. 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)202520242023
Operating lease cost$251 $227 $200 
Finance lease cost:
Amortization of lease assets9 12 15 
Interest on lease liabilities1 1 1 
Short-term lease cost23 19 18 
Variable lease cost26 29 28 
Sublease income(1)(1)(1)
Total lease cost$309 $287 $261 
During 2025, 2024 and 2023, Eaton entered into sale leaseback transactions primarily for certain non-production facilities and recorded gains of $38 million, $56 million and $53 million, respectively, in Other expense (income) - net. The terms of the new operating leases ranged from 2 to 15 years.
In March 2025, Eaton entered into a non-cancellable synthetic lease for a manufacturing facility, for which the Company is the construction agent. Construction costs are expected to be approximately $185 million. The lease will commence upon completion of construction of the facility which is expected to be in the first half of 2027. The term of the lease is five years after commencement. At the end of the lease term, Eaton will be required to either negotiate a renewal of the lease, purchase the facility, or sell the facility. Upon lease commencement, the lease classification will be determined and the lease asset and lease liability recognized. The lease arrangement contains a residual value guarantee of approximately 85% of the total construction cost.
Supplemental cash flow information related to leases is as follows:
(In millions)202520242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases$(198)$(200)$(180)
Operating cash outflows - interest payments on finance leases(1)(1)(1)
Financing cash outflows - payments on finance lease obligations(9)(14)(18)
Lease assets obtained in exchange for new lease obligations, including leases acquired:
Operating leases$193 $268 $183 
Finance leases6 13 38 
Supplemental balance sheet information related to leases is as follows:
December 31
(In millions)20252024
Operating Leases
Operating lease assets$768 $806 
Other current liabilities152 163 
Operating lease liabilities637 669 
Total operating lease liabilities$789 $832 
Finance Leases
Land and buildings$9 $5 
Machinery and equipment47 61 
Accumulated depreciation(31)(37)
Net property, plant and equipment$25 $29 
Current portion of long-term debt$7 $9 
Long-term debt18 19 
Total finance lease liabilities$25 $28 
December 31
20252024
Weighted-average remaining lease term
Operating leases8.0 years7.1 years
Finance leases4.7 years4.2 years
Weighted-average discount rate
Operating leases4.7 %4.4 %
Finance leases3.8 %3.7 %
Maturities of lease liabilities at December 31, 2025 are as follows:
(In millions)Operating LeasesFinance Leases
2026$183 $8 
2027150 7 
2028122 4 
202997 3 
203072 2 
Thereafter332 3 
Total lease payments957 27 
Less imputed interest168 2 
Total present value of lease liabilities$789 $25 
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, with the exception of the non-cancellable synthetic lease discussed below. 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)202520242023
Operating lease cost$251 $227 $200 
Finance lease cost:
Amortization of lease assets9 12 15 
Interest on lease liabilities1 1 1 
Short-term lease cost23 19 18 
Variable lease cost26 29 28 
Sublease income(1)(1)(1)
Total lease cost$309 $287 $261 
During 2025, 2024 and 2023, Eaton entered into sale leaseback transactions primarily for certain non-production facilities and recorded gains of $38 million, $56 million and $53 million, respectively, in Other expense (income) - net. The terms of the new operating leases ranged from 2 to 15 years.
In March 2025, Eaton entered into a non-cancellable synthetic lease for a manufacturing facility, for which the Company is the construction agent. Construction costs are expected to be approximately $185 million. The lease will commence upon completion of construction of the facility which is expected to be in the first half of 2027. The term of the lease is five years after commencement. At the end of the lease term, Eaton will be required to either negotiate a renewal of the lease, purchase the facility, or sell the facility. Upon lease commencement, the lease classification will be determined and the lease asset and lease liability recognized. The lease arrangement contains a residual value guarantee of approximately 85% of the total construction cost.
Supplemental cash flow information related to leases is as follows:
(In millions)202520242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases$(198)$(200)$(180)
Operating cash outflows - interest payments on finance leases(1)(1)(1)
Financing cash outflows - payments on finance lease obligations(9)(14)(18)
Lease assets obtained in exchange for new lease obligations, including leases acquired:
Operating leases$193 $268 $183 
Finance leases6 13 38 
Supplemental balance sheet information related to leases is as follows:
December 31
(In millions)20252024
Operating Leases
Operating lease assets$768 $806 
Other current liabilities152 163 
Operating lease liabilities637 669 
Total operating lease liabilities$789 $832 
Finance Leases
Land and buildings$9 $5 
Machinery and equipment47 61 
Accumulated depreciation(31)(37)
Net property, plant and equipment$25 $29 
Current portion of long-term debt$7 $9 
Long-term debt18 19 
Total finance lease liabilities$25 $28 
December 31
20252024
Weighted-average remaining lease term
Operating leases8.0 years7.1 years
Finance leases4.7 years4.2 years
Weighted-average discount rate
Operating leases4.7 %4.4 %
Finance leases3.8 %3.7 %
Maturities of lease liabilities at December 31, 2025 are as follows:
(In millions)Operating LeasesFinance Leases
2026$183 $8 
2027150 7 
2028122 4 
202997 3 
203072 2 
Thereafter332 3 
Total lease payments957 27 
Less imputed interest168 2 
Total present value of lease liabilities$789 $25