Document and Entity Information
Document and Entity Information | 3 Months Ended |
Apr. 02, 2017shares | |
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 | Apr. 2, 2017 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q1 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 167,975,197 |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |||
Apr. 02, 2017 | Apr. 03, 2016 | |||
Income Statement [Abstract] | ||||
NET SALES | [1] | $ 4,589 | $ 4,291 | [2] |
Cost of sales | 3,461 | 3,235 | ||
GROSS MARGIN | 1,128 | 1,056 | ||
OPERATING EXPENSES AND INCOME | ||||
Selling, general and administrative expenses | 537 | 490 | ||
Research, development and engineering expenses | 158 | 166 | [2] | |
Equity, royalty and interest income from investees (Note 4) | 108 | 72 | [2] | |
Other operating income (expense), net | 5 | (2) | ||
OPERATING INCOME | 546 | 470 | ||
Interest income | 2 | 6 | [2] | |
Interest expense (Note 7) | 18 | 19 | ||
Other income (expense), net | 18 | 8 | ||
INCOME BEFORE INCOME TAXES | 548 | 465 | ||
Income tax expense | 143 | 132 | ||
CONSOLIDATED NET INCOME | 405 | 333 | ||
Less: Net income attributable to noncontrolling interests | 9 | 12 | ||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 396 | $ 321 | ||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | ||||
Basic (in dollars per share) | $ 2.36 | $ 1.87 | ||
Diluted (in dollars per share) | $ 2.36 | $ 1.87 | ||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic (in shares) | 167.5 | 171.8 | ||
Dilutive effect of stock compensation awards (in shares) | 0.5 | 0.2 | ||
Diluted (in shares) | 168 | 172 | ||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.025 | $ 0.975 | ||
Sales to nonconsolidated equity investees | $ 267 | $ 242 | ||
[1] | Includes sales to nonconsolidated equity investees of $267 million and $242 million for the three months ended April 2, 2017 and April 3, 2016, respectively. | |||
[2] | In the second quarter of 2016, we realigned our reportable operating segments. The three months ended April 3, 2016, were revised retrospectively to conform with these changes. |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2017 | Apr. 03, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
CONSOLIDATED NET INCOME | $ 405 | $ 333 |
Other comprehensive income (loss), net of tax (Note 10) | ||
Foreign currency translation adjustments | 80 | (57) |
Unrealized gain (loss) on derivatives | 1 | (21) |
Change in pension and other postretirement defined benefit plans | 21 | 9 |
Total other comprehensive income (loss), net of tax | 102 | (69) |
COMPREHENSIVE INCOME | 507 | 264 |
Less: Comprehensive income attributable to noncontrolling interests | 22 | 12 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 485 | $ 252 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Apr. 02, 2017 | Dec. 31, 2016 | |
Current assets | |||
Cash and cash equivalents | $ 1,322 | $ 1,120 | |
Marketable securities (Note 5) | 145 | 260 | |
Total cash, cash equivalents and marketable securities | 1,467 | 1,380 | |
Accounts and notes receivable, net | |||
Trade and other | 2,980 | 2,803 | |
Nonconsolidated equity investees | 267 | 222 | |
Inventories (Note 6) | 2,894 | 2,675 | |
Prepaid expenses and other current assets | 551 | 627 | |
Total current assets | 8,159 | 7,707 | |
Long-term assets | |||
Property, plant and equipment | 7,746 | 7,635 | |
Accumulated depreciation | (3,944) | (3,835) | |
Property, plant and equipment, net | 3,802 | 3,800 | |
Investments and advances related to equity method investees | 1,059 | 946 | |
Goodwill | 482 | 480 | |
Other intangible assets, net | 345 | 332 | |
Pension assets | 785 | 731 | |
Other assets | 1,002 | 1,015 | |
Total assets | 15,634 | 15,011 | |
Current liabilities | |||
Accounts payable (principally trade) | 2,168 | 1,854 | |
Loans payable (Note 7) | [1] | 48 | 41 |
Commercial paper (Note 7) | [2] | 274 | 212 |
Accrued compensation, benefits and retirement costs | 334 | 412 | |
Current portion of accrued product warranty (Note 8) | 352 | 333 | |
Current portion of deferred revenue | 498 | 468 | |
Other accrued expenses | 941 | 970 | |
Current maturities of long-term debt (Note 7) | 47 | 35 | |
Total current liabilities | 4,662 | 4,325 | |
Long-term liabilities | |||
Long-term debt (Note 7) | 1,576 | 1,568 | |
Postretirement benefits other than pensions | 317 | 329 | |
Pensions | 325 | 326 | |
Other liabilities and deferred revenue | 1,278 | 1,289 | |
Total liabilities | 8,158 | 7,837 | |
Commitments and contingencies (Note 9) | |||
Cummins Inc. shareholders' equity | |||
Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.4 shares issued | 2,163 | 2,153 | |
Retained earnings | 11,265 | 11,040 | |
Treasury stock, at cost, 54.4 and 54.2 shares | (4,524) | (4,489) | |
Common stock held by employee benefits trust, at cost, 0.6 and 0.7 shares | (7) | (8) | |
Accumulated other comprehensive loss | |||
Accumulated other comprehensive loss (Note 10) | (1,732) | (1,821) | |
Total Cummins Inc. shareholders' equity | 7,165 | 6,875 | |
Noncontrolling interests | 311 | 299 | |
Total equity | 7,476 | 7,174 | |
Total liabilities and equity | $ 15,634 | $ 15,011 | |
[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] | The weighted average interest rate, inclusive of all brokerage fees, was 0.94 percent and 0.79 percent at April 2, 2017 and December 31, 2016, respectively. |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Apr. 02, 2017 | Dec. 31, 2016 |
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 | 222.3 | 222.4 |
Treasury stock, shares | 54.4 | 54.2 |
Common stock held by employee benefits trust, shares | 0.6 | 0.7 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2017 | Apr. 03, 2016 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Consolidated net income | $ 405 | $ 333 | |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | |||
Depreciation and amortization | 139 | 128 | |
Deferred income taxes | 10 | (2) | |
Equity in income of investees, net of dividends (Note 4) | (83) | (48) | |
Pension contributions in excess of expense (Note 3) | (23) | (50) | |
Other post-retirement benefits payments in excess of expense (Note 3) | (10) | (8) | |
Stock-based compensation expense | 7 | 5 | |
Restructuring charges and other actions, net of cash payments | 0 | (25) | |
Translation and hedging activities | 11 | (14) | |
Changes in current assets and liabilities, net of acquisitions | |||
Accounts and notes receivable | (205) | (98) | |
Inventories | (202) | (54) | |
Other current assets | 73 | 188 | |
Accounts payable | 296 | 107 | |
Accrued expenses | (90) | (283) | |
Changes in other liabilities and deferred revenue | 48 | 78 | |
