Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended |
Sep. 28, 2014 | |
Document and Entity Information | ' |
Entity Registrant Name | 'CUMMINS INC |
Entity Central Index Key | '0000026172 |
Document Type | '10-Q |
Document Period End Date | 28-Sep-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Entity Current Reporting Status | 'Yes |
Entity Filer Category | 'Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 182,691,807 |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q3 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, except Per Share data, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | ||||
Income Statement [Abstract] | ' | ' | ' | ' | ||||
NET SALES | $4,890 | [1] | $4,266 | [1] | $14,131 | [1] | $12,713 | [1] |
Cost of sales | 3,606 | 3,185 | 10,543 | 9,570 | ||||
GROSS MARGIN | 1,284 | 1,081 | 3,588 | 3,143 | ||||
OPERATING EXPENSES AND INCOME | ' | ' | ' | ' | ||||
Selling, general and administrative expenses | 529 | 464 | 1,527 | 1,344 | ||||
Research, development and engineering expenses | 198 | 173 | 567 | 532 | ||||
Equity, royalty and interest income from investees (Note 5) | 99 | 91 | 294 | 281 | ||||
Other operating income (expense), net | 3 | -11 | -4 | 0 | ||||
OPERATING INCOME | 659 | 524 | 1,784 | 1,548 | ||||
Interest income | 6 | 6 | 17 | 21 | ||||
Interest expense | 15 | 8 | 47 | 22 | ||||
Other income (expense), net | 19 | 6 | 68 | 25 | ||||
INCOME BEFORE INCOME TAXES | 669 | 528 | 1,822 | 1,572 | ||||
Income tax expense (Note 6) | 230 | 154 | 553 | 445 | ||||
CONSOLIDATED NET INCOME | 439 | 374 | 1,269 | 1,127 | ||||
Less: Net income attributable to noncontrolling interests | 16 | 19 | 62 | 76 | ||||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $423 | $355 | $1,207 | $1,051 | ||||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | ' | ' | ' | ' | ||||
Basic (in dollars per share) | $2.32 | $1.91 | $6.59 | $5.61 | ||||
Diluted (in dollars per share) | $2.32 | $1.90 | $6.58 | $5.60 | ||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ' | ' | ' | ' | ||||
Basic (in shares) | 182.2 | 186 | 183.1 | 187.4 | ||||
Dilutive effect of stock compensation awards (in shares) | 0.5 | 0.5 | 0.4 | 0.4 | ||||
Diluted (in shares) | 182.7 | 186.5 | 183.5 | 187.8 | ||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $0.78 | $0.63 | $2.03 | $1.63 | ||||
[1] | Includes sales to nonconsolidated equity investees of $518 million and $1,656 million and $553 million and $1,681 million for the three and nine month periods ended September 28, 2014 and September 29, 2013, respectively. |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Income Statement [Abstract] | ' | ' | ' | ' |
Sales to nonconsolidated equity investees | $518 | $553 | $1,656 | $1,681 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Statement of Comprehensive Income [Abstract] | ' | ' | ' | ' |
CONSOLIDATED NET INCOME | $439 | $374 | $1,269 | $1,127 |
Other comprehensive income (loss), net of tax (Note 13) | ' | ' | ' | ' |
Foreign currency translation adjustments | -172 | 95 | -62 | -101 |
Unrealized gain (loss) on derivatives | -5 | 10 | 0 | -2 |
Change in pension and other postretirement defined benefit plans | 14 | 16 | 28 | 56 |
Unrealized gain (loss) on marketable securities | -1 | 1 | -12 | -2 |
Total other comprehensive income (loss), net of tax | -164 | 122 | -46 | -49 |
COMPREHENSIVE INCOME | 275 | 496 | 1,223 | 1,078 |
Less: Comprehensive income attributable to noncontrolling interest | 10 | 10 | 59 | 45 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $265 | $486 | $1,164 | $1,033 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 28, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $2,328 | $2,699 |
Marketable securities (Note 7) | 53 | 150 |
Total cash, cash equivalents and marketable securities | 2,381 | 2,849 |
Accounts and notes receivable, net | ' | ' |
Trade and other | 2,774 | 2,362 |
Nonconsolidated equity investees | 285 | 287 |
Inventories (Note 8) | 2,833 | 2,381 |
Prepaid expenses and other current assets | 795 | 760 |
Total current assets | 9,068 | 8,639 |
Long-term assets | ' | ' |
Property, plant and equipment | 6,899 | 6,410 |
Accumulated depreciation | -3,435 | -3,254 |
Property, plant and equipment, net | 3,464 | 3,156 |
Investments and advances related to equity method investees (Note 5) | 981 | 931 |
Goodwill | 465 | 461 |
Other intangible assets, net | 346 | 357 |
Prepaid pensions | 701 | 514 |
Other assets | 619 | 670 |
Total assets | 15,644 | 14,728 |
Current liabilities | ' | ' |
Loans payable | 78 | 17 |
Accounts payable (principally trade) | 1,930 | 1,557 |
Current maturities of long-term debt (Note 9) | 27 | 51 |
Current portion of accrued product warranty (Note 10) | 351 | 360 |
Accrued compensation, benefits and retirement costs | 507 | 433 |
Deferred revenue | 328 | 285 |
Taxes payable (including taxes on income) | 134 | 99 |
Other accrued expenses | 683 | 566 |
Total current liabilities | 4,038 | 3,368 |
Long-term liabilities | ' | ' |
Long-term debt (Note 9) | 1,584 | 1,672 |
Pensions | 234 | 232 |
Postretirement benefits other than pensions | 333 | 356 |
Other liabilities and deferred revenue | 1,358 | 1,230 |
Total liabilities | 7,547 | 6,858 |
Cummins Inc. shareholders' equity | ' | ' |
Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.3 shares issued | 2,125 | 2,099 |
Retained earnings | 9,243 | 8,406 |
Treasury stock, at cost, 39.6 and 35.6 shares | -2,779 | -2,195 |
Common stock held by employee benefits trust, at cost, 1.1 and 1.3 shares | -14 | -16 |
Accumulated other comprehensive loss (Note 13) | ' | ' |
Defined benefit postretirement plans | -583 | -611 |
Other | -244 | -173 |
Total accumulated other comprehensive loss | -827 | -784 |
Total Cummins Inc. shareholders' equity | 7,748 | 7,510 |
Noncontrolling interests | 349 | 360 |
Total equity | 8,097 | 7,870 |
Total liabilities and equity | $15,644 | $14,728 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 28, 2014 | Dec. 31, 2013 |
In Millions, except Per Share data, unless otherwise specified | ||
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 | 222.3 |
Treasury stock, shares | 39.6 | 35.6 |
Common stock held by employee benefits trust, shares | 1.1 | 1.3 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES | ' | ' |
Consolidated net income | $1,269 | $1,127 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ' | ' |
Depreciation and amortization | 330 | 305 |
Gain on fair value adjustment for consolidated investees (Note 3) | -38 | -12 |
Deferred income taxes | -37 | 78 |
Equity in income of investees, net of dividends | -103 | -98 |
Pension contributions in excess of expense (Note 4) | -154 | -96 |
Other post-retirement benefits payments in excess of expense (Note 4) | -22 | -20 |
Stock-based compensation expense | 27 | 29 |
Excess tax benefits on stock-based awards | -5 | -13 |
Translation and hedging activities | -19 | 26 |
Changes in current assets and liabilities, net of acquisitions | ' | ' |
Accounts and notes receivable | -236 | -216 |
Inventories | -302 | -206 |
Other current assets | -6 | 182 |
Accounts payable | 316 | 252 |
Accrued expenses | 162 | -146 |
Changes in other liabilities and deferred revenue | 184 | 147 |
Other, net | 22 | -6 |
Net cash provided by operating activities | 1,388 | 1,333 |
CASH FLOWS FROM INVESTING ACTIVITIES | ' | ' |
Capital expenditures | -409 | -417 |
Investments in internal use software | -40 | -43 |
Investments in and advances to equity investees | -39 | -12 |
Acquisition of businesses, net of cash acquired (Note 3) | -266 | -145 |
Investments in marketable securities-acquisitions (Note 7) | -213 | -360 |
Investments in marketable securities-liquidations (Note 7) | 316 | 433 |
Cash flows from derivatives not designated as hedges | ' | -15 |
Other, net | 11 | 14 |
Net cash used in investing activities | -640 | -545 |
CASH FLOWS FROM FINANCING ACTIVITIES | ' | ' |
Proceeds from borrowings | 39 | 987 |
Payments on borrowings and capital lease obligations | -72 | -62 |
Net (payments) borrowings under short-term credit agreements | -41 | 34 |
Distributions to noncontrolling interests | -52 | -53 |
Dividend payments on common stock | -370 | -305 |
Repurchases of common stock | -605 | -289 |
Excess tax benefits on stock-based awards | 5 | 13 |
Other, net | -3 | 19 |
Net cash (used in) provided by financing activities | -1,099 | 344 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | -20 | -2 |
Net (decrease) increase in cash and cash equivalents | -371 | 1,130 |
Cash and cash equivalents at beginning of year | 2,699 | 1,369 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $2,328 | $2,499 |
CONDENSED_CONSOLIDATED_STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Common Stock Held in Trust | Total Cummins Inc. Shareholders' Equity | Noncontrolling Interests |
In Millions, unless otherwise specified | |||||||||
BALANCE at Dec. 31, 2012 | $6,974 | $556 | $1,502 | $7,343 | ($950) | ($1,830) | ($18) | $6,603 | $371 |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net income | 1,127 | ' | ' | 1,051 | ' | ' | ' | 1,051 | 76 |
Other comprehensive income (loss) | -49 | ' | ' | ' | -18 | ' | ' | -18 | -31 |
Issuance of shares | 5 | ' | 5 | ' | ' | ' | ' | 5 | ' |
Employee benefits trust activity | 20 | ' | 18 | ' | ' | ' | 2 | 20 | ' |
Acquisition of shares | -289 | ' | ' | ' | ' | -289 | ' | -289 | ' |
Cash dividends on common stock | -305 | ' | ' | -305 | ' | ' | ' | -305 | ' |
Distributions to noncontrolling interests | -53 | ' | ' | ' | ' | ' | ' | ' | -53 |
Stock based awards | 16 | ' | 1 | ' | ' | 15 | ' | 16 | ' |
Other shareholder transactions | 18 | ' | 13 | ' | ' | ' | ' | 13 | 5 |
BALANCE at Sep. 29, 2013 | 7,464 | 556 | 1,539 | 8,089 | -968 | -2,104 | -16 | 7,096 | 368 |
BALANCE at Jun. 30, 2013 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net income | 374 | ' | ' | ' | ' | ' | ' | ' | ' |
Other comprehensive income (loss) | 122 | ' | ' | ' | ' | ' | ' | 131 | -9 |
BALANCE at Sep. 29, 2013 | 7,464 | 556 | ' | ' | ' | ' | ' | 7,096 | 368 |
BALANCE at Dec. 31, 2013 | 7,870 | 556 | 1,543 | 8,406 | -784 | -2,195 | -16 | 7,510 | 360 |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net income | 1,269 | ' | ' | 1,207 | ' | ' | ' | 1,207 | 62 |
Other comprehensive income (loss) | -46 | ' | ' | ' | -43 | ' | ' | -43 | -3 |
Issuance of shares | 8 | ' | 8 | ' | ' | ' | ' | 8 | ' |
Employee benefits trust activity | 21 | ' | 19 | ' | ' | ' | 2 | 21 | ' |
Acquisition of shares | -605 | ' | ' | ' | ' | -605 | ' | -605 | ' |
Cash dividends on common stock | -370 | ' | ' | -370 | ' | ' | ' | -370 | ' |
Distributions to noncontrolling interests | -63 | ' | ' | ' | ' | ' | ' | ' | -63 |
Stock based awards | 16 | ' | -5 | ' | ' | 21 | ' | 16 | ' |
Other shareholder transactions | -3 | ' | 4 | ' | ' | ' | ' | 4 | -7 |
BALANCE at Sep. 28, 2014 | 8,097 | 556 | 1,569 | 9,243 | -827 | -2,779 | -14 | 7,748 | 349 |
BALANCE at Jun. 29, 2014 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Increase (Decrease) in Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net income | 439 | ' | ' | ' | ' | ' | ' | ' | ' |
Other comprehensive income (loss) | -164 | ' | ' | ' | ' | ' | ' | -158 | -6 |
BALANCE at Sep. 28, 2014 | $8,097 | $556 | ' | ' | ' | ' | ' | $7,748 | $349 |
NATURE_OF_OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 28, 2014 | |
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 over 600 company-owned and independent distributor locations and over 6,800 dealer locations in more than 190 countries and territories. |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended | |||||||||||
