Document and Entity Information
Document and Entity Information | 9 Months Ended |
Oct. 02, 2016shares | |
Document and Entity Information | |
Entity Registrant Name | CUMMINS INC |
Entity Central Index Key | 26,172 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Document Type | 10-Q |
Document Period End Date | Oct. 2, 2016 |
Document Fiscal Year Focus | 2,016 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 168,275,116 |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | ||
Income Statement [Abstract] | |||||
NET SALES | [1] | $ 4,187 | $ 4,620 | $ 13,006 | $ 14,344 |
Cost of sales | 3,108 | 3,412 | 9,674 | 10,609 | |
GROSS MARGIN | 1,079 | 1,208 | 3,332 | 3,735 | |
OPERATING EXPENSES AND INCOME | |||||
Selling, general and administrative expenses | 513 | 530 | 1,527 | 1,584 | |
Research, development and engineering expenses | 157 | 197 | 478 | 558 | |
Equity, royalty and interest income from investees (Note 4) | 74 | 78 | 234 | 240 | |
Loss contingency (Note 10) | 99 | 0 | 138 | 0 | |
Other operating expense, net | 0 | (2) | (2) | (5) | |
OPERATING INCOME | 384 | 557 | 1,421 | 1,828 | |
Interest income | 6 | 9 | 18 | 20 | |
Interest expense (Note 8) | 16 | 16 | 51 | 47 | |
Other income, net | 8 | 11 | 34 | 12 | |
INCOME BEFORE INCOME TAXES | 382 | 561 | 1,422 | 1,813 | |
Income tax expense (Note 5) | 82 | 169 | 362 | 521 | |
CONSOLIDATED NET INCOME | 300 | 392 | 1,060 | 1,292 | |
Less: Net income attributable to noncontrolling interests | 11 | 12 | 44 | 54 | |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 289 | $ 380 | $ 1,016 | $ 1,238 | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | |||||
Basic (in dollars per share) | $ 1.72 | $ 2.15 | $ 5.99 | $ 6.92 | |
Diluted (in dollars per share) | $ 1.72 | $ 2.14 | $ 5.99 | $ 6.90 | |
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||
Basic (in shares) | 167.8 | 177 | 169.5 | 178.9 | |
Dilutive effect of stock compensation awards (in shares) | 0.4 | 0.4 | 0.2 | 0.4 | |
Diluted (in shares) | 168.2 | 177.4 | 169.7 | 179.3 | |
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.025 | $ 0.975 | $ 2.975 | $ 2.535 | |
Sales to nonconsolidated equity investees | $ 275 | $ 274 | $ 793 | $ 956 | |
[1] | Includes sales to nonconsolidated equity investees of $275 million and $793 million and $274 million and $956 million for the three and nine months ended October 2, 2016 and September 27, 2015, respectively. |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
CONSOLIDATED NET INCOME | $ 300 | $ 392 | $ 1,060 | $ 1,292 |
Other comprehensive (loss) income, net of tax (Note 11) | ||||
Foreign currency translation adjustments | (29) | (221) | (299) | (252) |
Unrealized gain (loss) on derivatives | 7 | 7 | (20) | 15 |
Change in pension and other postretirement defined benefit plans | 13 | 15 | 31 | 43 |
Unrealized gain (loss) on marketable securities | 0 | (1) | 1 | (1) |
Total other comprehensive loss, net of tax | (9) | (200) | (287) | (195) |
COMPREHENSIVE INCOME | 291 | 192 | 773 | 1,097 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | 14 | (1) | 41 | 39 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 277 | $ 193 | $ 732 | $ 1,058 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Oct. 02, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 1,251 | $ 1,711 |
Marketable securities (Note 6) | 250 | 100 |
Total cash, cash equivalents and marketable securities | 1,501 | 1,811 |
Accounts and notes receivable, net | ||
Trade and other | 2,680 | 2,640 |
Nonconsolidated equity investees | 193 | 180 |
Inventories (Note 7) | 2,820 | 2,707 |
Prepaid expenses and other current assets | 600 | 609 |
Total current assets | 7,794 | 7,947 |
Long-term assets | ||
Property, plant and equipment | 7,460 | 7,322 |
Accumulated depreciation | (3,783) | (3,577) |
Property, plant and equipment, net | 3,677 | 3,745 |
Investments and advances related to equity method investees | 1,077 | 975 |
Goodwill | 482 | 482 |
Other intangible assets, net | 319 | 328 |
Pension assets | 773 | 735 |
Other assets | 1,014 | 922 |
Total assets | 15,136 | 15,134 |
Current liabilities | ||
Accounts payable (principally trade) | 1,781 | 1,706 |
Loans payable (Note 8) | 48 | 24 |
Commercial paper (Note 8) | 273 | 0 |
Accrued compensation, benefits and retirement costs | 393 | 409 |
Current portion of accrued product warranty (Note 9) | 333 | 359 |
Current portion of deferred revenue | 460 | 403 |
Other accrued expenses | 985 | 863 |
Current maturities of long-term debt (Note 8) | 35 | 39 |
Total current liabilities | 4,308 | 3,803 |
Long-term liabilities | ||
Long-term debt (Note 8) | 1,593 | 1,576 |
Postretirement benefits other than pensions | 326 | 349 |
Pensions | 301 | 298 |
Other liabilities and deferred revenue | 1,344 | 1,358 |
Total liabilities | 7,872 | 7,384 |
Commitments and contingencies (Note 10) | ||
Cummins Inc. shareholders' equity | ||
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | 2,209 | 2,178 |
Retained earnings | 10,833 | 10,322 |
Treasury stock, at cost, 54.1 and 47.2 shares | (4,468) | (3,735) |
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares | (8) | (11) |
Accumulated other comprehensive loss | ||
Accumulated other comprehensive loss (Note 11) | (1,632) | (1,348) |
Total Cummins Inc. shareholders' equity | 6,934 | 7,406 |
Noncontrolling interests | 330 | 344 |
Total equity | 7,264 | 7,750 |
Total liabilities and equity | $ 15,136 | $ 15,134 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Oct. 02, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 2.50 | $ 2.50 |
Common stock, shares authorized | 500 | 500 |
Common stock, shares issued | 222.4 | 222.4 |
Treasury stock, shares | 54.1 | 47.2 |
Common stock held by employee benefits trust, shares | 0.7 | 0.9 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Oct. 02, 2016 | Sep. 27, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Consolidated net income | $ 1,060 | $ 1,292 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ||
Restructuring payments (Note 12) | (53) | 0 |
Loss contingency (Note 10) | 138 | 0 |
Depreciation and amortization | 391 | 383 |
Gain on fair value adjustment for consolidated investees | 0 | 17 |
Deferred income taxes | 60 | (120) |
Equity in income of investees, net of dividends | (94) | (68) |
Pension contributions in excess of expense (Note 3) | (92) | (119) |
Other post-retirement benefits payments in excess of expense (Note 3) | (16) | (18) |
Stock-based compensation expense | 28 | 24 |
Translation and hedging activities | (39) | 22 |
Changes in current assets and liabilities, net of acquisitions | ||
Accounts and notes receivable | (112) | (163) |
Inventories | (150) | (179) |
Other current assets | 138 | 133 |
Accounts payable | 97 | (52) |
Accrued expenses | (279) | (153) |
Changes in other liabilities and deferred revenue | 188 | 219 |
Other, net | 45 | (53) |
Net cash provided by operating activities | 1,310 | 1,131 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (312) | (393) |
Investments in internal use software | (42) | (38) |
Investments in and advances to equity investees | (29) | (9) |
Acquisitions of businesses, net of cash acquired | (1) | (102) |
Investments in marketable securities—acquisitions (Note 6) | (447) | (175) |
Investments in marketable securities—liquidations (Note 6) | 291 | 228 |
Cash flows from derivatives not designated as hedges | (64) | 17 |
Other, net | 14 | (5) |
Net cash used in investing activities | (590) | (477) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from borrowings | 111 | 24 |
Net borrowings of commercial paper (Note 8) | 273 | 0 |
Payments on borrowings and capital lease obligations | (156) | (64) |
Net borrowings (payments) under short-term credit agreements | 25 | (38) |
Distributions to noncontrolling interests | (42) | (35) |
Dividend payments on common stock | (505) | (452) |
Repurchases of common stock | (745) | (650) |
Other, net | (2) | |
Net cash used in financing activities | (1,041) | (1,215) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (139) | (52) |
Net decrease in cash and cash equivalents | (460) | (613) |
Cash and cash equivalents at beginning of year | 1,711 | 2,301 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,251 | $ 1,688 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Common Stock Held in Trust | Accumulated Other Comprehensive Loss | Total Cummins Inc. Shareholders' Equity | Noncontrolling Interests |
BALANCE at Dec. 31, 2014 | $ 8,093 | $ 556 | $ 1,583 | $ 9,545 | $ (2,844) | $ (13) | $ (1,078) | $ 7,749 | $ 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,292 | 1,238 | 1,238 | 54 | |||||
Other comprehensive (loss) income, net of tax (Note 11) | (195) | (180) | (180) | (15) | |||||
Issuance of shares | 7 | 7 | 7 | ||||||
Employee benefits trust activity | 23 | 21 | 2 | 23 | |||||
Acquisition of shares (Note 2) | (650) | (650) | (650) | ||||||
Cash dividends on common stock | (452) | (452) | (452) | ||||||
Distributions to noncontrolling interests | (46) | (46) | |||||||
Stock based awards | 4 | (4) | 8 | 4 | |||||
Other shareholder transactions | 5 | 10 | 10 | (5) | |||||
BALANCE at Sep. 27, 2015 | 8,081 | 556 | 1,617 | 10,331 | (3,486) | (11) | (1,258) | 7,749 | 332 |
BALANCE at Dec. 31, 2015 | 7,750 | 556 | 1,622 | 10,322 | (3,735) | (11) | (1,348) | 7,406 | 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,060 | 1,016 | 1,016 | 44 | |||||
Other comprehensive (loss) income, net of tax (Note 11) | (287) | (284) | (284) | (3) | |||||
Issuance of shares | 5 | 5 | 5 | ||||||
Employee benefits trust activity | 22 | 19 | 3 | 22 | |||||
Acquisition of shares (Note 2) | (745) | (745) | (745) | ||||||
Cash dividends on common stock | (505) | (505) | (505) | ||||||
Distributions to noncontrolling interests | (49) | (49) | |||||||