Other, net | 3 | 10 | |
Net cash provided by operating activities | 379 | 267 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Capital expenditures | (81) | (71) | |
Investments in internal use software | (27) | (13) | |
Investments in and advances to equity investees | (20) | (25) | |
Investments in marketable securities—acquisitions (Note 5) | (26) | (291) | |
Investments in marketable securities—liquidations (Note 5) | [1] | 147 | 35 |
Cash flows from derivatives not designated as hedges | (24) | (26) | |
Other, net | 4 | 3 | |
Net cash used in investing activities | (27) | (388) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from borrowings | 105 | ||
Net borrowings of commercial paper (Note 7) | 62 | 50 | |
Payments on borrowings and capital lease obligations | (11) | (15) | |
Distributions to noncontrolling interests | (10) | (10) | |
Dividend payments on common stock | (171) | (170) | |
Repurchases of common stock | (51) | (575) | |
Other, net | 17 | (21) | |
Net cash used in financing activities | (164) | (636) | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 14 | (39) | |
Net increase (decrease) in cash and cash equivalents | 202 | (796) | |
Cash and cash equivalents at beginning of year | 1,120 | 1,711 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,322 | $ 915 | |
[1] | Gross realized gains and losses from the sale of available-for-sale securities were immaterial. |
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, 2015 | $ 7,750 | $ 556 | $ 1,622 | $ 10,322 | $ (3,735) | $ (11) | $ (1,348) | $ 7,406 | $ 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 333 | 321 | 321 | 12 | |||||
Other comprehensive income (loss), net of tax (Note 11) | (69) | (69) | (69) | 0 | |||||
Issuance of common stock | 2 | 2 | 2 | ||||||
Employee benefits trust activity | 11 | 9 | 2 | 11 | |||||
Repurchases of common stock | (575) | (100) | (475) | (575) | |||||
Cash dividends on common stock | (170) | (170) | (170) | ||||||
Distributions to noncontrolling interests | (10) | (10) | |||||||
Stock based awards, net | 1 | (6) | 7 | 1 | |||||
Acquisition of noncontrolling interests | (13) | (7) | (7) | (6) | |||||
BALANCE at Apr. 03, 2016 | 7,260 | 556 | 1,520 | 10,473 | (4,203) | (9) | (1,417) | 6,920 | 340 |
BALANCE at Dec. 31, 2016 | 7,174 | 556 | 1,597 | 11,040 | (4,489) | (8) | (1,821) | 6,875 | 299 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 405 | 396 | 396 | 9 | |||||
Other comprehensive income (loss), net of tax (Note 11) | 102 | 89 | 89 | 13 | |||||
Employee benefits trust activity | 10 | 9 | 1 | 10 | |||||
Repurchases of common stock | (51) | (51) | (51) | ||||||
Cash dividends on common stock | (171) | (171) | (171) | ||||||
Distributions to noncontrolling interests | (10) | (10) | |||||||
Stock based awards, net | 15 | (1) | 16 | 15 | |||||
Other shareholder transactions | 2 | 2 | 2 | 0 | |||||
BALANCE at Apr. 02, 2017 | $ 7,476 | $ 556 | $ 1,607 | $ 11,265 | $ (4,524) | $ (7) | $ (1,732) | $ 7,165 | $ 311 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 3 Months Ended |
Apr. 02, 2017 | |
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 Cummins Engine Company, a corporation in Columbus, Indiana, as one of the first diesel engine manufacturers. We changed our name to Cummins Inc. in 2001. 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 wholly-owned and independent distributor locations and over 7,400 dealer locations in more than 190 countries and territories. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Apr. 02, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | NOTE 2. BASIS OF PRESENTATION Interim Condensed Financial Statements 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 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. 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, 2016 . Our interim period financial results for the three 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. Reclassifications Certain amounts for prior year periods have been reclassified to conform to the presentation of the current year. Use of Estimates in Preparation of Financial Statements 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, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pension and other postretirement benefit costs, income taxes and deferred tax valuation allowances, lease classification and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. Reporting Period Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The first quarters of 2017 and 2016 ended on April 2 and April 3, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. Weighted-average Diluted Shares Outstanding 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 were as follows: Three months ended April 2, April 3, Options excluded 116,535 1,687,666 Accelerated Share Repurchase On February 9, 2016, we entered into an accelerated share repurchase (ASR) agreement with a third party financial institution to repurchase $500 million of our common stock under our previously announced share repurchase plans. Pursuant to the terms of the agreement, we paid the full $500 million purchase price and received approximately 4.1 million shares at a price of $98.43 per share, representing approximately 80 percent of the shares expected to be repurchased. The unsettled portion of the ASR met the criteria to be accounted for as a forward contract indexed to our stock and qualified as an equity transaction. This resulted in a $100 million reduction to additional paid-in capital during the first quarter of 2016. The initial delivery of shares resulted in a reduction to our common stock outstanding used to calculate earnings per share in the first quarter of 2016. |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 3 Months Ended |
Apr. 02, 2017 | |
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 In millions April 2, April 3, Defined benefit pension plans Voluntary contribution $ 43 $ 48 Mandatory contribution — 12 Defined benefit pension contributions $ 43 $ 60 Other postretirement plans $ 15 $ 13 Defined contribution pension plans $ 29 $ 21 We anticipate making additional defined benefit pension contributions during the remainder of 2017 of $91 million for our U.S. and U.K pension plans. Approximately $133 million of the estimated $134 million of pension contributions for the full year are voluntary. 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 2017 net periodic pension cost to approximate $83 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 April 2, April 3, April 2, April 3, April 2, April 3, Service cost $ 27 $ 23 $ 6 $ 5 $ — $ — Interest cost 26 28 10 13 3 4 Expected return on plan assets (51 ) (51 ) (17 ) (19 ) — — Recognized net actuarial loss 9 7 10 4 2 1 Net periodic benefit cost $ 11 $ 7 $ 9 $ 3 $ 5 $ 5 |