Sep. 28, 2014 | ||||||||||||
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 pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America (GAAP) 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. | ||||||||||||
We revised the classification of certain amounts for "Cost of sales" and "Selling, general and administrative expenses" for 2014 and 2013. In connection with the integration of recently acquired North American distributors and anticipating the future acquisition and integration of the entire North American channel, our Distribution segment has developed a framework against which Distribution management intends to measure the performance of the distribution channel. The segment EBIT (defined as earnings before interest expense, taxes and noncontrolling interests) performance measure is unchanged, however, certain activities that were previously classified in "Selling, general and administrative expenses" will be classified as "Cost of sales" to align with the new framework and allow for consistent treatment across the channel. We revised the expense presentation of our Condensed Consolidated Statements of Income for the periods presented to follow the new cost framework. The net impact of this revision for the six months ended June 29, 2014 was $39 million and for the three and nine months ended September 29, 2013, were $28 million and $76 million , respectively. The revision had no impact on reported net income, cash flows or the balance sheet. | ||||||||||||
Additionally, certain other reclassifications have been made to prior period amounts to conform to the presentation of the current period condensed financial statements. | ||||||||||||
Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2014 and 2013 ended on September 28 and September 29, respectively. The interim periods for both 2014 and 2013 contained 13 weeks, while the nine month periods both contained 39 weeks. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. | ||||||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the 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 and other rate assumptions for pension and other postretirement benefit expenses, income taxes and deferred tax valuation allowances, lease classifications and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. | ||||||||||||
The weighted-average diluted common shares outstanding exclude 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 month periods ended September 28, 2014 and September 29, 2013, were as follows: | ||||||||||||
Three months ended | Nine months ended | |||||||||||
September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||
Options excluded | 225,773 | 184,775 | 110,488 | 479,276 | ||||||||
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, 2013. Our interim period financial results for the three and nine month interim 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. |
ACQUISITIONS_AND_DIVESTITURES
ACQUISITIONS AND DIVESTITURES | 9 Months Ended | |||
Sep. 28, 2014 | ||||
Business Combinations [Abstract] | ' | |||
ACQUISITIONS AND DIVESTITURES | ' | |||
NOTE 3. ACQUISITIONS | ||||
In September 2013, we announced our intention to acquire the equity that we do not already own in most of our partially-owned United States and Canadian distributors over the next three to five years. In each acquisition we recorded a gain related to the remeasurement of our existing ownership interest to fair value in accordance with GAAP. We believe the price paid to the former principal is representative of fair value. As such, we valued our existing ownership interest by applying the price paid to the former principal to our existing ownership on a relative basis. The amount paid to the former principal is determined in accordance with a pre-existing agreement that attempts to value the business on a fair value basis. Gains recognized in the remeasurement are included in other income (expense), in the Condensed Consolidated Statements of Income. The following is a summary of the acquisition activity for the first nine months of 2014 and 2013. | ||||
Cummins Eastern Canada LP | ||||
On August 4, 2014, we acquired the remaining 50 percent interest in Cummins Eastern Canada LP (Eastern Canada) from the former distributor principal. The preliminary purchase consideration was $62 million, which included $22 million in cash and an additional $32 million to eliminate outstanding debt. The remaining $8 million will be paid in future periods. The intangible assets are primarily customer related, the majority of which will be amortized within one year subject to customary purchase price adjustments. The acquisition was accounted for as a business combination and the results of the acquired entity were included in the Distribution operating segment subsequent to the acquisition date. As a result of this transaction, third quarter 2014 Distribution segment results included an $18 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Eastern Canada to fair value in accordance with GAAP. The transaction generated $5 million of goodwill based on the preliminary purchase price allocation. Net sales for Eastern Canada were $228 million for the year ended December 31, 2013. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | ||||
Cummins Power Systems LLC | ||||
On May 5, 2014, we acquired the remaining 30 percent interest in Cummins Power Systems LLC (Power Systems) from the former distributor principal for consideration of approximately $14 million in cash. The entity was previously consolidated and, as a result, the acquisition was accounted for as an equity transaction instead of a business combination. | ||||
Cummins Southern Plains LLC | ||||
On March 31, 2014, we acquired the remaining 50 percent interest in Cummins Southern Plains LLC (Southern Plains) from the former distributor principal. The purchase consideration was $92 million as presented below, which included $42 million in cash and an additional $48 million paid to eliminate outstanding debt as of September 28, 2014. The intangible assets are primarily customer related and are being amortized over periods ranging from one to five years. The acquisition was accounted for as a business combination and the results of the acquired entity were included in the Distribution operating segment subsequent to the acquisition date. As a result of this transaction, second quarter 2014 Distribution segment results included a $13 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Southern Plains to fair value in accordance with GAAP. The transaction generated less than $1 million of goodwill. Net sales for Southern Plains were $433 million for the year ended December 31, 2013. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | ||||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 63 | ||
Inventory | 59 | |||
Fixed assets | 47 | |||
Intangible assets | 11 | |||
Other current assets | 9 | |||
Current liabilities | (53 | ) | ||
Total business valuation | 136 | |||
Fair value of pre-existing 50 percent interest | (44 | ) | ||
Purchase price | $ | 92 | ||
Cummins Mid-South LLC | ||||
On February 14, 2014, we acquired the remaining 62.2 percent interest in Cummins Mid-South LLC (Mid-South) from the former distributor principal. The purchase consideration was $118 million as presented below, which included $32 million in cash paid in the first quarter along with an additional $61 million paid to eliminate outstanding debt. As of September 28, 2014, an additional $23 million had been paid. The intangible assets are primarily customer related and are being amortized over periods ranging from one to five years. The acquisition was accounted for as a business combination and the results of the acquired entity were included in the Distribution operating segment subsequent to the acquisition date. As a result of this transaction, first quarter 2014 Distribution segment results included a $6 million gain, as we were required to re-measure our pre-existing 37.8 percent ownership interest in Mid-South to fair value in accordance with GAAP. In the second quarter of 2014, we recognized an additional $1 million gain as the result of the final valuation. The transaction generated $4 million of goodwill. Net sales for Mid-South were $368 million for the year ended December 31, 2013. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | ||||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 71 | ||
Inventory | 70 | |||
Fixed assets | 37 | |||
Intangible assets | 8 | |||
Goodwill | 4 | |||
Other current assets | 10 | |||
Current liabilities | (43 | ) | ||
Other long-term liability | (4 | ) | ||
Total business valuation | 153 | |||
Fair value of pre-existing 37.8 percent interest | (35 | ) | ||
Purchase price | $ | 118 | ||
Cummins Rocky Mountain LLC | ||||
In May 2013, we acquired the remaining 67 percent interest in Cummins Rocky Mountain LLC (Rocky Mountain) from the former distributor principal for consideration of approximately $62 million in cash and an additional $74 million in cash paid to creditors to eliminate all debt related to the entity. The purchase price was approximately $136 million as presented below. The intangible assets are primarily customer related and are being amortized over periods ranging from one to four years. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution operating segment subsequent to the acquisition date. Distribution segment results also included a $5 million gain, as we were required to re-measure our pre-existing 33 percent ownership interest in Rocky Mountain to fair value in accordance with GAAP. Net sales for Rocky Mountain were $384 million for the year ended December 31, 2012. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | ||||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 48 | ||
Inventory | 100 | |||
Fixed assets | 34 | |||
Intangible assets | 8 | |||
Goodwill | 10 | |||
Other current assets | 8 | |||
Current liabilities | (41 | ) | ||
Total business valuation | 167 | |||
Fair value of pre-existing 33 percent interest | (31 | ) | ||
Purchase price | $ | 136 | ||
Cummins Northwest LLC | ||||
In January 2013, we acquired the remaining 50 percent interest in Cummins Northwest LLC (Northwest) from the former distributor principal for consideration of approximately $18 million. We immediately formed a new partnership with a new distributor principal and sold 20.01 percent to the new distributor principal. We retained a new ownership in Northwest of 79.99 percent. The acquisition was accounted for as a business combination, with the results of the acquired entity included in the Distribution segment subsequent to the acquisition date. Distribution segment results also included a $7 million gain, as we were required to re-measure our pre-existing 50 percent ownership interest in Northwest to fair value in accordance with GAAP. The transaction generated $3 million of goodwill. Net sales for Northwest were $137 million for the year ended December 31, 2012. This amount is not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | ||||
In July 2013, we acquired the remaining 20.01 percent from the new distributor principal for an additional $4 million. Since the entity was already consolidated, the acquisition was accounted for as an equity transaction instead of a business combination. |
PENSION_AND_OTHER_POSTRETIREME
PENSION AND OTHER POSTRETIREMENT BENEFITS | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | ||||||||||||||||||||||||
PENSION AND OTHER POSTRETIREMENT BENEFITS | ' | ||||||||||||||||||||||||