Stock based awards | 5 | (7) | 12 | 5 | |||||
Other shareholder transactions | 8 | 14 | 14 | (6) | |||||
BALANCE at Oct. 02, 2016 | $ 7,264 | $ 556 | $ 1,653 | $ 10,833 | $ (4,468) | $ (8) | $ (1,632) | $ 6,934 | $ 330 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Oct. 02, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NOTE 1. NATURE OF OPERATIONS Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as a corporation in Columbus, Indiana, as one of the first diesel engine manufacturers. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of approximately 600 company-owned and independent distributor locations and over 7,200 dealer locations in more than 190 countries and territories. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Oct. 02, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | NOTE 2. BASIS OF PRESENTATION The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations. Certain reclassifications have been made to prior period amounts to conform to the presentation of the current period condensed financial statements. These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 . Our interim period financial results for the three and nine month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements . Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, useful lives for depreciation and amortization, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, determination of discount rates and other assumptions for pension and other postretirement benefit costs, warranty programs, income taxes and deferred tax valuation allowances, lease classification, contingencies and restructuring costs. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2016 and 2015 ended on October 2 and September 27, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. The weighted-average diluted common shares outstanding excludes the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share for the three and nine months ended October 2, 2016 and September 27, 2015 , were as follows: Three months ended Nine months ended October 2, September 27, October 2, September 27, Options excluded 936,857 950,345 1,295,664 593,436 In 2016, we entered into an accelerated share repurchase agreement with a third party financial institution to repurchase $500 million of our common stock under our previously announced share repurchase plans and received 4.7 million shares at an average purchase price of $105.50 per share. |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 9 Months Ended |
Oct. 02, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
PENSION AND OTHER POSTRETIREMENT BENEFITS | NOTE 3. PENSION AND OTHER POSTRETIREMENT BENEFITS We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement plans. Contributions to these plans were as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Defined benefit pension plans Voluntary contribution $ 16 $ 7 $ 101 $ 79 Mandatory contribution 5 5 23 87 Defined benefit pension contributions $ 21 $ 12 $ 124 $ 166 Other postretirement plans $ 4 $ 8 $ 32 $ 33 Defined contribution pension plans $ 17 $ 14 $ 53 $ 56 We anticipate making $22 million of additional defined benefit pension contributions during the remainder of 2016 . The estimated $146 million of pension contributions for the full year include voluntary contributions of approximately $103 million . These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2016 net periodic pension cost to approximate $42 million . The components of net periodic pension and other postretirement benefit costs under our plans were as follows: Pension U.S. Plans U.K. Plans Other Postretirement Benefits Three months ended In millions October 2, September 27, October 2, September 27, October 2, September 27, Service cost $ 22 $ 20 $ 5 $ 7 $ — $ — Interest cost 26 25 13 14 4 4 Expected return on plan assets (50 ) (47 ) (17 ) (23 ) — — Recognized net actuarial loss 9 11 3 8 1 1 Net periodic benefit cost $ 7 $ 9 $ 4 $ 6 $ 5 $ 5 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions October 2, September 27, October 2, September 27, October 2, September 27, Service cost $ 68 $ 60 $ 16 $ 20 $ — $ — Interest cost 82 76 39 42 12 12 Expected return on plan assets (152 ) (142 ) (55 ) (68 ) — — Recognized net actuarial loss 23 34 11 25 4 3 Net periodic benefit cost $ 21 $ 28 $ 11 $ 19 $ 16 $ 15 |
EQUITY, ROYALTY AND INTEREST IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 9 Months Ended |
Oct. 02, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | NOTE 4. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the reporting periods was as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Distribution entities Komatsu Cummins Chile, Ltda. $ 8 $ 8 $ 26 $ 23 North American distributors 7 9 18 27 All other distributors 1 1 2 2 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 19 18 59 47 Chongqing Cummins Engine Company, Ltd. 11 9 28 32 Dongfeng Cummins Engine Company, Ltd. 10 11 32 40 All other manufacturers 8 13 40 41 Cummins share of net income 64 69 205 212 Royalty and interest income 10 9 29 28 Equity, royalty and interest income from investees $ 74 $ 78 $ 234 $ 240 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Oct. 02, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 5. INCOME TAXES Our effective tax rate for the year is expected to approximate 25.5 percent , excluding any one-time items that may arise. Our tax rate is generally less than the 35 percent U.S. statutory income tax rate primarily due to lower tax rates on foreign income and the research tax credit. Our effective tax rate for the three and nine months ended October 2, 2016 , was 21.5 percent and 25.5 percent , respectively. Our effective tax rate for the three and nine months ended September 27, 2015 , was 30.1 percent and 28.7 percent , respectively. The tax rate for the nine months ended September 27, 2015, included an $18 million discrete tax benefit to reflect the release of reserves for uncertain tax positions related to a favorable federal audit settlement. The decrease in the effective tax rate for the three and nine months ended October 2, 2016, versus the comparable periods in 2015 was primarily due to favorable changes in the jurisdictional mix of pre-tax income. It is reasonably possible that our existing liabilities for uncertain tax benefits may decrease in an amount ranging from $20 million to $26 million within the next 12 months for U.S. and non-U.S. audits that are in progress. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Oct. 02, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 6. MARKETABLE SECURITIES A summary of marketable securities, all of which are classified as current, was as follows: October 2, 2016 December 31, 2015 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale Level 2 (1) Bank debentures $ 118 $ — $ 118 $ — $ — $ — Debt mutual funds 118 — 118 88 — 88 Equity mutual funds 12 — 12 11 (1 ) 10 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 250 $ — $ 250 $ 101 $ (1 ) $ 100 ____________________________________ (1) The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2016 or for the year ended December 31, 2015. A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows: • Bank debentures — These investments provide us with a contractual rate of return and generally range in maturity from three months to one year . The counter-parties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institutions’ month-end statement. • Debt mutual funds — The fair value measure for these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input. • Equity mutual funds — The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure. • Government debt securities-non-U.S. — The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure. The proceeds from sales and maturities of marketable securities and gross realized gains and losses from the sale of available-for-sale securities were as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Proceeds from sales and maturities of marketable securities $ 54 $ 73 $ 291 $ 228 Gross realized gains from the sale of marketable securities (1) — — — 1 ____________________________________ (1) Gross realized losses from the sale of available-for-sale securities were immaterial. At October 2, 2016 , the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below: Contractual Maturity (In millions) 1 year or less $ 237 5 - 10 years 1 Total $ 238 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Oct. 02, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 7. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: In millions October 2, December 31, Finished products $ 1,779 $ 1,796 Work-in-process and raw materials 1,146 1,022 Inventories at FIFO cost 2,925 2,818 Excess of FIFO over LIFO (105 ) (111 ) Total inventories $ 2,820 $ 2,707 |
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) — — ____________________________________ (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, December 31, 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, December 31, Fair value of total debt (1) $ 2,292 $ 1,821 Carrying value of total debt 1,949 1,639 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 9 Months Ended |