EQUITY, ROYALTY AND INTEREST IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 3 Months Ended |
Apr. 02, 2017 | |
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 In millions April 2, April 3, Distribution entities Komatsu Cummins Chile, Ltda. $ 7 $ 10 North American distributors — 5 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 33 18 Dongfeng Cummins Engine Company, Ltd. 22 7 Chongqing Cummins Engine Company, Ltd. 9 8 All other manufacturers 24 16 Cummins share of net income 95 64 Royalty and interest income 13 8 Equity, royalty and interest income from investees $ 108 $ 72 |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 3 Months Ended |
Apr. 02, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 5. MARKETABLE SECURITIES A summary of marketable securities, all of which are classified as current, was as follows: April 2, 2017 December 31, 2016 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale (1) Debt mutual funds $ 130 $ — $ 130 $ 132 $ — $ 132 Bank debentures — — — 114 — 114 Equity mutual funds 12 1 13 12 — 12 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 144 $ 1 $ 145 $ 260 $ — $ 260 ____________________________________ (1) All marketable securities are classified as Level 2 securities. 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 three months of 2017 and for the year ended 2016. A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows: • Debt mutual funds — The fair value measure for the vast majority of 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. • Bank debentures — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years . The counterparties 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. • 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 — 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 In millions April 2, April 3, Proceeds from sales and maturities of marketable securities (1) $ 147 $ 35 ____________________________________ (1) Gross realized gains and losses from the sale of available-for-sale securities were immaterial. 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) April 2, 1 year or less $ 131 5 - 10 years 1 Total $ 132 |
INVENTORIES
INVENTORIES | 3 Months Ended |
Apr. 02, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 6. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: In millions April 2, December 31, Finished products $ 1,867 $ 1,779 Work-in-process and raw materials 1,145 1,005 Inventories at FIFO cost 3,012 2,784 Excess of FIFO over LIFO (118 ) (109 ) Total inventories $ 2,894 $ 2,675 |
DEBT
DEBT | 3 Months Ended |
Apr. 02, 2017 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 7. DEBT Loans Payable and Commercial Paper Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions April 2, 2017 December 31, 2016 Loans payable (1) $ 48 $ 41 Commercial paper (2) 274 212 ____________________________________ (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) The weighted average interest rate, inclusive of all brokerage fees, was 0.94 percent and 0.79 percent at April 2, 2017 and December 31, 2016 , respectively. Long-term Debt A summary of long-term debt was as follows: In millions April 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 69 51 Unamortized discount (55 ) (56 ) Fair value adjustments due to hedge on indebtedness 43 47 Capital leases 93 88 Total long-term debt 1,623 1,603 Less: Current maturities of long-term debt 47 35 Long-term debt $ 1,576 $ 1,568 Principal payments required on long-term debt during the next five years are as follows: In millions 2017 2018 2019 2020 2021 Principal payments $ 34 $ 45 $ 35 $ 10 $ 4 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, were as follows: In millions April 2, December 31, Fair value of total debt (1) $ 2,150 $ 2,077 Carrying value of total debt 1,945 1,856 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 3 Months Ended |
Apr. 02, 2017 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 8. 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 April 2, April 3, Balance, beginning of year $ 1,414 $ 1,404 Provision for warranties issued 92 93 Deferred revenue on extended warranty contracts sold 48 55 Payments (95 ) (102 ) Amortization of deferred revenue on extended warranty contracts (54 ) (47 ) Changes in estimates for pre-existing warranties 34 — Foreign currency translation (2 ) — Balance, end of period $ 1,437 $ 1,403 Warranty related deferred revenue and the long-term portion of the warranty liability on our April 2, 2017, balance sheet were as follows: In millions April 2, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 224 Current portion of deferred revenue Long-term portion 515 Other liabilities and deferred revenue Total $ 739 Long-term portion of warranty liability $ 346 Other liabilities and deferred revenue |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Apr. 02, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9. 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; product recalls; 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 pursuant to GAAP 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 Charges 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 2016. We concluded based upon additional in-use emission testing performed in 2016, that the Campaign should be expanded to include a larger population of vehicles manufactured by this one OEM. We recorded additional charges of $138 million in 2016 to reflect the estimated cost of our participation in the 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. The campaign began in the fourth quarter of 2016. The remaining accrual of $181 million related to the Campaign is included in ''Other accrued expenses'' in our Condensed Consolidated Balance Sheets. Guarantees and Commitments Periodically, 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 April 2, 2017, the maximum potential loss related to these guarantees was $43 million . We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At April 2, 2017, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $119 million , of which $41 million relates to a contract with a components supplier that extends to 2018 and $35 million relates to a contract with a power systems supplier that extends to 2019. 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 April 2, 2017, the total commitments under these contracts were $24 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 $83 million at April 2, 2017 . 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 counterparty 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. The accrual related to the Campaign which is included in "Other accrued expenses" in our Balance Sheets $ 181 |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 3 Months Ended |