NOTE 4. 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 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||
Defined benefit pension and other postretirement plans | |||||||||||||||||||||||||
Voluntary contribution | $ | 34 | $ | 33 | $ | 109 | $ | 110 | |||||||||||||||||
Mandatory contribution | 7 | 7 | 88 | 51 | |||||||||||||||||||||
Defined benefit pension contributions | 41 | 40 | 197 | 161 | |||||||||||||||||||||
Other postretirement plans | 12 | 11 | 35 | 37 | |||||||||||||||||||||
Total defined benefit plans | $ | 53 | $ | 51 | $ | 232 | $ | 198 | |||||||||||||||||
Defined contribution pension plans | $ | 16 | $ | 14 | $ | 57 | $ | 50 | |||||||||||||||||
We anticipate making additional defined benefit pension contributions and other postretirement benefit payments during the remainder of 2014 of $8 million and $11 million, respectively. The $205 million of pension contributions for the full year include voluntary contributions of approximately $111 million. These contributions and payments may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. | |||||||||||||||||||||||||
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 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||
Service cost | $ | 16 | $ | 17 | $ | 7 | $ | 5 | $ | — | $ | — | |||||||||||||
Interest cost | 26 | 23 | 16 | 14 | 4 | 4 | |||||||||||||||||||
Expected return on plan assets | (43 | ) | (42 | ) | (23 | ) | (17 | ) | — | — | |||||||||||||||
Recognized net actuarial loss | 8 | 16 | 7 | 6 | — | 2 | |||||||||||||||||||
Net periodic benefit cost | $ | 7 | $ | 14 | $ | 7 | $ | 8 | $ | 4 | $ | 6 | |||||||||||||
Pension | |||||||||||||||||||||||||
U.S. Plans | U.K. Plans | Other Postretirement Benefits | |||||||||||||||||||||||
Nine months ended | |||||||||||||||||||||||||
In millions | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||
Service cost | $ | 50 | $ | 52 | $ | 19 | $ | 15 | $ | — | $ | — | |||||||||||||
Interest cost | 79 | 70 | 49 | 42 | 13 | 12 | |||||||||||||||||||
Expected return on plan assets | (131 | ) | (126 | ) | (66 | ) | (53 | ) | — | — | |||||||||||||||
Recognized net actuarial loss | 23 | 47 | 20 | 18 | — | 5 | |||||||||||||||||||
Net periodic benefit cost | $ | 21 | $ | 43 | $ | 22 | $ | 22 | $ | 13 | $ | 17 | |||||||||||||
EQUITY_ROYALTY_AND_INTEREST_IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 9 Months Ended | ||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ' | ||||||||||||||||
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | ' | ||||||||||||||||
NOTE 5. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | |||||||||||||||||
Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the interim reporting periods was as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
In millions | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||
Distribution Entities | |||||||||||||||||
North American distributors | $ | 27 | $ | 34 | $ | 89 | $ | 98 | |||||||||
Komatsu Cummins Chile, Ltda. | 8 | 6 | 22 | 17 | |||||||||||||
All other distributors | — | 1 | 2 | 1 | |||||||||||||
Manufacturing Entities | |||||||||||||||||
Dongfeng Cummins Engine Company, Ltd. | 15 | 13 | 51 | 45 | |||||||||||||
Chongqing Cummins Engine Company, Ltd. | 13 | 15 | 39 | 44 | |||||||||||||
Beijing Foton Cummins Engine Co., Ltd. (Light-duty) | 10 | 4 | 24 | 14 | |||||||||||||
Shanghai Fleetguard Filter Co., Ltd. | 3 | 4 | 9 | 11 | |||||||||||||
Tata Cummins, Ltd. | 2 | 1 | 6 | 4 | |||||||||||||
Cummins Westport, Inc. | 2 | 2 | 3 | 5 | |||||||||||||
Beijing Foton Cummins Engine Co., Ltd. (Heavy-duty) | (5 | ) | (4 | ) | (18 | ) | (14 | ) | |||||||||
All other manufacturers | 13 | 7 | 36 | 29 | |||||||||||||
Cummins share of net income | 88 | 83 | 263 | 254 | |||||||||||||
Royalty and interest income | 11 | 8 | 31 | 27 | |||||||||||||
Equity, royalty and interest income from investees | $ | 99 | $ | 91 | $ | 294 | $ | 281 | |||||||||
INCOME_TAXES
INCOME TAXES | 9 Months Ended |
Sep. 28, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
NOTE 6. INCOME TAXES | |
Our effective tax rate for the year is expected to approximate 29.5 percent, excluding any one-time items that may arise. The expected tax rate does not include the benefits of the research tax credit which expired December 31, 2013 and has not yet been renewed by Congress. 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. | |
The effective tax rates for the three and nine month periods ended September 28, 2014, were 34.4 percent and 30.4 percent, respectively. The tax rate for the three months ended September 28, 2014, included a $19 million discrete tax expense to reflect the reduction in value of state tax credits as a result of a favorable state tax rate change that will lower future taxes. Additionally, the tax rate for the nine month period included a second quarter $2 million discrete tax benefit for the release of reserves for uncertain tax positions related to multiple state audit settlements, a first quarter $12 million discrete tax expense attributable primarily to state deferred tax adjustments, as well as a first quarter $6 million discrete net tax benefit resulting from a $70 million dividend paid from China earnings generated prior to 2012. | |
Our effective tax rates for the three and nine month periods ended September 29, 2013, were 29.2 percent and 28.3 percent, respectively. These tax rates include a $7 million discrete net tax expense for the third quarter tax adjustments: $4 million expense attributable to prior year tax return true-up adjustments, $1 million benefit related to release of prior year tax reserves and a discrete tax charge for $4 million related to a third quarter enactment of U.K. tax law changes. In addition, the nine month tax rate includes a discrete tax benefit in the first quarter of 2013 of $28 million attributable to the reinstatement of the research credit back to 2012, as well as a discrete tax expense in the first quarter of 2013 of $17 million, which primarily relates to the write-off of a deferred tax asset deemed unrecoverable. | |
The increase in the three month effective tax rate from 2013 to 2014 is primarily due to unfavorable changes in the jurisdictional mix of pre-tax income and the 2014 unfavorable discrete tax items. | |
We anticipate that we may resolve tax matters related primarily to certain tax credits presently under examination in U.S. federal and state tax jurisdictions. As of September 28, 2014, we estimate that it is reasonably possible that unrecognized tax benefits may decrease in an amount ranging from $0 to $75 million in the next 12 months due to the resolution of these issues. We do not expect this resolution to have a material impact on our results of operations. |
MARKETABLE_SECURITIES
MARKETABLE SECURITIES | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ' | ||||||||||||||||||||||||
MARKETABLE SECURITIES | ' | ||||||||||||||||||||||||
NOTE 7. MARKETABLE SECURITIES | |||||||||||||||||||||||||
A summary of marketable securities, all of which are classified as current, was as follows: | |||||||||||||||||||||||||
September 28, 2014 | December 31, 2013 | ||||||||||||||||||||||||
In millions | Cost | Gross unrealized | Estimated | Cost | Gross unrealized | Estimated | |||||||||||||||||||
gains/(losses) | fair value | gains/(losses) | fair value | ||||||||||||||||||||||
Available-for-sale | |||||||||||||||||||||||||
Level 1(1) | |||||||||||||||||||||||||
Debt mutual funds | $ | 26 | $ | — | $ | 26 | $ | 72 | $ | — | $ | 72 | |||||||||||||
Equity securities and other | 7 | — | 7 | 10 | 13 | 23 | |||||||||||||||||||
Total level 1 | 33 | — | 33 | 82 | 13 | 95 | |||||||||||||||||||
Level 2(2) | |||||||||||||||||||||||||
Debt mutual funds | 14 | 1 | 15 | 27 | 2 | 29 | |||||||||||||||||||
Bank debentures | 3 | — | 3 | 2 | — | 2 | |||||||||||||||||||
Certificates of deposit | — | — | — | 22 | — | 22 | |||||||||||||||||||
Government debt securities-non-U.S. | 3 | (1 | ) | 2 | 3 | (1 | ) | 2 | |||||||||||||||||
Total level 2 | 20 | — | 20 | 54 | 1 | 55 | |||||||||||||||||||
Total marketable securities | $ | 53 | $ | — | $ | 53 | $ | 136 | $ | 14 | $ | 150 | |||||||||||||
________________________________________________________________________________________ | |||||||||||||||||||||||||
(1) The fair value of Level 1 securities is estimated primarily by referencing quoted prices in active markets for identical assets. | |||||||||||||||||||||||||
(2) The fair value of Level 2 securities is estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 securities, and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. | |||||||||||||||||||||||||
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 | September 28, 2014 | September 29, 2013 | 28-Sep-14 | September 29, 2013 | |||||||||||||||||||||
Proceeds from sales and maturities of marketable securities | $ | 137 | $ | 153 | $ | 316 | $ | 433 | |||||||||||||||||
Gross realized gains from the sale of available-for-sale securities | 1 | 1 | 14 | 12 | |||||||||||||||||||||
At September 28, 2014, the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure by contractual maturity was as follows: | |||||||||||||||||||||||||
Maturity date | Fair value | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
1 year or less | $ | 16 | |||||||||||||||||||||||
1 - 5 years | 3 | ||||||||||||||||||||||||
5 - 10 years | 1 | ||||||||||||||||||||||||
Total | $ | 20 | |||||||||||||||||||||||
INVENTORIES
INVENTORIES | 9 Months Ended | ||||||||
Sep. 28, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
INVENTORIES | ' | ||||||||
NOTE 8. INVENTORIES | |||||||||
Inventories are stated at the lower of cost or market. Inventories included the following: | |||||||||
In millions | September 28, 2014 | December 31, 2013 | |||||||
Finished products | $ | 1,775 | $ | 1,487 | |||||
Work-in-process and raw materials | 1,182 | 1,005 | |||||||
Inventories at FIFO cost | 2,957 | 2,492 | |||||||
Excess of FIFO over LIFO | (124 | ) | (111 | ) | |||||
Total inventories | $ | 2,833 | $ | 2,381 | |||||
DEBT
DEBT | 9 Months Ended | ||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||||||||||
DEBT | ' | ||||||||||||||||||||
NOTE 9. DEBT | |||||||||||||||||||||
A summary of long-term debt was as follows: | |||||||||||||||||||||
In millions | September 28, 2014 | December 31, 2013 | |||||||||||||||||||
Long-term debt | |||||||||||||||||||||
Senior notes, 3.65%, due 2023 (1) | $ | 500 | $ | 500 | |||||||||||||||||
Debentures, 6.75%, due 2027 | 58 | 58 | |||||||||||||||||||
Debentures, 7.125%, due 2028 (1) | 250 | 250 | |||||||||||||||||||
Senior notes, 4.875%, due 2043 | 500 | 500 | |||||||||||||||||||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | 165 | 165 | |||||||||||||||||||
Credit facilities related to consolidated joint ventures | 7 | 92 | |||||||||||||||||||
Other | 38 | 65 | |||||||||||||||||||
1,518 | 1,630 | ||||||||||||||||||||
Unamortized discount | (47 | ) | (48 | ) | |||||||||||||||||
Fair value adjustments due to hedge on indebtedness (1) | 51 | 49 | |||||||||||||||||||
Capital leases | 89 | 92 | |||||||||||||||||||
Total long-term debt | 1,611 | 1,723 | |||||||||||||||||||
Less: Current maturities of long-term debt | (27 | ) | (51 | ) | |||||||||||||||||
Long-term debt | $ | 1,584 | $ | 1,672 | |||||||||||||||||