Oct. 02, 2016 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 9. PRODUCT WARRANTY LIABILITY A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows: In millions October 2, September 27, Balance, beginning of year $ 1,404 $ 1,283 Provision for warranties issued 256 326 Deferred revenue on extended warranty contracts sold 179 217 Payments (291 ) (282 ) Amortization of deferred revenue on extended warranty contracts (148 ) (132 ) Changes in estimates for pre-existing warranties 22 18 Foreign currency translation (6 ) (10 ) Balance, end of period $ 1,416 $ 1,420 Warranty related deferred revenue and the long-term portion of the warranty liability on our October 2, 2016, balance sheet were as follows: In millions October 2, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 210 Current portion of deferred revenue Long-term portion 537 Other liabilities and deferred revenue Total $ 747 Long-term portion of warranty liability $ 336 Other liabilities and deferred revenue |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Oct. 02, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10. COMMITMENTS AND CONTINGENCIES We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows. We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances. Loss Contingency Engine systems sold in the U.S. must be certified to comply with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB) emission standards. EPA and CARB regulations require that in-use testing be performed on vehicles by the emission certificate holder and reported to the EPA and CARB in order to ensure ongoing compliance with these emission standards. We are the holder of this emission certificate for our engines, including engines installed in certain vehicles with one customer on which we did not also manufacture or sell the emission aftertreatment system. During 2015, a quality issue in certain of these third party aftertreatment systems caused some of our inter-related engines to fail in-use emission testing. In the fourth quarter of 2015, the vehicle manufacturer made a request that we assist in the design and bear the financial cost of a field campaign (Campaign) to address the technical issue purportedly causing some vehicles to fail the in-use testing. While we are not responsible for the warranty issues related to a component that we did not manufacture or sell, as the emission compliance certificate holder, we are responsible for proposing a remedy to the EPA and CARB. As a result, we have proposed actions to the agencies that we believe will address the emission failures. As the certificate holder, we expect to participate in the cost of the proposed voluntary Campaign and recorded a charge of $60 million in 2015. The Campaign design was finalized with our OEM customer, reviewed with the EPA and submitted for final approval in the second quarter of 2016, and we recorded an additional accrual of $39 million . We have concluded based upon additional in-use emission testing performed in the third quarter of 2016, that the Campaign should be expanded to include a larger population of vehicles manufactured by this one OEM. As a result, we recorded an additional accrual of $99 million in the third quarter to reflect the estimated cost of our participation in the expanded Campaign. We continue to work with our OEM customer to resolve the allocation of costs for the Campaign, including pending litigation between the parties. The Campaign is not expected to be completed for some time and our final cost could differ from the amount we have recorded. We do not currently expect any fines or penalties from the EPA or CARB related to this matter. Condensed Consolidated Balance Sheets. Guarantees and Commitments From time to time we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At October 2, 2016, the maximum potential loss related to these guarantees was $24 million . We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At October 2, 2016, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $108 million , of which $55 million relates to a contract with a components supplier that extends to 2018. Most of these arrangements enable us to secure critical components. We do not currently anticipate paying any penalties under these contracts. We enter into physical forward contracts with suppliers of platinum, palladium and copper to purchase minimum volumes of the commodities at contractually stated prices for various periods, not to exceed two years. At October 2, 2016, the total commitments under these contracts were $27 million . These arrangements enable us to fix the prices of these commodities, which otherwise are subject to market volatility. We have guarantees with certain customers that require us to satisfactorily honor contractual or regulatory obligations, or compensate for monetary losses related to nonperformance. These performance bonds and other performance-related guarantees were $79 million at October 2, 2016 . Indemnifications Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include: • product liability and license, patent or trademark indemnifications; • asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and • any contractual agreement where we agree to indemnify the counter-party for losses suffered as a result of a misrepresentation in the contract. We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Oct. 02, 2016 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 11. ACCUMULATED OTHER COMPREHENSIVE LOSS Following are the changes in accumulated other comprehensive (loss) income by component for the three and nine months ended: Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at June 28, 2015 $ (641 ) $ (435 ) $ (1 ) $ 6 $ (1,071 ) Other comprehensive income before reclassifications Before tax amount — (239 ) (1 ) 13 (227 ) $ (13 ) $ (240 ) Tax benefit (expense) — 31 — (1 ) 30 — 30 After tax amount — (208 ) (1 ) 12 (197 ) (13 ) (210 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 15 — — (5 ) 10 — 10 Net current period other comprehensive income (loss) 15 (208 ) (1 ) 7 (187 ) $ (13 ) $ (200 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) Balance at July 3, 2016 $ (636 ) $ (960 ) $ (1 ) $ (23 ) $ (1,620 ) Other comprehensive income before reclassifications Before tax amount 5 (51 ) — (4 ) (50 ) $ 3 $ (47 ) Tax (expense) benefit (1 ) 19 — 1 19 — 19 After tax amount 4 (32 ) — (3 ) (31 ) 3 (28 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 9 — — 10 19 — 19 Net current period other comprehensive income (loss) 13 (32 ) — 7 (12 ) $ 3 $ (9 ) Balance at October 2, 2016 $ (623 ) $ (992 ) $ (1 ) $ (16 ) $ (1,632 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. Nine months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (3 ) (290 ) — 23 (270 ) $ (15 ) $ (285 ) Tax benefit (expense) 1 53 — (3 ) 51 — 51 After tax amount (2 ) (237 ) — 20 (219 ) (15 ) (234 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 45 — (1 ) (5 ) 39 — 39 Net current period other comprehensive income (loss) 43 (237 ) (1 ) 15 (180 ) $ (15 ) $ (195 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount 5 (316 ) 1 (40 ) (350 ) $ (3 ) $ (353 ) Tax (expense) benefit (1 ) 20 — 7 26 — 26 After tax amount 4 (296 ) 1 (33 ) (324 ) (3 ) (327 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 27 — — 13 40 — 40 Net current period other comprehensive income (loss) 31 (296 ) 1 (20 ) (284 ) $ (3 ) $ (287 ) Balance at October 2, 2016 $ (623 ) $ (992 ) $ (1 ) $ (16 ) $ (1,632 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. Following are the items reclassified out of accumulated other comprehensive (loss) income and the related tax effects: In millions Three months ended Nine months ended (Gain)/Loss Components October 2, September 27, October 2, September 27, Statement of Income Location Change in pensions and other postretirement defined benefit plans Recognized actuarial loss $ 14 $ 22 $ 40 $ 65 (1) Tax effect (5 ) (7 ) (13 ) (20 ) Income tax expense Net change in pensions and other postretirement defined benefit plans 9 15 27 45 Realized (gain) on marketable securities — — — (1 ) Other income, net Tax effect — — — — Income tax expense Net realized (gain) on marketable securities — — — (1 ) Realized loss (gain) on derivatives Foreign currency forward contracts 12 (6 ) 17 (6 ) Net sales Tax effect (2 ) 1 (4 ) 1 Income tax expense Net realized loss (gain) on derivatives 10 (5 ) 13 (5 ) Total reclassifications for the period $ 19 $ 10 $ 40 $ 39 ____________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
RESTRUCTURING ACTIONS AND OTHER
RESTRUCTURING ACTIONS AND OTHER CHARGES RESTRUCTURING ACTIONS AND OTHER CHARGES | 9 Months Ended |
Oct. 02, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Activities Disclosure [Text Block] | NOTE 12. RESTRUCTURING ACTIONS AND OTHER CHARGES We executed restructuring actions primarily in the form of professional voluntary and involuntary employee separation programs in the fourth quarter of 2015. These actions were in response to the continued deterioration in our global markets in the second half of 2015, as well as expected reductions in orders in most U.S. and global markets in 2016. We reduced our worldwide workforce by approximately 1,900 employees , including approximately 370 employees accepting voluntary retirement packages with the remainder of the reductions being involuntary. We incurred a charge of $90 million in the fourth quarter of 2015, of which $86 million related to severance costs for both voluntary and involuntary terminations and $4 million for asset impairments and other charges. Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans or statutory requirements and the expected timetable for completion of the plan. Estimates of restructuring costs and benefits were made based on information available at the time charges were recorded. Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates. Restructuring actions and other charges were included in each segment in our operating results as follows: In millions Year ended December 31, 2015 (1) Power Systems 26 Distribution 23 Engine 17 Components 13 Non-segment 11 Restructuring actions and other charges $ 90 ____________________________________________________ (1) Restructuring actions and other charges by segment were re-allocated in conjunction with our segment realignment. See Note 13 , " OPERATING SEGMENTS ," for additional information. At October 2, 2016 , substantially all terminations have been completed . The table below summarizes the activity and balance of accrued workforce reductions, which is included in "Other accrued expenses" in our Condensed Consolidated Balance Sheets : In millions October 2, 2016 Balance, beginning of year $ 60 Cash payments for 2015 actions (53 ) Balance, end of period $ 7 |