Apr. 02, 2017 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 10. ACCUMULATED OTHER COMPREHENSIVE LOSS Following are the changes in accumulated other comprehensive income (loss) by component : Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount — (58 ) — (26 ) (84 ) $ — $ (84 ) Tax benefit (expense) — 1 — 4 5 — 5 After tax amount — (57 ) — (22 ) (79 ) — (79 ) Amounts reclassified from accumulated other comprehensive loss (1)(2) 9 — — 1 10 — 10 Net current period other comprehensive income (loss) 9 (57 ) — (21 ) (69 ) $ — $ (69 ) Balance at April 3, 2016 $ (645 ) $ (753 ) $ (2 ) $ (17 ) $ (1,417 ) Balance at December 31, 2016 $ (685 ) $ (1,127 ) $ (1 ) $ (8 ) $ (1,821 ) Other comprehensive income before reclassifications Before tax amount 8 75 1 (6 ) 78 $ 13 $ 91 Tax benefit (expense) (3 ) (8 ) — 2 (9 ) — (9 ) After tax amount 5 67 1 (4 ) 69 13 82 Amounts reclassified from accumulated other comprehensive loss (1)(2) 16 — (1 ) 5 20 — 20 Net current period other comprehensive income (loss) 21 67 — 1 89 $ 13 $ 102 Balance at April 2, 2017 $ (664 ) $ (1,060 ) $ (1 ) $ (7 ) $ (1,732 ) ____________________________________ (1) Amounts are net of tax. (2) Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
OPERATING SEGMENTS
OPERATING SEGMENTS | 3 Months Ended |
Apr. 02, 2017 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 11. 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. Our reportable operating segments consist of Engine, Distribution, Components and Power Systems. This 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, marine and rail), standby and prime power generator sets, alternators and other power components. 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. 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. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. 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 is shown in the table below: In millions Engine Distribution Components Power Systems Non-segment Items (1) Total Three months ended April 2, 2017 External sales $ 1,457 $ 1,637 $ 980 $ 515 $ — $ 4,589 Intersegment sales 566 8 364 367 (1,305 ) — Total sales 2,023 1,645 1,344 882 (1,305 ) 4,589 Depreciation and amortization (2) 44 30 37 28 — 139 Research, development and engineering expenses 54 4 50 50 — 158 Equity, royalty and interest income from investees 72 11 13 12 — 108 Interest income 1 1 — — — 2 Segment EBIT 229 100 179 57 1 566 Three months ended April 3, 2016 (3) External sales $ 1,489 $ 1,458 $ 897 $ 447 $ — $ 4,291 Intersegment sales 487 5 340 361 (1,193 ) — Total sales 1,976 1,463 1,237 808 (1,193 ) 4,291 Depreciation and amortization (2) 39 28 31 29 — 127 Research, development and engineering expenses 57 4 56 49 — 166 Equity, royalty and interest income from investees 36 18 8 10 — 72 Interest income 2 1 1 2 — 6 Segment EBIT 197 87 163 46 (9 ) 484 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 2, 2017 and April 3, 2016 . (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 were less than $1 million and $1 million for the three months ended April 2, 2017 and April 3, 2016, respectively. (3) In the second quarter of 2016, we realigned our reportable operating segments. The three months ended April 3, 2016, were revised retrospectively to conform with these changes. 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 In millions April 2, April 3, Total segment EBIT $ 566 $ 484 Less: Interest expense 18 19 Income before income taxes $ 548 $ 465 |
RECENTLY ADOPTED AND RECENTLY I
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Apr. 02, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | NOTE 12. RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Recently Adopted In March 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the accounting for stock compensation which became effective for us beginning January 1, 2017. We adopted certain provisions prospectively in accordance with the standard, while others were required to be adopted retrospectively. The amendment replaced the requirement to record excess tax benefits and certain tax deficiencies in additional paid-in capital (APIC) with prospectively recording all excess tax benefits and tax deficiencies as income tax expense / benefit in the income statement. Excess tax benefits and deficiencies are required to be recorded as discrete items in the period in which they occur and were not material for three months ended April 2, 2017. In addition, the standard impacted our Condensed Consolidated Statements of Cash Flows , as excess tax benefits are now required to be presented as an operating activity (we elected a retrospective presentation) and the cash paid to tax authorities when shares are withheld to satisfy the employer's statutory income tax withholding obligation are required to be presented as a financing activity (requiring retrospective presentation). This resulted in a net reclassification of $4 million from operating to financing activities for the three months ended April 3, 2016. Finally, in accordance with the standard, we elected to continue our historical approach of estimating forfeitures during the award's vesting period and adjusting our estimate when it is no longer probable that the employee will fulfill the service condition. The adoption of the standard was not material to our diluted earnings per common share. Accounting Pronouncements Issued But Not Yet Effective In March 2017, the FASB amended its standards related to the presentation of pension and other postretirement benefit costs in the financial statements. Under the new standard, we will be required to separate service costs from all other elements of pension costs and reflect the other elements of pension costs outside of operating income in our Consolidated Statements of Income . This presentation is required to be reflected retrospectively. In addition, the standard will limit the amount eligible for capitalization (into inventory or self-constructed assets) to the amount of service cost. This portion of the standard will be applied on a prospective basis. The new standard is required to be adopted by us on January 1, 2018. While we are still evaluating the impact of this standard, the change in presentation requirements will likely result in a decrease in operating income primarily due to the requirement to present the effects of expected return on plan assets