___________________________________________________________________________________ | |||||||||||||||||||||
(1) In February 2014, we settled our November 2005 interest rate swap which previously converted our $250 million debt issue, due in 2028, from a fixed rate to a floating rate based on a LIBOR spread. We are amortizing the $52 million gain realized upon settlement over the remaining 14-year term of related debt. Also, in February 2014, we entered into a series of interest rate swaps to effectively convert our September 2013, $500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread. See Note 12, "DERIVATIVES" for further details. | |||||||||||||||||||||
Principal payments required on long-term debt during the next five years are as follows: | |||||||||||||||||||||
Required Principal Payments | |||||||||||||||||||||
In millions | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||
Payment | $ | 11 | $ | 22 | $ | 32 | $ | 12 | $ | 16 | |||||||||||
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 | September 28, 2014 | December 31, 2013 | |||||||||||||||||||
Fair value of total debt(1) | $ | 1,922 | $ | 1,877 | |||||||||||||||||
Carrying value of total debt | 1,689 | 1,740 | |||||||||||||||||||
_________________________________________________ | |||||||||||||||||||||
(1)The fair value of debt is derived from Level 2 inputs. |
PRODUCT_WARRANTY_LIABILITY
PRODUCT WARRANTY LIABILITY | 9 Months Ended | ||||||||
Sep. 28, 2014 | |||||||||
Product Warranties Disclosures [Abstract] | ' | ||||||||
PRODUCT WARRANTY LIABILITY | ' | ||||||||
NOTE 10. PRODUCT WARRANTY LIABILITY | |||||||||
We charge the estimated costs of warranty programs, other than product recalls, to income when the sale is recorded. We use historical claims experience to develop the estimated liability. We review product recall programs on a quarterly basis and, if necessary, record a liability when we commit to an action, or when they become probable and estimable, which is reflected in the provision for warranties issued line. We also sell extended warranty coverage on several engines. 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: | |||||||||
Nine months ended | |||||||||
In millions | September 28, 2014 | September 29, 2013 | |||||||
Balance, beginning of year | $ | 1,129 | $ | 1,088 | |||||
Provision for warranties issued | 307 | 317 | |||||||
Deferred revenue on extended warranty contracts sold | 175 | 138 | |||||||
Payments | (313 | ) | (312 | ) | |||||
Amortization of deferred revenue on extended warranty contracts | (109 | ) | (84 | ) | |||||
Changes in estimates for pre-existing warranties | 28 | (26 | ) | ||||||
Foreign currency translation | (4 | ) | (3 | ) | |||||
Balance, end of period | $ | 1,213 | $ | 1,118 | |||||
Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our September 28, 2014, balance sheet were as follows: | |||||||||
In millions | September 28, 2014 | Balance Sheet Location | |||||||
Deferred revenue related to extended coverage programs | |||||||||
Current portion | $ | 159 | Deferred revenue | ||||||
Long-term portion | 401 | Other liabilities and deferred revenue | |||||||
Total | $ | 560 | |||||||
Receivables related to estimated supplier recoveries | |||||||||
Current portion | $ | 9 | Trade and other receivables | ||||||
Long-term portion | 3 | Other assets | |||||||
Total | $ | 12 | |||||||
Long-term portion of warranty liability | $ | 302 | Other liabilities and deferred revenue | ||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended | |
Sep. 28, 2014 | ||
Commitments and Contingencies Disclosure [Abstract] | ' | |
COMMITMENTS AND CONTINGENCIES | ' | |
NOTE 11. 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. | ||
U.S. Distributor Commitments | ||
Our distribution agreements with independent and partially-owned distributors generally have a renewable three-year term and are restricted to specified territories. Our distributors develop and maintain a network of dealers with which we have no direct relationship. Our distributors are permitted to sell other, noncompetitive products only with our consent. We license all of our distributors to use our name and logo in connection with the sale and service of our products, with no right to assign or sublicense the trademarks, except to authorized dealers, without our consent. Products are sold to the distributors at standard domestic or international distributor net prices, as applicable. Net prices are wholesale prices we establish to permit our distributors an adequate margin on their sales. Subject to local laws, we can generally refuse to renew these agreements upon expiration or terminate them upon written notice for inadequate sales, change in principal ownership and certain other reasons. Distributors also have the right to terminate the agreements upon 60-day notice without cause, or 30-day notice for cause. Upon termination or failure to renew, we are required to purchase the distributor’s current inventory, signage and special tools and may, at our option purchase other assets of the distributor, but are under no obligation to do so. | ||
Other Guarantees and Commitments | ||
In addition to the matters discussed above, from time to time we enter into other guarantee arrangements, including guarantees of non-U.S. distributor financing, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of third-party obligations. As of September 28, 2014, the maximum potential loss related to these other guarantees was $8 million. | ||
We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. The penalty amounts are less than our purchase commitments and essentially allow the supplier to recover their tooling costs in most instances. As of September 28, 2014, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $86 million, of which $47 million relates to a contract with an engine parts supplier that extends to 2016. These arrangements enable us to secure critical components. We do not currently anticipate paying any penalties under these contracts. | ||
During the second quarter of 2014, we began entering into physical forward contracts with suppliers of platinum and palladium to purchase minimum volumes of the commodities at contractually stated prices for various periods, not to exceed two years. As of September 28, 2014, the total commitments under these contracts were $51 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 $80 million at September 28, 2014 and $66 million at December 31, 2013. | ||
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. | ||
Joint Venture Commitments | ||
As of September 28, 2014, we have committed to invest an additional $4 million in existing joint ventures, of which $1 million is expected to be funded in 2014. |
DERIVATIVES
DERIVATIVES | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||||||||||||||||||||||||
DERIVATIVES | ' | ||||||||||||||||||||||||||||||||
NOTE 12. DERIVATIVES | |||||||||||||||||||||||||||||||||
We are exposed to financial risk resulting from volatility in foreign exchange rates, commodity prices and interest rates. This risk is closely monitored and managed through the use of financial derivative instruments including foreign currency forward contracts, commodity zero-cost collars and interest rate swaps. These instruments, as further described below, are accounted for as cash flow or fair value hedges or as economic hedges not designated as hedges for accounting purposes. Financial derivatives are used expressly for hedging purposes and under no circumstances are they used for speculative purposes. When material, we adjust the estimated fair value of our derivative contracts for counter-party or our credit risk. None of our derivative instruments are subject to collateral requirements. Substantially all of our derivative contracts are subject to master netting arrangements which provide us with the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. | |||||||||||||||||||||||||||||||||
Commodity Price Risk | |||||||||||||||||||||||||||||||||
During the second quarter of 2014, we chose to de-designate and unwind all of our cash flow hedges for platinum and palladium. As of the de-designation date, we had an unrealized net gain of $2 million in "Accumulated other comprehensive loss" (AOCL) that will be reclassified to income during the next year as the related purchases are made. See Note 11, "COMMITMENTS AND CONTINGENCIES" for additional information on new platinum and palladium purchase committments. | |||||||||||||||||||||||||||||||||
Interest Rate Risk | |||||||||||||||||||||||||||||||||
We are exposed to market risk from fluctuations in interest rates. We manage our exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk. | |||||||||||||||||||||||||||||||||
In February 2014, we settled our November 2005 interest rate swap which previously converted our $250 million debt issue, due in 2028, from a fixed rate to a floating rate based on a LIBOR spread. We are amortizing the $52 million gain realized upon settlement over the remaining 14-year term of related debt. | |||||||||||||||||||||||||||||||||
Also, in February 2014, we entered into a series of interest rate swaps to effectively convert our September 2013, $500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread. The terms of the swaps mirror those of the debt, with interest paid semi-annually. The swaps were designated, and will be accounted for, as fair value hedges under GAAP. The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as “Interest expense.” The net swap settlements that accrue each period are also reported in interest expense. | |||||||||||||||||||||||||||||||||
The following table summarizes these gains and losses for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||||||||||||||
In millions | 28-Sep-14 | 29-Sep-13 | 28-Sep-14 | 29-Sep-13 | |||||||||||||||||||||||||||||
Income Statement | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | |||||||||||||||||||||||||
Classification | Swaps | Borrowings | Swaps | Borrowings | Swaps | Borrowings | Swaps | Borrowings | |||||||||||||||||||||||||
Interest expense(1) | $ | — | $ | 2 | $ | (6 | ) | $ | 6 | $ | 8 | $ | (5 | ) | $ | (34 | ) | $ | 34 | ||||||||||||||
(1)The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. | |||||||||||||||||||||||||||||||||
Cash Flow Hedging | |||||||||||||||||||||||||||||||||
The following table summarizes the effect on our Condensed Consolidated Statements of Income for derivative instruments classified as cash flow hedges for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
In millions(1) | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
Derivatives in cash flow hedging relationships | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||||||||||
Gain/(loss) reclassified from AOCL into income - Net sales(2) | $ | 1 | $ | (2 | ) | $ | 6 | $ | (4 | ) | |||||||||||||||||||||||
Gain/(loss) reclassified from AOCL into income - Cost of sales(3) | 1 | (2 | ) | (2 | ) | 1 | |||||||||||||||||||||||||||
Total | $ | 2 | $ | (4 | ) | $ | 4 | $ | (3 | ) | |||||||||||||||||||||||
_____________________________________________________ | |||||||||||||||||||||||||||||||||
(1)The table does not include amounts related to ineffectiveness or the effective portion of gain (loss) recognized in AOCL as they were not material for the periods presented. | |||||||||||||||||||||||||||||||||
(2)Includes foreign currency forward contracts. | |||||||||||||||||||||||||||||||||
(3)Includes commodity swap contracts. | |||||||||||||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments | |||||||||||||||||||||||||||||||||
The following table summarizes the effect on our Condensed Consolidated Statements of Income for derivative instruments not classified as cash flow hedges for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
In millions | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||||||||||