OPERATING SEGMENTS
OPERATING SEGMENTS | 9 Months Ended |
Oct. 02, 2016 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 13. OPERATING SEGMENTS Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Operating Officer. We use segment EBIT (defined as earnings before interest expense, income taxes and noncontrolling interests) as a primary basis for the CODM to evaluate the performance of each of our operating segments. Segment amounts exclude certain expenses not specifically identifiable to segments. As previously announced, beginning with the second quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how the CODM monitors the performance of our segments. We reorganized our business to combine our Power Generation segment and our high-horsepower engine business to create the new Power Systems segment. Our reportable operating segments consist of Engine, Distribution, Components and Power Systems. We began to report results for our new reporting structure in the second quarter of 2016 and also reflected this change for historical periods. We allocate certain common costs and expenses, primarily corporate functions, among segments. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. In addition to the reorganization noted above, we reevaluated the allocation of these costs, considering the new segment structure created in April 2016 and adjusted our allocation methodology accordingly. The revised methodology, which is based on a combination of relative segment sales and relative service usage levels, is effective for the periods beginning after January 1, 2016 and resulted in the revision of our segment operating results, including segment EBIT, for all four segments for the first quarter of 2016 with a greater share of costs allocated to the Distribution and Components segments than in previous years. Prior periods were not revised for the new allocation methodology. These changes had no impact on our consolidated results. Our new reporting structure is organized according to the products and markets each segment serves . The Engine segment produces engines (15 liters and less in size) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers and fuel systems. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas and marine), standby and prime power generator sets, alternators and other power components. The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements . We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. As noted above, we allocate certain common costs and expenses, primarily corporate functions, among segments. We do not allocate debt-related items, actuarial gains or losses, prior service costs or credits, changes in cash surrender value of corporate owned life insurance or income taxes to individual segments. Segment EBIT may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments for the three and nine month periods is shown in the table below: In millions Engine Distribution Components Power Systems Non-segment Items (1) Total Three months ended October 2, 2016 External sales $ 1,357 $ 1,497 $ 824 $ 509 $ — $ 4,187 Intersegment sales 502 7 319 347 (1,175 ) — Total sales 1,859 1,504 1,143 856 (1,175 ) 4,187 Depreciation and amortization (2) 42 28 32 29 — 131 Research, development and engineering expenses 56 3 54 44 — 157 Equity, royalty and interest income from investees 38 19 9 8 — 74 Loss contingency 99 (3) — — — — 99 Interest income 3 1 1 1 — 6 Segment EBIT 89 96 148 59 6 398 Three months ended September 27, 2015 External sales $ 1,627 $ 1,543 $ 891 $ 559 $ — $ 4,620 Intersegment sales 475 8 349 423 (1,255 ) — Total sales 2,102 1,551 1,240 982 (1,255 ) 4,620 Depreciation and amortization (2) 47 26 28 27 — 128 Research, development and engineering expenses 73 2 65 57 — 197 Equity, royalty and interest income from investees 33 19 9 17 — 78 Interest income 6 1 1 1 — 9 Segment EBIT 217 123 156 74 7 577 Nine months ended October 2, 2016 External sales $ 4,350 $ 4,493 $ 2,654 $ 1,509 $ — $ 13,006 Intersegment sales 1,487 18 1,005 1,076 (3,586 ) — Total sales 5,837 4,511 3,659 2,585 (3,586 ) 13,006 Depreciation and amortization (2) 121 86 95 87 — 389 Research, development and engineering expenses 166 10 161 141 — 478 Equity, royalty and interest income from investees 120 56 29 29 — 234 Loss contingency 138 (3) — — — — 138 Interest income 8 3 3 4 — 18 Segment EBIT 492 270 501 195 15 1,473 Nine months ended September 27, 2015 External sales $ 5,150 $ 4,499 $ 2,839 $ 1,856 $ — $ 14,344 Intersegment sales 1,422 23 1,097 1,225 (3,767 ) — Total sales 6,572 4,522 3,936 3,081 (3,767 ) 14,344 Depreciation and amortization (2) 140 78 82 81 — 381 Research, development and engineering expenses 195 8 183 172 — 558 Equity, royalty and interest income from investees 107 60 26 47 — 240 Interest income 10 3 3 4 — 20 Segment EBIT 695 324 574 302 (35 ) 1,860 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended October 2, 2016 and September 27, 2015 . (2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million for the nine months ended October 2, 2016 and September 27, 2015. (3) See Note 10 , " COMMITMENTS AND CONTINGENCIES ," for additional information. A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Total segment EBIT $ 398 $ 577 $ 1,473 $ 1,860 Less: Interest expense 16 16 51 47 Income before income taxes $ 382 $ 561 $ 1,422 $ 1,813 |
RECENTLY ADOPTED ACCOUNTING PRO
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Oct. 02, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | NOTE 14. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In August 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the classification of certain cash receipts and cash payments. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. We are in the process of evaluating the impact this standard will have on our Consolidated Statements of Cash Flows. In June 2016, the FASB amended its standards related to the accounting for credit losses on financial instruments. This amendment introduces new guidance for accounting for credit losses on instruments including trade receivables and held-to-maturity debt securities. The new rules are effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements. In March 2016, the FASB amended its standards related to the accounting for stock compensation. This amendment addresses several aspects of the accounting for share-based payment transactions that could impact us including, but not limited to, recognition of excess tax benefits or deficiencies in the income statement each period and classification of the excess tax benefits or deficiencies as operating activities in the cash flow statement. The new standard is effective for annual periods beginning after December 15, 2016, with early adoption permitted. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements. In February 2016, the FASB amended its standards related to the accounting for leases. Under the new standard, lessees will now be required to recognize substantially all leases on the balance sheet as both a right-of-use-asset and a liability. The standard will continue to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases will result in the recognition of a single lease expense on a straight-line basis over the lease term similar to the treatment for operating leases under today's standards. Finance leases will result in an accelerated expense similar to the accounting for capital leases under today's standards. The determination of a lease classification as operating or finance will be done in a manner very similar to today's standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components in an arrangement. The new standard is effective for us on January 1, 2019, with early adoption permitted. We are still evaluating the impact the standard could have on our Consolidated Financial Statements ; however, while we have not yet quantified the amount, we do expect the standard will have a material impact on our Consolidated Balance Sheets due to the recognition of additional assets and liabilities for operating leases. In January 2016, the FASB amended its standards related to the accounting for certain financial instruments. This amendment addresses certain aspects of recognition, measurement, presentation and disclosure. The new rules will become effective for annual and interim periods beginning after December 15, 2017. Early adoption is not permitted. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements . In May 2014, the FASB amended its standards related to revenue recognition. This amendment replaces all existing revenue recognition guidance and provides a single, comprehensive revenue recognition model for all contracts with customers. The standard contains principles that we will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that we will recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that we expect to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendment also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in those judgments and assets recognized from costs incurred to fulfill a contract. The standard allows either full or modified retrospective adoption effective for annual and interim periods beginning January 1, 2018. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements. We expect to adopt the standard using the modified retrospective approach. While we have not yet completed our evaluation process, we have identified transactions where revenue recognition is currently limited to the amount of billings not contingent on our future performance. With the allocation provisions of the new model, we expect to accelerate the timing of revenue recognition for amounts related to satisfied performance obligations that would have been delayed under the current guidance. We do not expect the impact of this change to be material, but we are still quantifying the impact. |