outside of operating income. In August 2016, the 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 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 occur in a manner 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 of an arrangement. The new standard is effective 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 that a change will be required related to our accounting for remanufactured product sales that include an exchange of the used product, referred to as core. Revenue is not currently recognized related to the core component unless the used product is not returned. Under the new standard, the transaction will be accounted for as a gross sale and a purchase of inventory. As a result the exchange will increase both sales and cost of sales, in equal amounts, related to core. This will not impact gross margin dollars, but will impact the gross margin percentage. We are still quantifying the amount of this change. We have also 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 EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Apr. 02, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13. SUBSEQUENT EVENT On April 10, 2017, we entered into an agreement to form a joint venture with Eaton Corporation PLC, subject to regulatory approvals. We will purchase a 50 percent interest in the new venture named Eaton Cummins Automated Transmission Technologies, for approximately $600 million in cash. The joint venture will design, assemble, sell and support medium-duty and heavy-duty automated transmissions for the commercial vehicle market, including new product launches. We expect the transaction to close in the third quarter of 2017, at which time we will consolidate the results of the joint venture in our Components segment as we have a majority voting interest in the venture by virtue of a tie-breaking vote on the board of directors. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Options excluded from diluted earnings per share | The options excluded from diluted earnings per share were as follows: Three months ended April 2, April 3, Options excluded 116,535 1,687,666 |
PENSION AND OTHER POSTRETIREM22
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
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 In millions April 2, April 3, Defined benefit pension plans Voluntary contribution $ 43 $ 48 Mandatory contribution — 12 Defined benefit pension contributions $ 43 $ 60 Other postretirement plans $ 15 $ 13 Defined contribution pension plans $ 29 $ 21 |
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 April 2, April 3, April 2, April 3, April 2, April 3, Service cost $ 27 $ 23 $ 6 $ 5 $ — $ — Interest cost 26 28 10 13 3 4 Expected return on plan assets (51 ) (51 ) (17 ) (19 ) — — Recognized net actuarial loss 9 7 10 4 2 1 Net periodic benefit cost $ 11 $ 7 $ 9 $ 3 $ 5 $ 5 |
EQUITY, ROYALTY AND INTEREST 23
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
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 In millions April 2, April 3, Distribution entities Komatsu Cummins Chile, Ltda. $ 7 $ 10 North American distributors — 5 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 33 18 Dongfeng Cummins Engine Company, Ltd. 22 7 Chongqing Cummins Engine Company, Ltd. 9 8 All other manufacturers 24 16 Cummins share of net income 95 64 Royalty and interest income 13 8 Equity, royalty and interest income from investees $ 108 $ 72 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
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: April 2, 2017 December 31, 2016 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale (1) Debt mutual funds $ 130 $ — $ 130 $ 132 $ — $ 132 Bank debentures — — — 114 — 114 Equity mutual funds 12 1 13 12 — 12 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 144 $ 1 $ 145 $ 260 $ — $ 260 ____________________________________ (1) All marketable securities are classified as Level 2 securities. 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 three months of 2017 and for the year ended 2016. |
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 In millions April 2, April 3, Proceeds from sales and maturities of marketable securities (1) $ 147 $ 35 ____________________________________ (1) Gross realized gains and losses from the sale of available-for-sale securities were immaterial |
Summary of fair value of available-for-sale investments with contractual maturities | 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) April 2, 1 year or less $ 131 5 - 10 years 1 Total $ 132 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are stated at the lower of cost or market. Inventories included the following: In millions April 2, December 31, Finished products $ 1,867 $ 1,779 Work-in-process and raw materials 1,145 1,005 Inventories at FIFO cost 3,012 2,784 Excess of FIFO over LIFO (118 ) (109 ) Total inventories $ 2,894 $ 2,675 |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Short-term Debt | Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions April 2, 2017 December 31, 2016 Loans payable (1) $ 48 $ 41 Commercial paper (2) 274 212 ____________________________________ (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) The weighted average interest rate, inclusive of all brokerage fees, was 0.94 percent and 0.79 percent at April 2, 2017 and December 31, 2016 , respectively. |
Summary of long-term debt | A summary of long-term debt was as follows: In millions April 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 69 51 Unamortized discount (55 ) (56 ) Fair value adjustments due to hedge on indebtedness 43 47 Capital leases 93 88 Total long-term debt 1,623 1,603 Less: Current maturities of long-term debt 47 35 Long-term debt $ 1,576 $ 1,568 |
Principal repayments on long-term debt | Principal payments required on long-term debt during the next five years are as follows: In millions 2017 2018 2019 2020 2021 Principal payments $ 34 $ 45 $ 35 $ 10 $ 4 |
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, were as follows: In millions April 2, December 31, Fair value of total debt (1) $ 2,150 $ 2,077 Carrying value of total debt 1,945 1,856 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
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 April 2, April 3, Balance, beginning of year $ 1,414 $ 1,404 Provision for warranties issued 92 93 Deferred revenue on extended warranty contracts sold 48 55 Payments (95 ) (102 ) Amortization of deferred revenue on extended warranty contracts (54 ) (47 ) Changes in estimates for pre-existing warranties 34 — Foreign currency translation (2 ) — Balance, end of period $ 1,437 $ 1,403 |