Gain/(loss) recognized in income - Cost of sales(1) | $ | 1 | $ | (1 | ) | $ | (2 | ) | $ | (2 | ) | ||||||||||||||||||||||
Gain/(loss) recognized in income - Other income (expense), net(2) | (12 | ) | 19 | (5 | ) | (3 | ) | ||||||||||||||||||||||||||
Total | $ | (11 | ) | $ | 18 | $ | (7 | ) | $ | (5 | ) | ||||||||||||||||||||||
_________________________________________________ | |||||||||||||||||||||||||||||||||
(1) Includes foreign currency forward contracts and commodity zero-cost collars. | |||||||||||||||||||||||||||||||||
(2) Includes foreign currency forward contracts. | |||||||||||||||||||||||||||||||||
Fair Value Amount and Location of Derivative Instruments | |||||||||||||||||||||||||||||||||
The following table summarizes the location and fair value of interest rate swap contracts, foreign currency forward contracts, commodity swap contracts and commodity zero-cost collars on our Condensed Consolidated Balance Sheets: | |||||||||||||||||||||||||||||||||
Derivatives Designated | Derivatives Not Designated | ||||||||||||||||||||||||||||||||
as Hedging Instruments | as Hedging Instruments | ||||||||||||||||||||||||||||||||
In millions | 28-Sep-14 | 31-Dec-13 | 28-Sep-14 | 31-Dec-13 | |||||||||||||||||||||||||||||
Notional amount(1) | $ | 603 | $ | 425 | $ | 747 | $ | 547 | |||||||||||||||||||||||||
Derivative assets recorded in: | |||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | — | 5 | — | 6 | |||||||||||||||||||||||||||||
Other assets | 5 | 49 | — | — | |||||||||||||||||||||||||||||
Total derivative assets(2) | $ | 5 | $ | 54 | $ | — | $ | 6 | |||||||||||||||||||||||||
Derivative liabilities recorded in: | |||||||||||||||||||||||||||||||||
Other accrued expenses | 2 | 5 | 1 | 5 | |||||||||||||||||||||||||||||
Total derivative liabilities(2) | $ | 2 | $ | 5 | $ | 1 | $ | 5 | |||||||||||||||||||||||||
______________________________________________ | |||||||||||||||||||||||||||||||||
(1)Commodity zero-cost collars are not designated as hedging instruments and had a notional quantity of 4,578 and 5,421 metric tons of copper at September 28, 2014 and December 31, 2013, respectively. These instruments are not included in the notional amounts above as they were subject to a USD denominated cap and floor; however, they are included in the total asset and liability balances as appropriate. The average cap and floor at September 28, 2014 and December 31, 2013 were $7,265 and $6,619 and $7,639 and $6,978, respectively. | |||||||||||||||||||||||||||||||||
(2)Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 input measures and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. | |||||||||||||||||||||||||||||||||
We have elected to present our derivative contracts on a gross basis in our Condensed Consolidated Balance Sheets. Had we chosen to present on a net basis, we would have derivatives in a net asset position of $4 million and $53 million and derivatives in a net liability position of $2 million and $3 million at September 28, 2014 and December 31, 2013, respectively. |
OTHER_COMPREHENSIVE_INCOME_LOS
OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | ' | ||||||||||||||||||||||||||||
NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||||||||||||
Following are the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended: | |||||||||||||||||||||||||||||
Three months ended | |||||||||||||||||||||||||||||
In millions | Change in | Foreign | Unrealized gain | Unrealized gain | Total | Noncontrolling | Total | ||||||||||||||||||||||
pensions and | currency | (loss) on | (loss) on | attributable to | interests | ||||||||||||||||||||||||
other | translation | marketable | derivatives | Cummins Inc. | |||||||||||||||||||||||||
postretirement | adjustment | securities | |||||||||||||||||||||||||||
defined benefit | |||||||||||||||||||||||||||||
plans | |||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | (754 | ) | $ | (338 | ) | $ | 5 | $ | (12 | ) | $ | (1,099 | ) | |||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | — | 105 | 2 | 10 | 117 | $ | (9 | ) | $ | 108 | |||||||||||||||||||
Tax (provision) benefit | — | (1 | ) | 1 | (3 | ) | (3 | ) | — | (3 | ) | ||||||||||||||||||
After tax amount | — | 104 | 3 | 7 | 114 | (9 | ) | 105 | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 16 | — | (2 | ) | 3 | 17 | — | 17 | |||||||||||||||||||||
Net current period other comprehensive income (loss) | 16 | 104 | 1 | 10 | 131 | $ | (9 | ) | $ | 122 | |||||||||||||||||||
Balance at September 29, 2013 | $ | (738 | ) | $ | (234 | ) | $ | 6 | $ | (2 | ) | $ | (968 | ) | |||||||||||||||
Balance at June 29, 2014 | $ | (597 | ) | $ | (76 | ) | $ | — | $ | 4 | $ | (669 | ) | ||||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | — | (184 | ) | — | (5 | ) | (189 | ) | $ | (6 | ) | $ | (195 | ) | |||||||||||||||
Tax (provision) benefit | — | 18 | — | 1 | 19 | — | 19 | ||||||||||||||||||||||
After tax amount | — | (166 | ) | — | (4 | ) | (170 | ) | (6 | ) | (176 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 14 | — | (1 | ) | (1 | ) | 12 | — | 12 | ||||||||||||||||||||
Net current period other comprehensive income (loss) | 14 | (166 | ) | (1 | ) | (5 | ) | (158 | ) | $ | (6 | ) | $ | (164 | ) | ||||||||||||||
Balance at September 28, 2014 | $ | (583 | ) | $ | (242 | ) | $ | (1 | ) | $ | (1 | ) | $ | (827 | ) | ||||||||||||||
Nine months ended | |||||||||||||||||||||||||||||
In millions | Change in | Foreign | Unrealized gain | Unrealized gain | Total | Noncontrolling | Total | ||||||||||||||||||||||
pensions and | currency | (loss) on | (loss) on | attributable to | interests | ||||||||||||||||||||||||
other | translation | marketable | derivatives | Cummins Inc. | |||||||||||||||||||||||||
postretirement | adjustment | securities | |||||||||||||||||||||||||||
defined benefit | |||||||||||||||||||||||||||||
plans | |||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | (794 | ) | $ | (161 | ) | $ | 5 | $ | — | $ | (950 | ) | ||||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | 13 | (86 | ) | 10 | (7 | ) | (70 | ) | $ | (28 | ) | $ | (98 | ) | |||||||||||||||
Tax (provision) benefit | (5 | ) | 13 | (1 | ) | 2 | 9 | — | 9 | ||||||||||||||||||||
After tax amount | 8 | (73 | ) | 9 | (5 | ) | (61 | ) | (28 | ) | (89 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 48 | — | (8 | ) | 3 | 43 | (3 | ) | 40 | ||||||||||||||||||||
Net current period other comprehensive income (loss) | 56 | (73 | ) | 1 | (2 | ) | (18 | ) | $ | (31 | ) | $ | (49 | ) | |||||||||||||||
Balance at September 29, 2013 | $ | (738 | ) | $ | (234 | ) | $ | 6 | $ | (2 | ) | $ | (968 | ) | |||||||||||||||
Balance at December 31, 2013 | $ | (611 | ) | $ | (179 | ) | $ | 7 | $ | (1 | ) | $ | (784 | ) | |||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | (7 | ) | (77 | ) | (1 | ) | 5 | (80 | ) | $ | 1 | $ | (79 | ) | |||||||||||||||
Tax (provision) benefit | 1 | 14 | — | (2 | ) | 13 | — | 13 | |||||||||||||||||||||
After tax amount | (6 | ) | (63 | ) | (1 | ) | 3 | (67 | ) | 1 | (66 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 34 | — | (7 | ) | (3 | ) | 24 | (4 | ) | 20 | |||||||||||||||||||
Net current period other comprehensive income (loss) | 28 | (63 | ) | (8 | ) | — | (43 | ) | $ | (3 | ) | $ | (46 | ) | |||||||||||||||
Balance at September 28, 2014 | $ | (583 | ) | $ | (242 | ) | $ | (1 | ) | $ | (1 | ) | $ | (827 | ) | ||||||||||||||
_________________________________________________________________________________________________________________________ | |||||||||||||||||||||||||||||
(1)Amounts are net of tax. | |||||||||||||||||||||||||||||
(2)See reclassifications out of accumulated other comprehensive income (loss) disclosure below for further details. | |||||||||||||||||||||||||||||
Following are the items reclassified out of accumulated other comprehensive income (loss) and the related tax effects: | |||||||||||||||||||||||||||||
In millions | Three months ended | Nine months ended | |||||||||||||||||||||||||||
(Gain)/Loss Components | 28-Sep-14 | 29-Sep-13 | 28-Sep-14 | 29-Sep-13 | Statement of Income Location | ||||||||||||||||||||||||
Realized (gain) loss on marketable securities | $ | (1 | ) | $ | (1 | ) | $ | (14 | ) | $ | (12 | ) | Other income (expense), net | ||||||||||||||||
Income tax expense | — | (1 | ) | 3 | 1 | Income tax expense | |||||||||||||||||||||||
Net realized (gain) loss on marketable securities | (1 | ) | (2 | ) | (11 | ) | (11 | ) | |||||||||||||||||||||
Realized (gain) loss on derivatives | |||||||||||||||||||||||||||||
Foreign currency forward contracts | (1 | ) | 2 | (6 | ) | 4 | Net sales | ||||||||||||||||||||||
Commodity swap contracts | (1 | ) | 2 | 2 | (1 | ) | Cost of sales | ||||||||||||||||||||||
Total before taxes | (2 | ) | 4 | (4 | ) | 3 | |||||||||||||||||||||||
Income tax expense | 1 | (1 | ) | 1 | — | Income tax expense | |||||||||||||||||||||||
Net realized (gain) loss on derivatives | (1 | ) | 3 | (3 | ) | 3 | |||||||||||||||||||||||
Change in pension and other postretirement defined benefit plans | |||||||||||||||||||||||||||||
Recognized actuarial loss | 18 | 24 | 47 | 71 | (1) | ||||||||||||||||||||||||
Total before taxes | 18 | 24 | 47 | 71 | |||||||||||||||||||||||||
Income tax expense | (4 | ) | (8 | ) | (13 | ) | (23 | ) | Income tax expense | ||||||||||||||||||||
Net change in pensions and other postretirement defined benefit plans | 14 | 16 | 34 | 48 | |||||||||||||||||||||||||
Total reclassifications for the period | $ | 12 | $ | 17 | $ | 20 | $ | 40 | |||||||||||||||||||||
_______________________________________________________________________ | |||||||||||||||||||||||||||||
(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4). |
OPERATING_SEGMENTS
OPERATING SEGMENTS | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||||||
OPERATING SEGMENTS | ' | ||||||||||||||||||||||||
NOTE 14. 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, or decision-making group, in deciding how to allocate resources and in assessing performance. Cummins' chief operating decision-maker (CODM) is the Chief Executive Officer. | |||||||||||||||||||||||||
Our reportable operating segments consist of the following: Engine, Components, Power Generation and Distribution. This reporting structure is organized according to the products and markets each segment serves and allows management to focus its efforts on providing enhanced service to a wide range of customers. The Engine segment produces engines and parts for sale to customers in on-highway and various industrial markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, mining, agriculture, marine, oil and gas, rail and military equipment. The Components segment sells filtration products, aftertreatment systems, turbochargers and fuel systems. The Power Generation segment is an integrated provider of power systems, which sells engines, generator sets and alternators. 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. | |||||||||||||||||||||||||
We use segment EBIT (defined as earnings before interest expense, 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 have allocated 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 and finance. We also 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, divestiture gains or losses 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 | Components | Power Generation | Distribution | Non-segment | Total | |||||||||||||||||||
Items (1) | |||||||||||||||||||||||||
Three months ended September 28, 2014 | |||||||||||||||||||||||||
External sales | $ | 2,181 | $ | 946 | $ | 481 | $ | 1,282 | $ | — | $ | 4,890 | |||||||||||||