SUBSEQUENT EVENT SUBSEQUENT EVE
SUBSEQUENT EVENT SUBSEQUENT EVENTS | 9 Months Ended |
Oct. 02, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15. SUBSEQUENT EVENT Acquisition of Cummins Pacific, LLC In October 2016, we acquired the remaining 50 percent interest in Cummins Pacific, LLC from the former distributor principal. The purchase consideration was $97 million , which included $17 million in cash and an additional $66 million paid to eliminate outstanding debt. The remaining $14 million will be paid in future periods, subject to customary purchase price adjustments. We will recognize a gain of $13 million on the fair value adjustment in the fourth quarter of 2016, resulting from this acquisition. This is the final acquisition of the plan we announced on September 17, 2013, to acquire the equity that we did not already own in most of our partially-owned U.S. and Canadian distributors. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Options excluded from diluted earnings per share | The options excluded from diluted earnings per share for the three and nine months ended October 2, 2016 and September 27, 2015 , were as follows: Three months ended Nine months ended October 2, September 27, October 2, September 27, Options excluded 936,857 950,345 1,295,664 593,436 |
PENSION AND OTHER POSTRETIREM24
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Schedule of Defined Benefit Plans Disclosures Cash Contributions [Text Block] | Contributions to these plans were as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Defined benefit pension plans Voluntary contribution $ 16 $ 7 $ 101 $ 79 Mandatory contribution 5 5 23 87 Defined benefit pension contributions $ 21 $ 12 $ 124 $ 166 Other postretirement plans $ 4 $ 8 $ 32 $ 33 Defined contribution pension plans $ 17 $ 14 $ 53 $ 56 |
Components of net periodic pension and other postretirement benefit cost | The components of net periodic pension and other postretirement benefit costs under our plans were as follows: Pension U.S. Plans U.K. Plans Other Postretirement Benefits Three months ended In millions October 2, September 27, October 2, September 27, October 2, September 27, Service cost $ 22 $ 20 $ 5 $ 7 $ — $ — Interest cost 26 25 13 14 4 4 Expected return on plan assets (50 ) (47 ) (17 ) (23 ) — — Recognized net actuarial loss 9 11 3 8 1 1 Net periodic benefit cost $ 7 $ 9 $ 4 $ 6 $ 5 $ 5 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions October 2, September 27, October 2, September 27, October 2, September 27, Service cost $ 68 $ 60 $ 16 $ 20 $ — $ — Interest cost 82 76 39 42 12 12 Expected return on plan assets (152 ) (142 ) (55 ) (68 ) — — Recognized net actuarial loss 23 34 11 25 4 3 Net periodic benefit cost $ 21 $ 28 $ 11 $ 19 $ 16 $ 15 |
EQUITY, ROYALTY AND INTEREST 25
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity, royalty and interest income from investees | Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the reporting periods was as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Distribution entities Komatsu Cummins Chile, Ltda. $ 8 $ 8 $ 26 $ 23 North American distributors 7 9 18 27 All other distributors 1 1 2 2 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 19 18 59 47 Chongqing Cummins Engine Company, Ltd. 11 9 28 32 Dongfeng Cummins Engine Company, Ltd. 10 11 32 40 All other manufacturers 8 13 40 41 Cummins share of net income 64 69 205 212 Royalty and interest income 10 9 29 28 Equity, royalty and interest income from investees $ 74 $ 78 $ 234 $ 240 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of marketable securities | A summary of marketable securities, all of which are classified as current, was as follows: October 2, 2016 December 31, 2015 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale Level 2 (1) Bank debentures $ 118 $ — $ 118 $ — $ — $ — Debt mutual funds 118 — 118 88 — 88 Equity mutual funds 12 — 12 11 (1 ) 10 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 250 $ — $ 250 $ 101 $ (1 ) $ 100 ____________________________________ (1) The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2016 or for the year ended December 31, 2015. |
Schedule of proceeds from sales and maturities and gross realized gains and losses | The proceeds from sales and maturities of marketable securities and gross realized gains and losses from the sale of available-for-sale securities were as follows: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Proceeds from sales and maturities of marketable securities $ 54 $ 73 $ 291 $ 228 Gross realized gains from the sale of marketable securities (1) — — — 1 ____________________________________ (1) Gross realized losses from the sale of available-for-sale securities were immaterial |
Summary of fair value of available-for-sale investments with contractual maturities | At October 2, 2016 , the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below: Contractual Maturity (In millions) 1 year or less $ 237 5 - 10 years 1 Total $ 238 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are stated at the lower of cost or market. Inventories included the following: In millions October 2, December 31, Finished products $ 1,779 $ 1,796 Work-in-process and raw materials 1,146 1,022 Inventories at FIFO cost 2,925 2,818 Excess of FIFO over LIFO (105 ) (111 ) Total inventories $ 2,820 $ 2,707 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Short-term Debt | 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) — — ____________________________________ (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. |
Summary of long-term debt | A summary of long-term debt was as follows: In millions October 2, December 31, 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 repayments on long-term debt | 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 and carrying value of total 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, December 31, Fair value of total debt (1) $ 2,292 $ 1,821 Carrying value of total debt 1,949 1,639 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Product Warranties Disclosures [Abstract] | |
Summary of activity in the product warranty account | A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows: In millions October 2, September 27, Balance, beginning of year $ 1,404 $ 1,283 Provision for warranties issued 256 326 Deferred revenue on extended warranty contracts sold 179 217 Payments (291 ) (282 ) Amortization of deferred revenue on extended warranty contracts (148 ) (132 ) Changes in estimates for pre-existing warranties 22 18 Foreign currency translation (6 ) (10 ) Balance, end of period $ 1,416 $ 1,420 |
Warranty related deferred revenue and the long-term portion of the warranty liability | Warranty related deferred revenue and the long-term portion of the warranty liability on our October 2, 2016, balance sheet were as follows: In millions October 2, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 210 Current portion of deferred revenue Long-term portion 537 Other liabilities and deferred revenue Total $ 747 Long-term portion of warranty liability $ 336 Other liabilities and deferred revenue |
ACCUMULATED OTHER COMPREHENSI30
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Equity [Abstract] | |
Changes in accumulated other comprehensive income (loss) by component | Following are the changes in accumulated other comprehensive (loss) income by component for the three and nine months ended: Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at June 28, 2015 $ (641 ) $ (435 ) $ (1 ) $ 6 $ (1,071 ) Other comprehensive income before reclassifications Before tax amount — (239 ) (1 ) 13 (227 ) $ (13 ) $ (240 ) Tax benefit (expense) — 31 — (1 ) 30 — 30 After tax amount — (208 ) (1 ) 12 (197 ) (13 ) (210 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 15 — — (5 ) 10 — 10 Net current period other comprehensive income (loss) 15 (208 ) (1 ) 7 (187 ) $ (13 ) $ (200 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) Balance at July 3, 2016 $ (636 ) $ (960 ) $ (1 ) $ (23 ) $ (1,620 ) Other comprehensive income before reclassifications Before tax amount 5 (51 ) — (4 ) (50 ) $ 3 $ (47 ) Tax (expense) benefit (1 ) 19 — 1 19 — 19 After tax amount 4 (32 ) — (3 ) (31 ) 3 (28 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 9 — — 10 19 — 19 Net current period other comprehensive income (loss) 13 (32 ) — 7 (12 ) $ 3 $ (9 ) Balance at October 2, 2016 $ (623 ) $ (992 ) $ (1 ) $ (16 ) $ (1,632 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. Nine months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (3 ) (290 ) — 23 (270 ) $ (15 ) $ (285 ) Tax benefit (expense) 1 53 — (3 ) 51 — 51 After tax amount (2 ) (237 ) — 20 (219 ) (15 ) (234 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 45 — (1 ) (5 ) 39 — 39 Net current period other comprehensive income (loss) 43 (237 ) (1 ) 15 (180 ) $ (15 ) $ (195 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount 5 (316 ) 1 (40 ) (350 ) $ (3 ) $ (353 ) Tax (expense) benefit (1 ) 20 — 7 26 — 26 After tax amount 4 (296 ) 1 (33 ) (324 ) (3 ) (327 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 27 — — 13 40 — 40 Net current period other comprehensive income (loss) 31 (296 ) 1 (20 ) (284 ) $ (3 ) $ (287 ) Balance at October 2, 2016 $ (623 ) $ (992 ) $ (1 ) $ (16 ) $ (1,632 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. |