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 April 2, 2017, balance sheet were as follows: In millions April 2, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 224 Current portion of deferred revenue Long-term portion 515 Other liabilities and deferred revenue Total $ 739 Long-term portion of warranty liability $ 346 Other liabilities and deferred revenue |
ACCUMULATED OTHER COMPREHENSI28
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
Equity [Abstract] | |
Changes in accumulated other comprehensive income (loss) by component | Following are the changes in accumulated other comprehensive income (loss) by component : Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total other comprehensive income (loss) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount — (58 ) — (26 ) (84 ) $ — $ (84 ) Tax benefit (expense) — 1 — 4 5 — 5 After tax amount — (57 ) — (22 ) (79 ) — (79 ) Amounts reclassified from accumulated other comprehensive loss (1)(2) 9 — — 1 10 — 10 Net current period other comprehensive income (loss) 9 (57 ) — (21 ) (69 ) $ — $ (69 ) Balance at April 3, 2016 $ (645 ) $ (753 ) $ (2 ) $ (17 ) $ (1,417 ) Balance at December 31, 2016 $ (685 ) $ (1,127 ) $ (1 ) $ (8 ) $ (1,821 ) Other comprehensive income before reclassifications Before tax amount 8 75 1 (6 ) 78 $ 13 $ 91 Tax benefit (expense) (3 ) (8 ) — 2 (9 ) — (9 ) After tax amount 5 67 1 (4 ) 69 13 82 Amounts reclassified from accumulated other comprehensive loss (1)(2) 16 — (1 ) 5 20 — 20 Net current period other comprehensive income (loss) 21 67 — 1 89 $ 13 $ 102 Balance at April 2, 2017 $ (664 ) $ (1,060 ) $ (1 ) $ (7 ) $ (1,732 ) ____________________________________ (1) Amounts are net of tax. (2) Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 3 Months Ended |
Apr. 02, 2017 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments is shown in the table below: In millions Engine Distribution Components Power Systems Non-segment Items (1) Total Three months ended April 2, 2017 External sales $ 1,457 $ 1,637 $ 980 $ 515 $ — $ 4,589 Intersegment sales 566 8 364 367 (1,305 ) — Total sales 2,023 1,645 1,344 882 (1,305 ) 4,589 Depreciation and amortization (2) 44 30 37 28 — 139 Research, development and engineering expenses 54 4 50 50 — 158 Equity, royalty and interest income from investees 72 11 13 12 — 108 Interest income 1 1 — — — 2 Segment EBIT 229 100 179 57 1 566 Three months ended April 3, 2016 (3) External sales $ 1,489 $ 1,458 $ 897 $ 447 $ — $ 4,291 Intersegment sales 487 5 340 361 (1,193 ) — Total sales 1,976 1,463 1,237 808 (1,193 ) 4,291 Depreciation and amortization (2) 39 28 31 29 — 127 Research, development and engineering expenses 57 4 56 49 — 166 Equity, royalty and interest income from investees 36 18 8 10 — 72 Interest income 2 1 1 2 — 6 Segment EBIT 197 87 163 46 (9 ) 484 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 2, 2017 and April 3, 2016 . (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." |
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 In millions April 2, April 3, Total segment EBIT $ 566 $ 484 Less: Interest expense 18 19 Income before income taxes $ 548 $ 465 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 3 Months Ended |
Apr. 02, 2017countrylocation | |
Nature of Operations | |
Company Owned and Independent Distributor Locations Number | 600 |
Dealer Locations Number | 7,400 |
Countries and Territories Number | country | 190 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - USD ($) $ / shares in Units, $ in Millions | Feb. 09, 2016 | Apr. 02, 2017 | Apr. 03, 2016 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | |||
Treasury Stock, Value, Acquired, Cost Method | $ 51 | $ 575 | |
Options excluded (in shares) | 116,535 | 1,687,666 | |
Accelerated Share Repurchases, Settlement (Payment) or Receipt | $ 500 | ||
Treasury Stock, Shares, Acquired | 4,100,000 | ||
Accelerated Share Repurchases, Initial Price Paid Per Share | $ 98.43 | ||
PercentageOfStockRepurchasedAsPercentageOfTotalAmountOfSharesEstimateedUnderAcceleratedShareRepurchaseAgreement | 80.00% | ||
Additional Paid-in Capital | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | |||
Treasury Stock, Value, Acquired, Cost Method | $ 100 |
PENSION AND OTHER POSTRETIREM32
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Apr. 02, 2017 | Apr. 03, 2016 | |
Pension and other postretirement benefits | ||
Defined Benefit Plan, Contributions by Employer | $ 43 | $ 60 |
Defined Contribution Plan, Cost Recognized | 29 | 21 |
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year | 91 | |
Defined Benefit Plan, Expected Contributions in Current Fiscal Year | 134 | |
Voluntary contributions | ||
Pension and other postretirement benefits | ||
Defined Benefit Plan, Contributions by Employer | 43 | 48 |
Defined Benefit Plan, Expected Contributions in Current Fiscal Year | 133 | |
Mandatory contribution | ||
Pension and other postretirement benefits | ||
Defined Benefit Plan, Contributions by Employer | 0 | 12 |
Pension Plan | ||
Pension and other postretirement benefits | ||
Defined Benefit Plan, Future Amortization of Gain (Loss) | 83 | |
Pension - U.S. Plans | ||
Components of Net Periodic Benefit Cost | ||
Service cost | 27 | 23 |
Interest cost | 26 | 28 |
Expected return on plan assets | (51) | (51) |
Recognized net actuarial loss | 9 | 7 |
Net periodic benefit cost | 11 | 7 |
Pension - U.K. Plans | ||
Components of Net Periodic Benefit Cost | ||
Service cost | 6 | 5 |
Interest cost | 10 | 13 |
Expected return on plan assets | (17) | (19) |
Recognized net actuarial loss | 10 | 4 |
Net periodic benefit cost | 9 | 3 |
Other Postretirement Benefits | ||
Pension and other postretirement benefits | ||
Defined Benefit Plan, Contributions by Employer | 15 | 13 |
Components of Net Periodic Benefit Cost | ||
Service cost | 0 | 0 |
Interest cost | 3 | 4 |
Expected return on plan assets | 0 | 0 |
Recognized net actuarial loss | 2 | 1 |
Net periodic benefit cost | $ 5 | $ 5 |
EQUITY, ROYALTY AND INTEREST 33
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2017 | Apr. 03, 2016 | ||
Equity, royalty and interest income from investees | |||
Cummins share of net income | $ 95 | $ 64 | |
Royalty and interest income | 13 | 8 | |
Equity, royalty and interest income from investees | 108 | 72 | [1] |
Distribution - Komatsu Cummins Chile, Ltda. | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | 7 | 10 | |
Distribution - North American distributors | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | 5 | ||
Manufacturing - Beijing Foton Cummins Engine Company | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | 33 | 18 | |