Intersegment sales | 635 | 341 | 273 | 10 | (1,259 | ) | — | ||||||||||||||||||
Total sales | 2,816 | 1,287 | 754 | 1,292 | (1,259 | ) | 4,890 | ||||||||||||||||||
Depreciation and amortization(2) | 50 | 27 | 13 | 22 | — | 112 | |||||||||||||||||||
Research, development and engineering expenses | 114 | 64 | 18 | 2 | — | 198 | |||||||||||||||||||
Equity, royalty and interest income from investees | 40 | 9 | 13 | 37 | — | 99 | |||||||||||||||||||
Interest income | 3 | 1 | 1 | 1 | — | 6 | |||||||||||||||||||
Segment EBIT | 330 | 172 | 60 | 131 | (3) | (9 | ) | 684 | |||||||||||||||||
Three months ended September 29, 2013 | |||||||||||||||||||||||||
External sales | $ | 2,045 | $ | 784 | $ | 499 | $ | 938 | $ | — | $ | 4,266 | |||||||||||||
Intersegment sales | 447 | 288 | 213 | 6 | (954 | ) | — | ||||||||||||||||||
Total sales | 2,492 | 1,072 | 712 | 944 | (954 | ) | 4,266 | ||||||||||||||||||
Depreciation and amortization(2) | 53 | 24 | 13 | 15 | — | 105 | |||||||||||||||||||
Research, development and engineering expenses | 103 | 51 | 18 | 1 | — | 173 | |||||||||||||||||||
Equity, royalty and interest income from investees | 31 | 5 | 13 | 42 | — | 91 | |||||||||||||||||||
Interest income | 4 | 1 | 1 | — | — | 6 | |||||||||||||||||||
Segment EBIT | 272 | 132 | 45 | 86 | (3) | 1 | 536 | ||||||||||||||||||
Nine months ended September 28, 2014 | |||||||||||||||||||||||||
External sales | $ | 6,449 | $ | 2,821 | $ | 1,408 | $ | 3,453 | $ | — | $ | 14,131 | |||||||||||||
Intersegment sales | 1,674 | 976 | 728 | 27 | (3,405 | ) | — | ||||||||||||||||||
Total sales | 8,123 | 3,797 | 2,136 | 3,480 | (3,405 | ) | 14,131 | ||||||||||||||||||
Depreciation and amortization(2) | 153 | 79 | 38 | 58 | — | 328 | |||||||||||||||||||
Research, development and engineering expenses | 335 | 170 | 55 | 7 | — | 567 | |||||||||||||||||||
Equity, royalty and interest income from investees | 117 | 27 | 30 | 120 | — | 294 | |||||||||||||||||||
Interest income | 9 | 3 | 3 | 2 | — | 17 | |||||||||||||||||||
Segment EBIT | 910 | 524 | 146 | 333 | (3) | (44 | ) | 1,869 | |||||||||||||||||
Nine months ended September 29, 2013 | |||||||||||||||||||||||||
External sales | $ | 6,139 | $ | 2,292 | $ | 1,621 | $ | 2,661 | $ | — | $ | 12,713 | |||||||||||||
Intersegment sales | 1,312 | 915 | 651 | 15 | (2,893 | ) | — | ||||||||||||||||||
Total sales | 7,451 | 3,207 | 2,272 | 2,676 | (2,893 | ) | 12,713 | ||||||||||||||||||
Depreciation and amortization(2) | 156 | 71 | 37 | 40 | — | 304 | |||||||||||||||||||
Research, development and engineering expenses | 310 | 165 | 53 | 4 | — | 532 | |||||||||||||||||||
Equity, royalty and interest income from investees | 106 | 21 | 30 | 124 | — | 281 | |||||||||||||||||||
Interest income | 13 | 2 | 5 | 1 | — | 21 | |||||||||||||||||||
Segment EBIT | 806 | 387 | 172 | 281 | (3) | (52 | ) | 1,594 | |||||||||||||||||
_________________________________________________________________ | |||||||||||||||||||||||||
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended September 28, 2014 and September 29, 2013. | |||||||||||||||||||||||||
(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 $2 million and $8 million for the nine months ended September 28, 2014 and September 29, 2013, respectively. | |||||||||||||||||||||||||
(3)Distribution segment EBIT included gains as disclosed in the table below. See Note 3, "ACQUISITIONS" for additional information. | |||||||||||||||||||||||||
Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors in the periods presented below: | |||||||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||||||
In millions | September 28, | September 29, | September 28, | September 29, | |||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Eastern Canada | $ | 18 | $ | — | $ | 18 | $ | — | |||||||||||||||||
Southern Plains | — | — | 13 | — | |||||||||||||||||||||
Mid-South | — | — | 7 | — | |||||||||||||||||||||
Rocky Mountain | — | — | — | 5 | |||||||||||||||||||||
Northwest | — | — | — | 7 | |||||||||||||||||||||
Total gains included in EBIT | $ | 18 | $ | — | $ | 38 | $ | 12 | |||||||||||||||||
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 | September 28, | September 29, | September 28, | September 29, | |||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Total EBIT | $ | 684 | $ | 536 | $ | 1,869 | $ | 1,594 | |||||||||||||||||
Less: Interest expense | 15 | 8 | 47 | 22 | |||||||||||||||||||||
Income before income taxes | $ | 669 | $ | 528 | $ | 1,822 | $ | 1,572 | |||||||||||||||||
RECENTLY_ADOPTED_ACCOUNTING_PR
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 28, 2014 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | ' |
NOTE 15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |
In May 2014, the Financial Accounting Standards Board (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 standard allows either full or modified retrospective adoption. Early adoption is not permitted. 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 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 judgments and assets recognized from costs incurred to fulfill a contract. The new rules will become effective for annual and interim periods beginning January 1, 2017. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements and determining our method for adoption. |
SUBSEQUENT_EVENT_SUBSEQUENT_EV
SUBSEQUENT EVENT SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 28, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
NOTE 16. SUBSEQUENT EVENTS | |
Acquisition of Cummins Npower LLC | |
On September 29, 2014, we acquired the remaining 50 percent interest in Cummins Npower LLC (Npower) from the former distributor principal for consideration of approximately $39 million in cash and an additional $33 million paid to creditors to eliminate all debt related to the entity, or total consideration of $72 million, subject to customary purchase price adjustments. | |
Acquisition of Cummins Power South LLC | |
On September 29, 2014, we acquired the remaining 50 percent interest in Cummins Power South LLC (Power South) from the former distributor principal for consideration of approximately $19 million in cash and an additional $16 million paid to creditors to eliminate all debt related to the entity, or total consideration of $35 million, subject to customary purchase price adjustments. | |
These acquisitions will be accounted for as business combinations and the results of the acquired entities will be included in the Distribution operating segment beginning with the fourth quarter of 2014. |
BASIS_OF_PRESENTATION_Tables
BASIS OF PRESENTATION (Tables) | 9 Months Ended | |||||||||||
Sep. 28, 2014 | ||||||||||||
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 month periods ended September 28, 2014 and September 29, 2013, were as follows: | ||||||||||||
Three months ended | Nine months ended | |||||||||||
September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||
Options excluded | 225,773 | 184,775 | 110,488 | 479,276 | ||||||||
ACQUISITIONS_AND_DIVESTITURES_
ACQUISITIONS AND DIVESTITURES (Tables) | 9 Months Ended | |||
Sep. 28, 2014 | ||||
Cummins Southern Plains LLC | ' | |||
Business Acquisition | ' | |||
Schedule of purchase price allocation | ' | |||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 63 | ||
Inventory | 59 | |||
Fixed assets | 47 | |||
Intangible assets | 11 | |||
Other current assets | 9 | |||
Current liabilities | (53 | ) | ||
Total business valuation | 136 | |||
Fair value of pre-existing 50 percent interest | (44 | ) | ||
Purchase price | $ | 92 | ||
Cummins Mid-South LLC | ' | |||
Business Acquisition | ' | |||
Schedule of purchase price allocation | ' | |||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 71 | ||
Inventory | 70 | |||
Fixed assets | 37 | |||
Intangible assets | 8 | |||
Goodwill | 4 | |||
Other current assets | 10 | |||
Current liabilities | (43 | ) | ||
Other long-term liability | (4 | ) | ||
Total business valuation | 153 | |||
Fair value of pre-existing 37.8 percent interest | (35 | ) | ||
Purchase price | $ | 118 | ||
Cummins Rocky Mountain LLC | ' | |||
Business Acquisition | ' | |||
Schedule of purchase price allocation | ' | |||
The final purchase price allocation was as follows: | ||||
In millions | ||||
Accounts receivable | $ | 48 | ||
Inventory | 100 | |||
Fixed assets | 34 | |||
Intangible assets | 8 | |||
Goodwill | 10 | |||
Other current assets | 8 | |||
Current liabilities | (41 | ) | ||
Total business valuation | 167 | |||
Fair value of pre-existing 33 percent interest | (31 | ) | ||
Purchase price | $ | 136 | ||
PENSION_AND_OTHER_POSTRETIREME1
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | ' | ||||||||||||||||||||||||
Cash contributions to pension and other postretirement benefit plans | ' | ||||||||||||||||||||||||
Contributions to these plans were as follows: | |||||||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||||||
In millions | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||
Defined benefit pension and other postretirement plans | |||||||||||||||||||||||||
Voluntary contribution | $ | 34 | $ | 33 | $ | 109 | $ | 110 | |||||||||||||||||
Mandatory contribution | 7 | 7 | 88 | 51 | |||||||||||||||||||||
Defined benefit pension contributions | 41 | 40 | 197 | 161 | |||||||||||||||||||||
Other postretirement plans | 12 | 11 | 35 | 37 | |||||||||||||||||||||
Total defined benefit plans | $ | 53 | $ | 51 | $ | 232 | $ | 198 | |||||||||||||||||
Defined contribution pension plans | $ | 16 | $ | 14 | $ | 57 | $ | 50 | |||||||||||||||||
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 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||
Service cost | $ | 16 | $ | 17 | $ | 7 | $ | 5 | $ | — | $ | — | |||||||||||||
Interest cost | 26 | 23 | 16 | 14 | 4 | 4 | |||||||||||||||||||
Expected return on plan assets | (43 | ) | (42 | ) | (23 | ) | (17 | ) | — | — | |||||||||||||||
Recognized net actuarial loss | 8 | 16 | 7 | 6 | — | 2 | |||||||||||||||||||
Net periodic benefit cost | $ | 7 | $ | 14 | $ | 7 | $ | 8 | $ | 4 | $ | 6 | |||||||||||||
Pension | |||||||||||||||||||||||||
U.S. Plans | U.K. Plans | Other Postretirement Benefits | |||||||||||||||||||||||
Nine months ended | |||||||||||||||||||||||||
In millions | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||
Service cost | $ | 50 | $ | 52 | $ | 19 | $ | 15 | $ | — | $ | — | |||||||||||||
Interest cost | 79 | 70 | 49 | 42 | 13 | 12 | |||||||||||||||||||
Expected return on plan assets | (131 | ) | (126 | ) | (66 | ) | (53 | ) | — | — | |||||||||||||||
Recognized net actuarial loss | 23 | 47 | 20 | 18 | — | 5 | |||||||||||||||||||
Net periodic benefit cost | $ | 21 | $ | 43 | $ | 22 | $ | 22 | $ | 13 | $ | 17 | |||||||||||||
EQUITY_ROYALTY_AND_INTEREST_IN1
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||
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 interim reporting periods was as follows: | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
In millions | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||
Distribution Entities | |||||||||||||||||
North American distributors | $ | 27 | $ | 34 | $ | 89 | $ | 98 | |||||||||
Komatsu Cummins Chile, Ltda. | 8 | 6 | 22 | 17 | |||||||||||||
All other distributors | — | 1 | 2 | 1 | |||||||||||||
Manufacturing Entities | |||||||||||||||||
Dongfeng Cummins Engine Company, Ltd. | 15 | 13 | 51 | 45 | |||||||||||||
Chongqing Cummins Engine Company, Ltd. | 13 | 15 | 39 | 44 | |||||||||||||
Beijing Foton Cummins Engine Co., Ltd. (Light-duty) | 10 | 4 | 24 | 14 | |||||||||||||
Shanghai Fleetguard Filter Co., Ltd. | 3 | 4 | 9 | 11 | |||||||||||||