Schedule of reclassification out of accumulated other comprehensive income (loss) and related tax effects | Following are the items reclassified out of accumulated other comprehensive (loss) income and the related tax effects: In millions Three months ended Nine months ended (Gain)/Loss Components October 2, September 27, October 2, September 27, Statement of Income Location Change in pensions and other postretirement defined benefit plans Recognized actuarial loss $ 14 $ 22 $ 40 $ 65 (1) Tax effect (5 ) (7 ) (13 ) (20 ) Income tax expense Net change in pensions and other postretirement defined benefit plans 9 15 27 45 Realized (gain) on marketable securities — — — (1 ) Other income, net Tax effect — — — — Income tax expense Net realized (gain) on marketable securities — — — (1 ) Realized loss (gain) on derivatives Foreign currency forward contracts 12 (6 ) 17 (6 ) Net sales Tax effect (2 ) 1 (4 ) 1 Income tax expense Net realized loss (gain) on derivatives 10 (5 ) 13 (5 ) Total reclassifications for the period $ 19 $ 10 $ 40 $ 39 ____________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
RESTRUCTURING ACTIONS AND OTH31
RESTRUCTURING ACTIONS AND OTHER CHARGES RESTRUCTURING ACTIONS AND OTHER CHARGES (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Costs [Table Text Block] | Restructuring actions and other charges were included in each segment in our operating results as follows: In millions Year ended December 31, 2015 (1) Power Systems 26 Distribution 23 Engine 17 Components 13 Non-segment 11 Restructuring actions and other charges $ 90 ____________________________________________________ (1) Restructuring actions and other charges by segment were re-allocated in conjunction with our segment realignment. See Note 13 , " OPERATING SEGMENTS ," for additional information. |
Schedule of Restructuring and Related Costs Accrual Rollforward [Table Text Block] | The table below summarizes the activity and balance of accrued workforce reductions, which is included in "Other accrued expenses" in our Condensed Consolidated Balance Sheets : In millions October 2, 2016 Balance, beginning of year $ 60 Cash payments for 2015 actions (53 ) Balance, end of period $ 7 |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 9 Months Ended |
Oct. 02, 2016 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments for the three and nine month periods is shown in the table below: In millions Engine Distribution Components Power Systems Non-segment Items (1) Total Three months ended October 2, 2016 External sales $ 1,357 $ 1,497 $ 824 $ 509 $ — $ 4,187 Intersegment sales 502 7 319 347 (1,175 ) — Total sales 1,859 1,504 1,143 856 (1,175 ) 4,187 Depreciation and amortization (2) 42 28 32 29 — 131 Research, development and engineering expenses 56 3 54 44 — 157 Equity, royalty and interest income from investees 38 19 9 8 — 74 Loss contingency 99 (3) — — — — 99 Interest income 3 1 1 1 — 6 Segment EBIT 89 96 148 59 6 398 Three months ended September 27, 2015 External sales $ 1,627 $ 1,543 $ 891 $ 559 $ — $ 4,620 Intersegment sales 475 8 349 423 (1,255 ) — Total sales 2,102 1,551 1,240 982 (1,255 ) 4,620 Depreciation and amortization (2) 47 26 28 27 — 128 Research, development and engineering expenses 73 2 65 57 — 197 Equity, royalty and interest income from investees 33 19 9 17 — 78 Interest income 6 1 1 1 — 9 Segment EBIT 217 123 156 74 7 577 Nine months ended October 2, 2016 External sales $ 4,350 $ 4,493 $ 2,654 $ 1,509 $ — $ 13,006 Intersegment sales 1,487 18 1,005 1,076 (3,586 ) — Total sales 5,837 4,511 3,659 2,585 (3,586 ) 13,006 Depreciation and amortization (2) 121 86 95 87 — 389 Research, development and engineering expenses 166 10 161 141 — 478 Equity, royalty and interest income from investees 120 56 29 29 — 234 Loss contingency 138 (3) — — — — 138 Interest income 8 3 3 4 — 18 Segment EBIT 492 270 501 195 15 1,473 Nine months ended September 27, 2015 External sales $ 5,150 $ 4,499 $ 2,839 $ 1,856 $ — $ 14,344 Intersegment sales 1,422 23 1,097 1,225 (3,767 ) — Total sales 6,572 4,522 3,936 3,081 (3,767 ) 14,344 Depreciation and amortization (2) 140 78 82 81 — 381 Research, development and engineering expenses 195 8 183 172 — 558 Equity, royalty and interest income from investees 107 60 26 47 — 240 Interest income 10 3 3 4 — 20 Segment EBIT 695 324 574 302 (35 ) 1,860 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended October 2, 2016 and September 27, 2015 . (2) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million for the nine months ended October 2, 2016 and September 27, 2015. (3) See Note 10 , " COMMITMENTS AND CONTINGENCIES ," for additional information. |
Reconciliation of segment information | A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below: Three months ended Nine months ended In millions October 2, September 27, October 2, September 27, Total segment EBIT $ 398 $ 577 $ 1,473 $ 1,860 Less: Interest expense 16 16 51 47 Income before income taxes $ 382 $ 561 $ 1,422 $ 1,813 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 9 Months Ended |
Oct. 02, 2016countrylocation | |
Nature of Operations | |
Company Owned and Independent Distributor Locations Number | 600 |
Dealer Locations Number | 7,200 |
Countries and Territories Number | country | 190 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Oct. 02, 2016 | Sep. 27, 2015 | Jul. 03, 2016 | Oct. 02, 2016 | Sep. 27, 2015 | Feb. 09, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Options excluded (in shares) | 936,857 | 950,345 | 1,295,664 | 593,436 | ||
Accelerated Share Repurchases, Settlement (Payment) or Receipt | $ 500 | |||||
Treasury Stock, Shares, Acquired | 4,700,000 | |||||
Accelerated Share Repurchases, Final Price Paid Per Share | $ 105.50 |
PENSION AND OTHER POSTRETIREM35
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Contributions by Employer | $ 21 | $ 12 | $ 124 | $ 166 |
Defined Contribution Plan, Cost Recognized | 17 | 14 | 53 | 56 |
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year | 22 | |||
Voluntary contributions | ||||
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Contributions by Employer | 16 | 7 | 101 | 79 |
Defined Benefit Plan, Expected Contributions in Current Fiscal Year | 103 | |||
Mandatory contribution | ||||
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Contributions by Employer | 5 | 5 | 23 | 87 |
Total contribution | ||||
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Expected Contributions in Current Fiscal Year | 146 | |||
Pension Plan | ||||
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Future Amortization of Gain (Loss) | 42 | |||
Pension - U.S. Plans | ||||
Components of Net Periodic Benefit Cost | ||||
Service cost | 22 | 20 | 68 | 60 |
Interest cost | 26 | 25 | 82 | 76 |
Expected return on plan assets | (50) | (47) | (152) | (142) |
Recognized net actuarial loss | 9 | 11 | 23 | 34 |
Net periodic benefit cost | 7 | 9 | 21 | 28 |
Pension - U.K. Plans | ||||
Components of Net Periodic Benefit Cost | ||||
Service cost | 5 | 7 | 16 | 20 |
Interest cost | 13 | 14 | 39 | 42 |
Expected return on plan assets | (17) | (23) | (55) | (68) |
Recognized net actuarial loss | 3 | 8 | 11 | 25 |
Net periodic benefit cost | 4 | 6 | 11 | 19 |
Other Postretirement Benefits | ||||
Pension and other postretirement benefits | ||||
Defined Benefit Plan, Contributions by Employer | 4 | 8 | 32 | 33 |
Components of Net Periodic Benefit Cost | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 4 | 4 | 12 | 12 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Recognized net actuarial loss | 1 | 1 | 4 | 3 |
Net periodic benefit cost | $ 5 | $ 5 | $ 16 | $ 15 |
EQUITY, ROYALTY AND INTEREST 36
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 64 | $ 69 | $ 205 | $ 212 |
Royalty and interest income | 10 | 9 | 29 | 28 |
Equity, royalty and interest income from investees | 74 | 78 | 234 | 240 |
Distribution - Komatsu Cummins Chile, Ltda. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 8 | 8 | 26 | 23 |
Distribution - North American distributors | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 7 | 9 | 18 | 27 |
Distribution - All other distributors | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 1 | 1 | 2 | 2 |
Manufacturing - Beijing Foton Cummins Engine Company | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 19 | 18 | 59 | 47 |
Manufacturing - Chongqing Cummins Engine Company, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 11 | 9 | 28 | 32 |
Dongfeng Cummins Engine Company Ltd [Member] | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 10 | 11 | 32 | 40 |
Manufacturing - All other manufacturers | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 8 | $ 13 | $ 40 | $ 41 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | Oct. 03, 2016 | Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 |
Income Tax [Line Items] | |||||
Effective tax rate (as a percent) | 21.50% | 30.10% | 25.50% | 28.70% | |
U.S. statutory rate, (as a percent) | 35.00% | ||||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 18 | ||||
Estimate | |||||
Income Tax [Line Items] | |||||
Effective tax rate (as a percent) | 25.50% | ||||
Minimum | Estimate | |||||
Income Tax [Line Items] | |||||
Decrease in Unrecognized Tax Benefits is Reasonably Possible | $ 20 | ||||
Maximum | Estimate | |||||
Income Tax [Line Items] | |||||
Decrease in Unrecognized Tax Benefits is Reasonably Possible | $ 26 |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | Dec. 31, 2015 | ||
Schedule of Available-for-sale Securities | ||||||
Cost | $ 250 | $ 250 | $ 101 | |||
Gross unrealized gains/(losses) | 0 | 0 | (1) | |||
Estimated fair value | 250 | 250 | 100 | |||
Proceeds from sale and maturity of marketable securities | 54 | $ 73 | 291 | $ 228 | ||