Dongfeng Cummins Engine Company Ltd [Member] | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | 22 | 7 | |
Manufacturing - Chongqing Cummins Engine Company, Ltd. | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | 9 | 8 | |
Manufacturing - All other manufacturers | |||
Equity, royalty and interest income from investees | |||
Cummins share of net income | $ 24 | $ 16 | |
[1] | In the second quarter of 2016, we realigned our reportable operating segments. The three months ended April 3, 2016, were revised retrospectively to conform with these changes. |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Apr. 02, 2017 | Apr. 03, 2016 | Dec. 31, 2016 | ||
Schedule of Available-for-sale Securities | ||||
Cost | $ 144 | $ 260 | ||
Gross unrealized gains/(losses) | 1 | 0 | ||
Estimated fair value | 145 | 260 | ||
Proceeds from sales and maturities of marketable securities (1) | [1] | 147 | $ 35 | |
Fair value of available-for-sale investments by contractual maturity | ||||
1 year or less | 131 | |||
5-10 years | 1 | |||
Total | 132 | |||
Significant other observable inputs (Level 2) | Debt mutual funds | ||||
Schedule of Available-for-sale Securities | ||||
Cost | 130 | 132 | ||
Gross unrealized gains/(losses) | 0 | 0 | ||
Estimated fair value | [2] | 130 | 132 | |
Significant other observable inputs (Level 2) | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Cost | 0 | 114 | ||
Gross unrealized gains/(losses) | 0 | 0 | ||
Estimated fair value | [2] | 0 | 114 | |
Significant other observable inputs (Level 2) | Equity mutual funds | ||||
Schedule of Available-for-sale Securities | ||||
Cost | 12 | 12 | ||
Gross unrealized gains/(losses) | 1 | 0 | ||
Estimated fair value | [2] | 13 | 12 | |
Significant other observable inputs (Level 2) | Government debt securities | ||||
Schedule of Available-for-sale Securities | ||||
Cost | 2 | 2 | ||
Gross unrealized gains/(losses) | 0 | 0 | ||
Estimated fair value | [2] | $ 2 | $ 2 | |
Minimum | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Time Deposits, Description | three months | |||
Maximum | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Time Deposits, Description | five years | |||
[1] | Gross realized gains and losses from the sale of available-for-sale securities were immaterial. | |||
[2] | All marketable securities are classified as Level 2 securities. 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 three months of 2017 and for the year ended 2016. |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Apr. 02, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 1,867 | $ 1,779 |
Work-in-process and raw materials | 1,145 | 1,005 |
Inventories at FIFO cost | 3,012 | 2,784 |
Excess of FIFO over LIFO | (118) | (109) |
Total inventories | $ 2,894 | $ 2,675 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Millions | Apr. 02, 2017 | Dec. 31, 2016 | |
Short-term Debt [Line Items] | |||
Loans payable | [1] | $ 48 | $ 41 |
Commercial paper | [2] | 274 | 212 |
Long-term debt | |||
Unamortized discount | (55) | (56) | |
Fair value adjustment due to hedge on indebtedness | 43 | 47 | |
Capital leases | 93 | 88 | |
Total long-term debt | 1,623 | 1,603 | |
Current maturities of long-term debt | 47 | 35 | |
Long-term debt | 1,576 | 1,568 | |
Principal payments required on long-term debt | |||
2,017 | 34 | ||
2,018 | 45 | ||
2,019 | 35 | ||
2,020 | 10 | ||
2,021 | 4 | ||
Fair value | |||
Fair value of total debt | [3] | 2,150 | 2,077 |
Carrying value of total debt | $ 1,945 | $ 1,856 | |
Commercial Paper | |||
Short-term Debt [Line Items] | |||
Short-term Debt, Weighted Average Interest Rate | [2] | 0.94% | 0.79% |
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 | $ 69 | $ 51 | |
[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] | The weighted average interest rate, inclusive of all brokerage fees, was 0.94 percent and 0.79 percent at April 2, 2017 and December 31, 2016, respectively. | ||
[3] | The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2017 | Apr. 03, 2016 | Dec. 31, 2016 | |
Product Warranty Liability: | |||
Balance, beginning of year | $ 1,414 | $ 1,404 | |
Provision for warranties issued | 92 | 93 | |
Deferred revenue on extended warranty contracts sold | 48 | 55 | |
Payments | (95) | (102) | |
Amortization of deferred revenue on extended warranty contracts | 54 | 47 | |
Changes in estimates for pre-existing warranties | 34 | 0 | |
Foreign currency translation | (2) | 0 | |
Balance, end of period | 1,437 | $ 1,403 | |
Product Warranty Liability | |||
Current portion of deferred revenue | 498 | $ 468 | |
Total deferred revenue related to extended coverage programs | 739 | ||
Current portion of deferred revenue | |||
Product Warranty Liability | |||
Current portion of deferred revenue | 224 | ||
Other liabilities and deferred revenue | |||
Product Warranty Liability | |||
Deferred Revenue | 515 | ||
Long-term portion of warranty liability | $ 346 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Apr. 02, 2017 | Dec. 31, 2015 | Dec. 31, 2016 | |
Guarantee Obligations | |||
Loss Contingency Accrual | $ 181 | ||
Maximum | |||
Guarantee Obligations | |||
Forward Contract, Term | 2 years | ||
Other Guarantees and Commitments | |||
Guarantee Obligations | |||
Guarantor obligations, maximum potential loss | $ 43 | ||
Long-term purchase commitment, penalty exposure | 119 | ||
Total commitments under commodity contracts | 24 | ||
Components Supplier | |||
Guarantee Obligations | |||
Long-term purchase commitment, penalty exposure | 41 | ||
Power Systems Supplier | |||
Guarantee Obligations | |||
Long-term purchase commitment, penalty exposure | 35 | ||
Performance bonds and other performance-related guarantees | |||
Guarantee Obligations | |||
Guarantor Obligations, Current Carrying Value | $ 83 | ||
Engine | |||
Guarantee Obligations | |||
Loss Contingency, Loss in Period | $ 60 | $ 138 |
ACCUMULATED OTHER COMPREHENSI39
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Apr. 02, 2017 | Apr. 03, 2016 | ||
Changes in accumulated other comprehensive income (loss) by component: | |||
Balance at the beginning of the period | $ (1,821) | ||
Before tax amount | 91 | $ (84) | |
Tax benefit (expense) | (9) | 5 | |
After tax amount | 82 | (79) | |
Net current period other comprehensive income (loss) | 102 | (69) | |
Balance at the end of the period | (1,732) | ||
Reclassified out of accumulated other comprehensive income (loss) | |||
Changes in accumulated other comprehensive income (loss) by component: | |||
Amounts reclassified from accumulated other comprehensive loss | [1],[2] | 20 | 10 |
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 | (685) | (654) | |
Before tax amount | 8 | 0 | |