Tata Cummins, Ltd. | 2 | 1 | 6 | 4 | |||||||||||||
Cummins Westport, Inc. | 2 | 2 | 3 | 5 | |||||||||||||
Beijing Foton Cummins Engine Co., Ltd. (Heavy-duty) | (5 | ) | (4 | ) | (18 | ) | (14 | ) | |||||||||
All other manufacturers | 13 | 7 | 36 | 29 | |||||||||||||
Cummins share of net income | 88 | 83 | 263 | 254 | |||||||||||||
Royalty and interest income | 11 | 8 | 31 | 27 | |||||||||||||
Equity, royalty and interest income from investees | $ | 99 | $ | 91 | $ | 294 | $ | 281 | |||||||||
MARKETABLE_SECURITIES_Tables
MARKETABLE SECURITIES (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
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: | |||||||||||||||||||||||||
September 28, 2014 | December 31, 2013 | ||||||||||||||||||||||||
In millions | Cost | Gross unrealized | Estimated | Cost | Gross unrealized | Estimated | |||||||||||||||||||
gains/(losses) | fair value | gains/(losses) | fair value | ||||||||||||||||||||||
Available-for-sale | |||||||||||||||||||||||||
Level 1(1) | |||||||||||||||||||||||||
Debt mutual funds | $ | 26 | $ | — | $ | 26 | $ | 72 | $ | — | $ | 72 | |||||||||||||
Equity securities and other | 7 | — | 7 | 10 | 13 | 23 | |||||||||||||||||||
Total level 1 | 33 | — | 33 | 82 | 13 | 95 | |||||||||||||||||||
Level 2(2) | |||||||||||||||||||||||||
Debt mutual funds | 14 | 1 | 15 | 27 | 2 | 29 | |||||||||||||||||||
Bank debentures | 3 | — | 3 | 2 | — | 2 | |||||||||||||||||||
Certificates of deposit | — | — | — | 22 | — | 22 | |||||||||||||||||||
Government debt securities-non-U.S. | 3 | (1 | ) | 2 | 3 | (1 | ) | 2 | |||||||||||||||||
Total level 2 | 20 | — | 20 | 54 | 1 | 55 | |||||||||||||||||||
Total marketable securities | $ | 53 | $ | — | $ | 53 | $ | 136 | $ | 14 | $ | 150 | |||||||||||||
________________________________________________________________________________________ | |||||||||||||||||||||||||
(1) The fair value of Level 1 securities is estimated primarily by referencing quoted prices in active markets for identical assets. | |||||||||||||||||||||||||
(2) The fair value of Level 2 securities is estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 securities, and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. | |||||||||||||||||||||||||
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 | September 28, 2014 | September 29, 2013 | 28-Sep-14 | September 29, 2013 | |||||||||||||||||||||
Proceeds from sales and maturities of marketable securities | $ | 137 | $ | 153 | $ | 316 | $ | 433 | |||||||||||||||||
Gross realized gains from the sale of available-for-sale securities | 1 | 1 | 14 | 12 | |||||||||||||||||||||
Summary of fair value of available-for-sale investments with contractual maturities | ' | ||||||||||||||||||||||||
At September 28, 2014, the fair value of available-for-sale investments in debt securities that utilize a Level 2 fair value measure by contractual maturity was as follows: | |||||||||||||||||||||||||
Maturity date | Fair value | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
1 year or less | $ | 16 | |||||||||||||||||||||||
1 - 5 years | 3 | ||||||||||||||||||||||||
5 - 10 years | 1 | ||||||||||||||||||||||||
Total | $ | 20 | |||||||||||||||||||||||
INVENTORIES_Tables
INVENTORIES (Tables) | 9 Months Ended | ||||||||
Sep. 28, 2014 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Inventories | ' | ||||||||
Inventories are stated at the lower of cost or market. Inventories included the following: | |||||||||
In millions | September 28, 2014 | December 31, 2013 | |||||||
Finished products | $ | 1,775 | $ | 1,487 | |||||
Work-in-process and raw materials | 1,182 | 1,005 | |||||||
Inventories at FIFO cost | 2,957 | 2,492 | |||||||
Excess of FIFO over LIFO | (124 | ) | (111 | ) | |||||
Total inventories | $ | 2,833 | $ | 2,381 | |||||
DEBT_Tables
DEBT (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||||||||||
Summary of long-term debt | ' | ||||||||||||||||||||
A summary of long-term debt was as follows: | |||||||||||||||||||||
In millions | September 28, 2014 | December 31, 2013 | |||||||||||||||||||
Long-term debt | |||||||||||||||||||||
Senior notes, 3.65%, due 2023 (1) | $ | 500 | $ | 500 | |||||||||||||||||
Debentures, 6.75%, due 2027 | 58 | 58 | |||||||||||||||||||
Debentures, 7.125%, due 2028 (1) | 250 | 250 | |||||||||||||||||||
Senior notes, 4.875%, due 2043 | 500 | 500 | |||||||||||||||||||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | 165 | 165 | |||||||||||||||||||
Credit facilities related to consolidated joint ventures | 7 | 92 | |||||||||||||||||||
Other | 38 | 65 | |||||||||||||||||||
1,518 | 1,630 | ||||||||||||||||||||
Unamortized discount | (47 | ) | (48 | ) | |||||||||||||||||
Fair value adjustments due to hedge on indebtedness (1) | 51 | 49 | |||||||||||||||||||
Capital leases | 89 | 92 | |||||||||||||||||||
Total long-term debt | 1,611 | 1,723 | |||||||||||||||||||
Less: Current maturities of long-term debt | (27 | ) | (51 | ) | |||||||||||||||||
Long-term debt | $ | 1,584 | $ | 1,672 | |||||||||||||||||
___________________________________________________________________________________ | |||||||||||||||||||||
(1) In February 2014, we settled our November 2005 interest rate swap which previously converted our $250 million debt issue, due in 2028, from a fixed rate to a floating rate based on a LIBOR spread. We are amortizing the $52 million gain realized upon settlement over the remaining 14-year term of related debt. Also, in February 2014, we entered into a series of interest rate swaps to effectively convert our September 2013, $500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread. See Note 12, "DERIVATIVES" for further details. | |||||||||||||||||||||
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 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||
Payment | $ | 11 | $ | 22 | $ | 32 | $ | 12 | $ | 16 | |||||||||||
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 | September 28, 2014 | December 31, 2013 | |||||||||||||||||||
Fair value of total debt(1) | $ | 1,922 | $ | 1,877 | |||||||||||||||||
Carrying value of total debt | 1,689 | 1,740 | |||||||||||||||||||
_________________________________________________ | |||||||||||||||||||||
(1)The fair value of debt is derived from Level 2 inputs. |
PRODUCT_WARRANTY_LIABILITY_Tab
PRODUCT WARRANTY LIABILITY (Tables) | 9 Months Ended | ||||||||
Sep. 28, 2014 | |||||||||
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: | |||||||||
Nine months ended | |||||||||
In millions | September 28, 2014 | September 29, 2013 | |||||||
Balance, beginning of year | $ | 1,129 | $ | 1,088 | |||||
Provision for warranties issued | 307 | 317 | |||||||
Deferred revenue on extended warranty contracts sold | 175 | 138 | |||||||
Payments | (313 | ) | (312 | ) | |||||
Amortization of deferred revenue on extended warranty contracts | (109 | ) | (84 | ) | |||||
Changes in estimates for pre-existing warranties | 28 | (26 | ) | ||||||
Foreign currency translation | (4 | ) | (3 | ) | |||||
Balance, end of period | $ | 1,213 | $ | 1,118 | |||||
Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability | ' | ||||||||
Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our September 28, 2014, balance sheet were as follows: | |||||||||
In millions | September 28, 2014 | Balance Sheet Location | |||||||
Deferred revenue related to extended coverage programs | |||||||||
Current portion | $ | 159 | Deferred revenue | ||||||
Long-term portion | 401 | Other liabilities and deferred revenue | |||||||
Total | $ | 560 | |||||||
Receivables related to estimated supplier recoveries | |||||||||
Current portion | $ | 9 | Trade and other receivables | ||||||
Long-term portion | 3 | Other assets | |||||||
Total | $ | 12 | |||||||
Long-term portion of warranty liability | $ | 302 | Other liabilities and deferred revenue | ||||||
DERIVATIVES_Tables
DERIVATIVES (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||||||||||||||||||||||||
Gains and losses on interest rate swap | ' | ||||||||||||||||||||||||||||||||
The following table summarizes these gains and losses for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||||||||||||||
In millions | 28-Sep-14 | 29-Sep-13 | 28-Sep-14 | 29-Sep-13 | |||||||||||||||||||||||||||||
Income Statement | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | Gain/(Loss) on | |||||||||||||||||||||||||
Classification | Swaps | Borrowings | Swaps | Borrowings | Swaps | Borrowings | Swaps | Borrowings | |||||||||||||||||||||||||
Interest expense(1) | $ | — | $ | 2 | $ | (6 | ) | $ | 6 | $ | 8 | $ | (5 | ) | $ | (34 | ) | $ | 34 | ||||||||||||||
(1)The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. | |||||||||||||||||||||||||||||||||
Location and amounts of gains and losses for derivative instruments classified as cash flow hedges | ' | ||||||||||||||||||||||||||||||||
The following table summarizes the effect on our Condensed Consolidated Statements of Income for derivative instruments classified as cash flow hedges for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
In millions(1) | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
Derivatives in cash flow hedging relationships | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||||||||||
Gain/(loss) reclassified from AOCL into income - Net sales(2) | $ | 1 | $ | (2 | ) | $ | 6 | $ | (4 | ) | |||||||||||||||||||||||
Gain/(loss) reclassified from AOCL into income - Cost of sales(3) | 1 | (2 | ) | (2 | ) | 1 | |||||||||||||||||||||||||||
Total | $ | 2 | $ | (4 | ) | $ | 4 | $ | (3 | ) | |||||||||||||||||||||||
_____________________________________________________ | |||||||||||||||||||||||||||||||||
(1)The table does not include amounts related to ineffectiveness or the effective portion of gain (loss) recognized in AOCL as they were not material for the periods presented. | |||||||||||||||||||||||||||||||||
(2)Includes foreign currency forward contracts. | |||||||||||||||||||||||||||||||||
(3)Includes commodity swap contracts. | |||||||||||||||||||||||||||||||||
Location and amounts of gains and losses for derivative instruments that are not classified as hedges | ' | ||||||||||||||||||||||||||||||||
The following table summarizes the effect on our Condensed Consolidated Statements of Income for derivative instruments not classified as cash flow hedges for the three and nine month periods presented below: | |||||||||||||||||||||||||||||||||
In millions | Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments | September 28, 2014 | September 29, 2013 | September 28, 2014 | September 29, 2013 | |||||||||||||||||||||||||||||
Gain/(loss) recognized in income - Cost of sales(1) | $ | 1 | $ | (1 | ) | $ | (2 | ) | $ | (2 | ) | ||||||||||||||||||||||
Gain/(loss) recognized in income - Other income (expense), net(2) | (12 | ) | 19 | (5 | ) | (3 | ) | ||||||||||||||||||||||||||
Total | $ | (11 | ) | $ | 18 | $ | (7 | ) | $ | (5 | ) | ||||||||||||||||||||||
_________________________________________________ | |||||||||||||||||||||||||||||||||
(1) Includes foreign currency forward contracts and commodity zero-cost collars. | |||||||||||||||||||||||||||||||||
(2) Includes foreign currency forward contracts. | |||||||||||||||||||||||||||||||||
Location and fair value of derivative instruments | ' | ||||||||||||||||||||||||||||||||
The following table summarizes the location and fair value of interest rate swap contracts, foreign currency forward contracts, commodity swap contracts and commodity zero-cost collars on our Condensed Consolidated Balance Sheets: | |||||||||||||||||||||||||||||||||
Derivatives Designated | Derivatives Not Designated | ||||||||||||||||||||||||||||||||