Gross realized gains from the sale of marketable securities(1) | [1] | 0 | $ 0 | 0 | $ 1 | |
Fair value of available-for-sale investments by contractual maturity | ||||||
1 year or less | 237 | 237 | ||||
5-10 years | 1 | 1 | ||||
Total | 238 | 238 | ||||
Significant other observable inputs (Level 2) | Bank debentures | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 118 | 118 | 0 | |||
Gross unrealized gains/(losses) | 0 | 0 | 0 | |||
Estimated fair value | [2] | 118 | 118 | 0 | ||
Significant other observable inputs (Level 2) | Debt mutual funds | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 118 | 118 | 88 | |||
Gross unrealized gains/(losses) | 0 | 0 | 0 | |||
Estimated fair value | [2] | 118 | 118 | 88 | ||
Significant other observable inputs (Level 2) | Equity mutual funds | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 12 | 12 | 11 | |||
Gross unrealized gains/(losses) | 0 | 0 | (1) | |||
Estimated fair value | [2] | 12 | 12 | 10 | ||
Significant other observable inputs (Level 2) | Government debt securities | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 2 | 2 | 2 | |||
Gross unrealized gains/(losses) | 0 | 0 | 0 | |||
Estimated fair value | [2] | $ 2 | $ 2 | $ 2 | ||
Minimum | Bank debentures | ||||||
Schedule of Available-for-sale Securities | ||||||
Maturities of Time Deposits, Description | P3M | |||||
Maximum | Bank debentures | ||||||
Schedule of Available-for-sale Securities | ||||||
Maturities of Time Deposits, Description | P1Y | |||||
[1] | Gross realized losses from the sale of available-for-sale securities were immaterial | |||||
[2] | The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2016 or for the year ended December 31, 2015. |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Oct. 02, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 1,779 | $ 1,796 |
Work-in-process and raw materials | 1,146 | 1,022 |
Inventories at FIFO cost | 2,925 | 2,818 |
Excess of FIFO over LIFO | (105) | (111) |
Total inventories | $ 2,820 | $ 2,707 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Millions | Oct. 02, 2016 | Dec. 31, 2015 | ||
Short-term Debt [Line Items] | ||||
Loans payable | $ 48 | $ 24 | ||
Commercial paper | 273 | 0 | ||
Long-term debt | ||||
Unamortized discount | (56) | (57) | ||
Fair value adjustment due to hedge on indebtedness | 77 | 63 | ||
Capital leases | 85 | 81 | ||
Total long-term debt | 1,628 | 1,615 | ||
Current maturities of long-term debt | 35 | 39 | ||
Long-term debt | 1,593 | 1,576 | ||
Principal payments required on long-term debt | ||||
2,016 | 9 | |||
2,017 | 28 | |||
2,018 | 31 | |||
2,019 | 24 | |||
2,020 | 7 | |||
Fair value | ||||
Fair value of total debt | [1] | 2,292 | 1,821 | |
Carrying value of total debt | 1,949 | 1,639 | ||
Loans Payable | ||||
Short-term Debt [Line Items] | ||||
Loans payable | [2] | 48 | 24 | |
Commercial paper | ||||
Short-term Debt [Line Items] | ||||
Commercial paper | [3] | $ 273 | $ 0 | |
Short-term Debt, Weighted Average Interest Rate | [3] | 0.4747% | [4] | 0.00% |
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,750 | |||
Senior notes, 3.65%, due 2023 | ||||
Long-term debt | ||||
Unsecured Debt | $ 500 | $ 500 | ||
Debt instrument interest rate (as a percent) | 3.65% | |||
Debentures, 6.75%, due 2027 | ||||
Long-term debt | ||||
Unsecured Debt | $ 58 | 58 | ||
Debt instrument interest rate (as a percent) | 6.75% | |||
Debentures, 7.125%, due 2028 | ||||
Long-term debt | ||||
Unsecured Debt | $ 250 | 250 | ||
Debt instrument interest rate (as a percent) | 7.125% | |||
Senior notes, 4.875%, due 2043 | ||||
Long-term debt | ||||
Unsecured Debt | $ 500 | 500 | ||
Debt instrument interest rate (as a percent) | 4.875% | |||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | ||||
Long-term debt | ||||
Unsecured Debt | $ 165 | 165 | ||
Debt instrument interest rate (as a percent) | 5.65% | |||
Effective interest rate (as a percent) | 7.48% | |||
Other long-term debt | ||||
Long-term debt | ||||
Other Long-term Debt | $ 49 | $ 55 | ||
[1] | The fair value of debt is derived from Level 2 inputs. | |||
[2] | 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. | |||
[3] | In February 2016, the Board of Directors authorized the issuance of up to $1.75 billion of unsecured short-term promissory notes ("commercial paper") pursuant to a commercial paper program. The program will facilitate the private placement of unsecured short-term debt through third party brokers. We intend to use the net proceeds from the commercial paper program for general corporate purposes. | |||
[4] | The weighted average interest rate is inclusive of all brokerage fees. |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Oct. 02, 2016 | Sep. 27, 2015 | Dec. 31, 2015 | |
Product Warranty Liability: | |||
Balance, beginning of year | $ 1,404 | $ 1,283 | |
Provision for warranties issued | 256 | 326 | |
Deferred revenue on extended warranty contracts sold | 179 | 217 | |
Payments | (291) | (282) | |
Amortization of deferred revenue on extended warranty contracts | (148) | (132) | |
Changes in estimates for pre-existing warranties | 22 | 18 | |
Foreign currency translation | (6) | (10) | |
Balance, end of period | 1,416 | $ 1,420 | |
Product Warranty Liability | |||
Current portion of deferred revenue | 460 | $ 403 | |
Total deferred revenue related to extended coverage programs | 747 | ||
Current portion of deferred revenue | |||
Product Warranty Liability | |||
Current portion of deferred revenue | 210 | ||
Other liabilities and deferred revenue | |||
Product Warranty Liability | |||
Deferred revenue related to extended coverage programs, Noncurrent portion | 537 | ||
Long-term portion of warranty liability | $ 336 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Oct. 02, 2016 | Jul. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |||
Guarantee Obligations | ||||||||
Loss Contingency, Loss in Period | $ 99 | $ 0 | $ 138 | $ 0 | ||||
Maximum | ||||||||
Guarantee Obligations | ||||||||
Forward Contract, Term | 2 years | |||||||
Other Guarantees and Commitments | ||||||||
Guarantee Obligations | ||||||||
Guarantor obligations, maximum potential loss | 24 | $ 24 | ||||||
Long-term purchase commitment, penalty exposure | 108 | 108 | ||||||
Total commitments under commodity contracts | 27 | 27 | ||||||
Components Supplier | ||||||||
Guarantee Obligations | ||||||||
Long-term purchase commitment, penalty exposure | 55 | 55 | ||||||
Performance bonds and other performance-related guarantees | ||||||||
Guarantee Obligations | ||||||||
Guarantor obligations, maximum potential loss | 79 | 79 | ||||||
Engine | ||||||||
Guarantee Obligations | ||||||||
Loss Contingency, Loss in Period | $ 99 | [1] | $ 39 | $ 60 | $ 138 | [1] | ||
[1] | See Note 10, "COMMITMENTS AND CONTINGENCIES," for additional information. |
ACCUMULATED OTHER COMPREHENSI43
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | $ (1,348) | |||||||
Before tax amount | $ (47) | $ (240) | (353) | $ (285) | ||||
Tax benefit (expense) | 19 | 30 | 26 | 51 | ||||
After tax amount | (28) | (210) | (327) | (234) | ||||
Net current period other comprehensive income (loss) | (9) | (200) | (287) | (195) | ||||
Balance at the end of the period | (1,632) | (1,632) | ||||||
Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 19 | 10 | 40 | 39 | |||
Change in pensions and other postretirement defined benefit plans | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | (636) | (641) | (654) | (669) | ||||
Before tax amount | 5 | 0 | 5 | (3) | ||||
Tax benefit (expense) | (1) | 0 | (1) | 1 | ||||
After tax amount | 4 | 0 | 4 | (2) | ||||
Net current period other comprehensive income (loss) | 13 | 15 | 31 | 43 | ||||
Balance at the end of the period | (623) | (626) | (623) | (626) | ||||
Change in pensions and other postretirement defined benefit plans | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 9 | 15 | 27 | 45 | |||
Foreign currency translation adjustment | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | (960) | (435) | (696) | (406) | ||||
Before tax amount | (51) | (239) | (316) | (290) | ||||
Tax benefit (expense) | 19 | 31 | 20 | 53 | ||||
After tax amount | (32) | (208) | (296) | (237) | ||||
Net current period other comprehensive income (loss) | (32) | (208) | (296) | (237) | ||||
Balance at the end of the period | (992) | (643) | (992) | (643) | ||||
Foreign currency translation adjustment | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 0 | 0 | |||||
Unrealized gain (loss) on marketable securities | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | (1) | (1) | (2) | (1) | ||||
Before tax amount | 0 | (1) | 1 | |||||
Tax benefit (expense) | 0 | 0 | 0 | |||||
After tax amount | 0 | (1) | 1 | 0 | ||||
Net current period other comprehensive income (loss) | 0 | (1) | 1 | (1) | ||||
Balance at the end of the period | (1) | (2) | (1) | (2) | ||||
Unrealized gain (loss) on marketable securities | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | 0 | [1],[2] | 0 | [1],[2] | 0 | (1) | [1],[2] | |
Unrealized gain (loss) on derivatives | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | (23) | 6 | 4 | (2) | ||||
Before tax amount | (4) | 13 | (40) | 23 | ||||
Tax benefit (expense) | 1 | (1) | 7 | (3) | ||||
After tax amount | (3) | 12 | (33) | 20 | ||||
Net current period other comprehensive income (loss) | 7 | 7 | (20) | 15 | ||||
Balance at the end of the period | (16) | 13 | (16) | 13 | ||||
Unrealized gain (loss) on derivatives | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 10 | (5) | 13 | (5) | |||
Total attributable to Cummins Inc. | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Balance at the beginning of the period | (1,620) | (1,071) | (1,348) | (1,078) | ||||
Before tax amount | (50) | (227) | (350) | (270) | ||||