Tax benefit (expense) | (3) | 0 | |
After tax amount | 5 | 0 | |
Net current period other comprehensive income (loss) | 21 | 9 | |
Balance at the end of the period | (664) | (645) | |
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 loss | [1],[2] | 16 | 9 |
Foreign currency translation adjustment | |||
Changes in accumulated other comprehensive income (loss) by component: | |||
Balance at the beginning of the period | (1,127) | (696) | |
Before tax amount | 75 | (58) | |
Tax benefit (expense) | (8) | 1 | |
After tax amount | 67 | (57) | |
Net current period other comprehensive income (loss) | 67 | (57) | |
Balance at the end of the period | (1,060) | (753) | |
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 loss | [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) | (2) | |
Before tax amount | 1 | 0 | |
Tax benefit (expense) | 0 | 0 | |
After tax amount | 1 | 0 | |
Net current period other comprehensive income (loss) | 0 | 0 | |
Balance at the end of the period | (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 loss | [1],[2] | (1) | 0 |
Unrealized gain (loss) on derivatives | |||
Changes in accumulated other comprehensive income (loss) by component: | |||
Balance at the beginning of the period | (8) | 4 | |
Before tax amount | (6) | (26) | |
Tax benefit (expense) | 2 | 4 | |
After tax amount | (4) | (22) | |
Net current period other comprehensive income (loss) | 1 | (21) | |
Balance at the end of the period | (7) | (17) | |
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 loss | [1],[2] | 5 | 1 |
Total attributable to Cummins Inc. | |||
Changes in accumulated other comprehensive income (loss) by component: | |||
Balance at the beginning of the period | (1,821) | (1,348) | |
Before tax amount | 78 | (84) | |
Tax benefit (expense) | (9) | 5 | |
After tax amount | 69 | (79) | |
Net current period other comprehensive income (loss) | 89 | (69) | |
Balance at the end of the period | (1,732) | (1,417) | |
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 loss | [1],[2] | 20 | 10 |
Noncontrolling interests | |||
Changes in accumulated other comprehensive income (loss) by component: | |||
Before tax amount | 13 | 0 | |
After tax amount | 13 | 0 | |
Net current period other comprehensive income (loss) | $ 13 | 0 | |
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 loss | [1],[2] | $ 0 | |
[1] | Amounts are net of tax. | ||
[2] | Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Apr. 02, 2017 | Apr. 03, 2016 | |||
Operating results: | ||||
Total sales | [1] | $ 4,589 | $ 4,291 | [2] |
Depreciation and amortization | [3] | 139 | 127 | [2] |
Research, development and engineering expenses | 158 | 166 | [2] | |
Equity, royalty and interest income from investees | 108 | 72 | [2] | |
Interest income | 2 | 6 | [2] | |
Segment EBIT | 566 | 484 | [2] | |
Less: Interest expense | 18 | 19 | ||
INCOME BEFORE INCOME TAXES | 548 | 465 | ||
Amortization of Debt Discount (Premium) | 0 | 1 | ||
Engine | ||||
Operating results: | ||||
Total sales | 2,023 | 1,976 | [2] | |
Depreciation and amortization | [3] | 44 | 39 | [2] |
Research, development and engineering expenses | 54 | 57 | [2] | |
Equity, royalty and interest income from investees | 72 | 36 | [2] | |
Interest income | 1 | 2 | [2] | |
Segment EBIT | 229 | 197 | [2] | |
Distribution | ||||
Operating results: | ||||
Total sales | 1,645 | 1,463 | [2] | |
Depreciation and amortization | [3] | 30 | 28 | [2] |
Research, development and engineering expenses | 4 | 4 | [2] | |
Equity, royalty and interest income from investees | 11 | 18 | [2] | |
Interest income | 1 | 1 | [2] | |
Segment EBIT | 100 | 87 | [2] | |
Components | ||||
Operating results: | ||||
Total sales | 1,344 | 1,237 | [2] | |
Depreciation and amortization | [3] | 37 | 31 | [2] |
Research, development and engineering expenses | 50 | 56 | [2] | |
Equity, royalty and interest income from investees | 13 | 8 | [2] | |
Interest income | 0 | 1 | [2] | |
Segment EBIT | 179 | 163 | [2] | |
Power Systems | ||||
Operating results: | ||||
Total sales | 882 | 808 | [2] | |
Depreciation and amortization | [3] | 28 | 29 | [2] |
Research, development and engineering expenses | 50 | 49 | [2] | |
Equity, royalty and interest income from investees | 12 | 10 | [2] | |
Interest income | 0 | 2 | [2] | |
Segment EBIT | 57 | 46 | [2] | |
Non-segment items | ||||
Operating results: | ||||
Total sales | [4] | (1,305) | (1,193) | [2] |
Segment EBIT | [4] | 1 | (9) | [2] |
External Sales | ||||
Operating results: | ||||
Total sales | 4,589 | 4,291 | [2] | |
External Sales | Engine | ||||
Operating results: | ||||
Total sales | 1,457 | 1,489 | [2] | |
External Sales | Distribution | ||||
Operating results: | ||||
Total sales | 1,637 | 1,458 | [2] | |
External Sales | Components | ||||
Operating results: | ||||
Total sales | 980 | 897 | [2] | |
External Sales | Power Systems | ||||
Operating results: | ||||
Total sales | 515 | 447 | [2] | |
Intersegment sales | Engine | ||||
Operating results: | ||||
Total sales | 566 | 487 | [2] | |
Intersegment sales | Distribution | ||||
Operating results: | ||||
Total sales | 8 | 5 | [2] | |
Intersegment sales | Components | ||||
Operating results: | ||||
Total sales | 364 | 340 | [2] | |
Intersegment sales | Power Systems | ||||
Operating results: | ||||
Total sales | 367 | 361 | [2] | |
Intersegment sales | Non-segment items | ||||
Operating results: | ||||
Total sales | [4] | $ (1,305) | $ (1,193) | [2] |
[1] | Includes sales to nonconsolidated equity investees of $267 million and $242 million for the three months ended April 2, 2017 and April 3, 2016, respectively. | |||
[2] | In the second quarter of 2016, we realigned our reportable operating segments. The three months ended April 3, 2016, were revised retrospectively to conform with these changes. | |||
[3] | 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 were less than $1 million and $1 million for the three months ended April 2, 2017 and April 3, 2016, respectively. | |||
[4] | Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended April 2, 2017 and April 3, 2016. |
RECENTLY ADOPTED AND RECENTLY41
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) $ in Millions | 3 Months Ended |
Apr. 03, 2016USD ($) | |
Accounting Changes and Reclassifications [Abstract] | |
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | $ 4 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Eaton Cummins Automated Transmission Technologies [Member] - Estimate $ in Millions | Apr. 03, 2017USD ($) |
Subsequent Event [Line Items] | |
Equity Method Investment, Ownership Percentage | 50.00% |
Payments to Acquire Interest in Joint Venture | $ 600 |