Tax benefit (expense) | 19 | 30 | 26 | 51 | ||||
After tax amount | (31) | (197) | (324) | (219) | ||||
Net current period other comprehensive income (loss) | (12) | (187) | (284) | (180) | ||||
Balance at the end of the period | (1,632) | (1,258) | (1,632) | (1,258) | ||||
Total attributable to Cummins Inc. | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 19 | 10 | 40 | 39 | |||
Noncontrolling interests | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Before tax amount | 3 | (13) | (3) | (15) | ||||
After tax amount | 3 | (13) | (3) | (15) | ||||
Net current period other comprehensive income (loss) | $ 3 | (13) | (3) | $ (15) | ||||
Noncontrolling interests | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Changes in accumulated other comprehensive income (loss) by component: | ||||||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | $ 0 | $ 0 | |||||
[1] | Amounts are net of tax. | |||||||
[2] | See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. |
ACCUMULATED OTHER COMPREHENSI44
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Oct. 02, 2016 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | |||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
Tax effect | $ 82 | $ 169 | $ 362 | $ 521 | ||||
NET SALES | [1] | 4,187 | 4,620 | 13,006 | 14,344 | |||
Other income, net | 8 | 11 | 34 | 12 | ||||
Total Reclassifications for the Period | (300) | (392) | (1,060) | (1,292) | ||||
Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | [2],[3] | (19) | (10) | (40) | (39) | |||
Total Reclassifications for the Period | 19 | 10 | 40 | 39 | ||||
Change in pensions and other postretirement defined benefit plans | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
Recognized actuarial loss | [4] | 14 | 22 | 40 | 65 | |||
Tax effect | (5) | (7) | (13) | (20) | ||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | [2],[3] | (9) | (15) | (27) | (45) | |||
Realized (gain) on marketable securities | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
Tax effect | 0 | 0 | ||||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | 0 | [2],[3] | 0 | [2],[3] | 0 | 1 | [2],[3] | |
Other income, net | 0 | 0 | 0 | 1 | ||||
Realized loss (gain) on derivatives | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
Tax effect | (2) | 1 | (4) | 1 | ||||
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax | [2],[3] | (10) | 5 | (13) | 5 | |||
Realized loss (gain) on derivatives | Foreign currency forward contracts | Reclassified out of accumulated other comprehensive income (loss) | ||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ||||||||
NET SALES | $ (12) | $ 6 | $ (17) | $ 6 | ||||
[1] | Includes sales to nonconsolidated equity investees of $275 million and $793 million and $274 million and $956 million for the three and nine months ended October 2, 2016 and September 27, 2015, respectively. | |||||||
[2] | Amounts are net of tax. | |||||||
[3] | See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. | |||||||
[4] | These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 3, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
RESTRUCTURING ACTIONS AND OTH45
RESTRUCTURING ACTIONS AND OTHER CHARGES RESTRUCTURING ACTIONS AND OTHER CHARGES (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Dec. 31, 2015USD ($)employee | Oct. 02, 2016USD ($) | Sep. 27, 2015USD ($) | Dec. 31, 2015USD ($) | |||
Restructuring Charges [Abstract] | ||||||
Restructuring and Related Cost, Expected Number of Positions Eliminated | employee | 1,900 | |||||
Restructuring Charges | $ 90 | $ 90 | [1] | |||
Severance Costs | 86 | |||||
Other Restructuring Costs | 4 | |||||
Restructuring Reserve [Roll Forward] | ||||||
Restructuring Reserve, beginning of period | $ 60 | |||||
Payments for Restructuring | 53 | $ 0 | ||||
Restructuring Reserve, end of period | $ 60 | $ 7 | 60 | |||
Voluntary Retirement, Number of employees | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring and Related Cost, Number of Positions Eliminated | employee | 370 | |||||
Power Systems | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring Charges | [1] | 26 | ||||
Distribution | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring Charges | [1] | 23 | ||||
Engine | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring Charges | [1] | 17 | ||||
Components | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring Charges | [1] | 13 | ||||
Non-segment items | ||||||
Restructuring Charges [Abstract] | ||||||
Restructuring Charges | [1] | $ 11 | ||||
[1] | Restructuring actions and other charges by segment were re-allocated in conjunction with our segment realignment. See Note 13, "OPERATING SEGMENTS," for additional information. |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||||
Oct. 02, 2016 | Jul. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Oct. 02, 2016 | Sep. 27, 2015 | ||||
Operating results: | |||||||||
Total sales | [1] | $ 4,187 | $ 4,620 | $ 13,006 | $ 14,344 | ||||
Depreciation and amortization | [2] | 131 | 128 | 389 | 381 | ||||
Research, development and engineering expenses | 157 | 197 | 478 | 558 | |||||
Equity, royalty and interest income from investees | 74 | 78 | 234 | 240 | |||||
Loss Contingency, Loss in Period | 99 | 0 | 138 | 0 | |||||
Interest income | 6 | 9 | 18 | 20 | |||||
Segment EBIT | 398 | 577 | 1,473 | 1,860 | |||||
Less: Interest expense | 16 | 16 | 51 | 47 | |||||
INCOME BEFORE INCOME TAXES | 382 | 561 | 1,422 | 1,813 | |||||
Amortization of Debt Discount (Premium) | 2 | 2 | |||||||
Engine | |||||||||
Operating results: | |||||||||
Total sales | 1,859 | 2,102 | 5,837 | 6,572 | |||||
Depreciation and amortization | [2] | 42 | 47 | 121 | 140 | ||||
Research, development and engineering expenses | 56 | 73 | 166 | 195 | |||||
Equity, royalty and interest income from investees | 38 | 33 | 120 | 107 | |||||
Loss Contingency, Loss in Period | 99 | [3] | $ 39 | $ 60 | 138 | [3] | |||
Interest income | 3 | 6 | 8 | 10 | |||||
Segment EBIT | 89 | 217 | 492 | 695 | |||||
Distribution | |||||||||
Operating results: | |||||||||
Total sales | 1,504 | 1,551 | 4,511 | 4,522 | |||||
Depreciation and amortization | [2] | 28 | 26 | 86 | 78 | ||||
Research, development and engineering expenses | 3 | 2 | 10 | 8 | |||||
Equity, royalty and interest income from investees | 19 | 19 | 56 | 60 | |||||
Interest income | 1 | 1 | 3 | 3 | |||||
Segment EBIT | 96 | 123 | 270 | 324 | |||||
Components | |||||||||
Operating results: | |||||||||
Total sales | 1,143 | 1,240 | 3,659 | 3,936 | |||||
Depreciation and amortization | [2] | 32 | 28 | 95 | 82 | ||||
Research, development and engineering expenses | 54 | 65 | 161 | 183 | |||||
Equity, royalty and interest income from investees | 9 | 9 | 29 | 26 | |||||
Interest income | 1 | 1 | 3 | 3 | |||||
Segment EBIT | 148 | 156 | 501 | 574 | |||||
Power Systems | |||||||||
Operating results: | |||||||||
Total sales | 856 | 982 | 2,585 | 3,081 | |||||
Depreciation and amortization | [2] | 29 | 27 | 87 | 81 | ||||
Research, development and engineering expenses | 44 | 57 | 141 | 172 | |||||
Equity, royalty and interest income from investees | 8 | 17 | 29 | 47 | |||||
Interest income | 1 | 1 | 4 | 4 | |||||
Segment EBIT | 59 | 74 | 195 | 302 | |||||
Non-segment items | |||||||||
Operating results: | |||||||||
Total sales | [4] | (1,175) | (1,255) | (3,586) | (3,767) | ||||
Segment EBIT | [4] | 6 | 7 | 15 | (35) | ||||
External Sales | |||||||||
Operating results: | |||||||||
Total sales | 4,187 | 4,620 | 13,006 | 14,344 | |||||
External Sales | Engine | |||||||||
Operating results: | |||||||||
Total sales | 1,357 | 1,627 | 4,350 | 5,150 | |||||
External Sales | Distribution | |||||||||
Operating results: | |||||||||
Total sales | 1,497 | 1,543 | 4,493 | 4,499 | |||||
External Sales | Components | |||||||||
Operating results: | |||||||||
Total sales | 824 | 891 | 2,654 | 2,839 | |||||
External Sales | Power Systems | |||||||||
Operating results: | |||||||||
Total sales | 509 | 559 | 1,509 | 1,856 | |||||
Intersegment sales | Engine | |||||||||
Operating results: | |||||||||
Total sales | 502 | 475 | 1,487 | 1,422 | |||||
Intersegment sales | Distribution | |||||||||
Operating results: | |||||||||
Total sales | 7 | 8 | 18 | 23 | |||||
Intersegment sales | Components | |||||||||
Operating results: | |||||||||
Total sales | 319 | 349 | 1,005 | 1,097 | |||||
Intersegment sales | Power Systems | |||||||||
Operating results: | |||||||||
Total sales | 347 | 423 | 1,076 | 1,225 | |||||
Intersegment sales | Non-segment items | |||||||||
Operating results: | |||||||||
Total sales | [4] | $ (1,175) | $ (1,255) | $ (3,586) | $ (3,767) | ||||
[1] | Includes sales to nonconsolidated equity investees of $275 million and $793 million and $274 million and $956 million for the three and nine months ended October 2, 2016 and September 27, 2015, respectively. | ||||||||
[2] | Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." | ||||||||
[3] | See Note 10, "COMMITMENTS AND CONTINGENCIES," for additional information. | ||||||||
[4] | Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended October 2, 2016 and September 27, 2015. |
SUBSEQUENT EVENT SUBSEQUENT E47
SUBSEQUENT EVENT SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions | Oct. 03, 2016 | Oct. 02, 2016 | Sep. 27, 2015 |
Subsequent Event [Line Items] | |||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | $ 0 | $ 17 | |
Cummins Pacific LLC | |||
Subsequent Event [Line Items] | |||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | ||
Business Combination, Consideration Transferred | $ 97 | ||
Payments to Acquire Businesses, Gross | 17 | ||
Payments to Acquire Businesses Liabilities Paid | 66 | ||
Business Combination Purchase Price Distributed in Future Quarters | 14 | ||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | $ 13 |