as Hedging Instruments | as Hedging Instruments | ||||||||||||||||||||||||||||||||
In millions | 28-Sep-14 | 31-Dec-13 | 28-Sep-14 | 31-Dec-13 | |||||||||||||||||||||||||||||
Notional amount(1) | $ | 603 | $ | 425 | $ | 747 | $ | 547 | |||||||||||||||||||||||||
Derivative assets recorded in: | |||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | — | 5 | — | 6 | |||||||||||||||||||||||||||||
Other assets | 5 | 49 | — | — | |||||||||||||||||||||||||||||
Total derivative assets(2) | $ | 5 | $ | 54 | $ | — | $ | 6 | |||||||||||||||||||||||||
Derivative liabilities recorded in: | |||||||||||||||||||||||||||||||||
Other accrued expenses | 2 | 5 | 1 | 5 | |||||||||||||||||||||||||||||
Total derivative liabilities(2) | $ | 2 | $ | 5 | $ | 1 | $ | 5 | |||||||||||||||||||||||||
______________________________________________ | |||||||||||||||||||||||||||||||||
(1)Commodity zero-cost collars are not designated as hedging instruments and had a notional quantity of 4,578 and 5,421 metric tons of copper at September 28, 2014 and December 31, 2013, respectively. These instruments are not included in the notional amounts above as they were subject to a USD denominated cap and floor; however, they are included in the total asset and liability balances as appropriate. The average cap and floor at September 28, 2014 and December 31, 2013 were $7,265 and $6,619 and $7,639 and $6,978, respectively. | |||||||||||||||||||||||||||||||||
(2)Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 input measures and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. |
OTHER_COMPREHENSIVE_INCOME_LOS1
OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended | ||||||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||||||||||
Changes in accumulated other comprehensive income (loss) by component | ' | ||||||||||||||||||||||||||||
Following are the changes in accumulated other comprehensive income (loss) by component for the three and nine months ended: | |||||||||||||||||||||||||||||
Three months ended | |||||||||||||||||||||||||||||
In millions | Change in | Foreign | Unrealized gain | Unrealized gain | Total | Noncontrolling | Total | ||||||||||||||||||||||
pensions and | currency | (loss) on | (loss) on | attributable to | interests | ||||||||||||||||||||||||
other | translation | marketable | derivatives | Cummins Inc. | |||||||||||||||||||||||||
postretirement | adjustment | securities | |||||||||||||||||||||||||||
defined benefit | |||||||||||||||||||||||||||||
plans | |||||||||||||||||||||||||||||
Balance at June 30, 2013 | $ | (754 | ) | $ | (338 | ) | $ | 5 | $ | (12 | ) | $ | (1,099 | ) | |||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | — | 105 | 2 | 10 | 117 | $ | (9 | ) | $ | 108 | |||||||||||||||||||
Tax (provision) benefit | — | (1 | ) | 1 | (3 | ) | (3 | ) | — | (3 | ) | ||||||||||||||||||
After tax amount | — | 104 | 3 | 7 | 114 | (9 | ) | 105 | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 16 | — | (2 | ) | 3 | 17 | — | 17 | |||||||||||||||||||||
Net current period other comprehensive income (loss) | 16 | 104 | 1 | 10 | 131 | $ | (9 | ) | $ | 122 | |||||||||||||||||||
Balance at September 29, 2013 | $ | (738 | ) | $ | (234 | ) | $ | 6 | $ | (2 | ) | $ | (968 | ) | |||||||||||||||
Balance at June 29, 2014 | $ | (597 | ) | $ | (76 | ) | $ | — | $ | 4 | $ | (669 | ) | ||||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | — | (184 | ) | — | (5 | ) | (189 | ) | $ | (6 | ) | $ | (195 | ) | |||||||||||||||
Tax (provision) benefit | — | 18 | — | 1 | 19 | — | 19 | ||||||||||||||||||||||
After tax amount | — | (166 | ) | — | (4 | ) | (170 | ) | (6 | ) | (176 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 14 | — | (1 | ) | (1 | ) | 12 | — | 12 | ||||||||||||||||||||
Net current period other comprehensive income (loss) | 14 | (166 | ) | (1 | ) | (5 | ) | (158 | ) | $ | (6 | ) | $ | (164 | ) | ||||||||||||||
Balance at September 28, 2014 | $ | (583 | ) | $ | (242 | ) | $ | (1 | ) | $ | (1 | ) | $ | (827 | ) | ||||||||||||||
Nine months ended | |||||||||||||||||||||||||||||
In millions | Change in | Foreign | Unrealized gain | Unrealized gain | Total | Noncontrolling | Total | ||||||||||||||||||||||
pensions and | currency | (loss) on | (loss) on | attributable to | interests | ||||||||||||||||||||||||
other | translation | marketable | derivatives | Cummins Inc. | |||||||||||||||||||||||||
postretirement | adjustment | securities | |||||||||||||||||||||||||||
defined benefit | |||||||||||||||||||||||||||||
plans | |||||||||||||||||||||||||||||
Balance at December 31, 2012 | $ | (794 | ) | $ | (161 | ) | $ | 5 | $ | — | $ | (950 | ) | ||||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | 13 | (86 | ) | 10 | (7 | ) | (70 | ) | $ | (28 | ) | $ | (98 | ) | |||||||||||||||
Tax (provision) benefit | (5 | ) | 13 | (1 | ) | 2 | 9 | — | 9 | ||||||||||||||||||||
After tax amount | 8 | (73 | ) | 9 | (5 | ) | (61 | ) | (28 | ) | (89 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 48 | — | (8 | ) | 3 | 43 | (3 | ) | 40 | ||||||||||||||||||||
Net current period other comprehensive income (loss) | 56 | (73 | ) | 1 | (2 | ) | (18 | ) | $ | (31 | ) | $ | (49 | ) | |||||||||||||||
Balance at September 29, 2013 | $ | (738 | ) | $ | (234 | ) | $ | 6 | $ | (2 | ) | $ | (968 | ) | |||||||||||||||
Balance at December 31, 2013 | $ | (611 | ) | $ | (179 | ) | $ | 7 | $ | (1 | ) | $ | (784 | ) | |||||||||||||||
Other comprehensive income before reclassifications | |||||||||||||||||||||||||||||
Before tax amount | (7 | ) | (77 | ) | (1 | ) | 5 | (80 | ) | $ | 1 | $ | (79 | ) | |||||||||||||||
Tax (provision) benefit | 1 | 14 | — | (2 | ) | 13 | — | 13 | |||||||||||||||||||||
After tax amount | (6 | ) | (63 | ) | (1 | ) | 3 | (67 | ) | 1 | (66 | ) | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive income(1)(2) | 34 | — | (7 | ) | (3 | ) | 24 | (4 | ) | 20 | |||||||||||||||||||
Net current period other comprehensive income (loss) | 28 | (63 | ) | (8 | ) | — | (43 | ) | $ | (3 | ) | $ | (46 | ) | |||||||||||||||
Balance at September 28, 2014 | $ | (583 | ) | $ | (242 | ) | $ | (1 | ) | $ | (1 | ) | $ | (827 | ) | ||||||||||||||
_________________________________________________________________________________________________________________________ | |||||||||||||||||||||||||||||
(1)Amounts are net of tax. | |||||||||||||||||||||||||||||
(2)See reclassifications out of accumulated other comprehensive income (loss) 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 income (loss) and the related tax effects: | |||||||||||||||||||||||||||||
In millions | Three months ended | Nine months ended | |||||||||||||||||||||||||||
(Gain)/Loss Components | 28-Sep-14 | 29-Sep-13 | 28-Sep-14 | 29-Sep-13 | Statement of Income Location | ||||||||||||||||||||||||
Realized (gain) loss on marketable securities | $ | (1 | ) | $ | (1 | ) | $ | (14 | ) | $ | (12 | ) | Other income (expense), net | ||||||||||||||||
Income tax expense | — | (1 | ) | 3 | 1 | Income tax expense | |||||||||||||||||||||||
Net realized (gain) loss on marketable securities | (1 | ) | (2 | ) | (11 | ) | (11 | ) | |||||||||||||||||||||
Realized (gain) loss on derivatives | |||||||||||||||||||||||||||||
Foreign currency forward contracts | (1 | ) | 2 | (6 | ) | 4 | Net sales | ||||||||||||||||||||||
Commodity swap contracts | (1 | ) | 2 | 2 | (1 | ) | Cost of sales | ||||||||||||||||||||||
Total before taxes | (2 | ) | 4 | (4 | ) | 3 | |||||||||||||||||||||||
Income tax expense | 1 | (1 | ) | 1 | — | Income tax expense | |||||||||||||||||||||||
Net realized (gain) loss on derivatives | (1 | ) | 3 | (3 | ) | 3 | |||||||||||||||||||||||
Change in pension and other postretirement defined benefit plans | |||||||||||||||||||||||||||||
Recognized actuarial loss | 18 | 24 | 47 | 71 | (1) | ||||||||||||||||||||||||
Total before taxes | 18 | 24 | 47 | 71 | |||||||||||||||||||||||||
Income tax expense | (4 | ) | (8 | ) | (13 | ) | (23 | ) | Income tax expense | ||||||||||||||||||||
Net change in pensions and other postretirement defined benefit plans | 14 | 16 | 34 | 48 | |||||||||||||||||||||||||
Total reclassifications for the period | $ | 12 | $ | 17 | $ | 20 | $ | 40 | |||||||||||||||||||||
_______________________________________________________________________ | |||||||||||||||||||||||||||||
(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4). |
OPERATING_SEGMENTS_Tables
OPERATING SEGMENTS (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||||||||
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 | Components | Power Generation | Distribution | Non-segment | Total | |||||||||||||||||||
Items (1) | |||||||||||||||||||||||||
Three months ended September 28, 2014 | |||||||||||||||||||||||||
External sales | $ | 2,181 | $ | 946 | $ | 481 | $ | 1,282 | $ | — | $ | 4,890 | |||||||||||||
Intersegment sales | 635 | 341 | 273 | 10 | (1,259 | ) | — | ||||||||||||||||||
Total sales | 2,816 | 1,287 | 754 | 1,292 | (1,259 | ) | 4,890 | ||||||||||||||||||
Depreciation and amortization(2) | 50 | 27 | 13 | 22 | — | 112 | |||||||||||||||||||
Research, development and engineering expenses | 114 | 64 | 18 | 2 | — | 198 | |||||||||||||||||||
Equity, royalty and interest income from investees | 40 | 9 | 13 | 37 | — | 99 | |||||||||||||||||||
Interest income | 3 | 1 | 1 | 1 | — | 6 | |||||||||||||||||||
Segment EBIT | 330 | 172 | 60 | 131 | (3) | (9 | ) | 684 | |||||||||||||||||
Three months ended September 29, 2013 | |||||||||||||||||||||||||
External sales | $ | 2,045 | $ | 784 | $ | 499 | $ | 938 | $ | — | $ | 4,266 | |||||||||||||
Intersegment sales | 447 | 288 | 213 | 6 | (954 | ) | — | ||||||||||||||||||
Total sales | 2,492 | 1,072 | 712 | 944 | (954 | ) | 4,266 | ||||||||||||||||||
Depreciation and amortization(2) | 53 | 24 | 13 | 15 | — | 105 | |||||||||||||||||||
Research, development and engineering expenses | 103 | 51 | 18 | 1 | — | 173 | |||||||||||||||||||
Equity, royalty and interest income from investees | 31 | 5 | 13 | 42 | — | 91 | |||||||||||||||||||
Interest income | 4 | 1 | 1 | — | — | 6 | |||||||||||||||||||
Segment EBIT | 272 | 132 | 45 | 86 | (3) | 1 | 536 | ||||||||||||||||||
Nine months ended September 28, 2014 | |||||||||||||||||||||||||
External sales | $ | 6,449 | $ | 2,821 | $ | 1,408 | $ | 3,453 | $ | — | $ | 14,131 | |||||||||||||
Intersegment sales | 1,674 | 976 | 728 | 27 | (3,405 | ) | — | ||||||||||||||||||
Total sales | 8,123 | 3,797 | 2,136 | 3,480 | (3,405 | ) | 14,131 | ||||||||||||||||||
Depreciation and amortization(2) | 153 | 79 | 38 | 58 | — | 328 | |||||||||||||||||||
Research, development and engineering expenses | 335 | 170 | 55 | 7 | — | 567 | |||||||||||||||||||
Equity, royalty and interest income from investees | 117 | 27 | 30 | 120 | — | 294 | |||||||||||||||||||
Interest income | 9 | 3 | 3 | 2 | — | 17 | |||||||||||||||||||
Segment EBIT | 910 | 524 | 146 | 333 | (3) | (44 | ) | 1,869 | |||||||||||||||||
Nine months ended September 29, 2013 | |||||||||||||||||||||||||
External sales | $ | 6,139 | $ | 2,292 | $ | 1,621 | $ | 2,661 | $ | — | $ | 12,713 | |||||||||||||
Intersegment sales | 1,312 | 915 | 651 | 15 | (2,893 | ) | — | ||||||||||||||||||
Total sales | 7,451 | 3,207 | 2,272 | 2,676 | (2,893 | ) | 12,713 | ||||||||||||||||||
Depreciation and amortization(2) | 156 | 71 | 37 | 40 | — | 304 | |||||||||||||||||||
Research, development and engineering expenses | 310 | 165 | 53 | 4 | — | 532 | |||||||||||||||||||
Equity, royalty and interest income from investees | 106 | 21 | 30 | 124 | — | 281 | |||||||||||||||||||
Interest income | 13 | 2 | 5 | 1 | — | 21 | |||||||||||||||||||
Segment EBIT | 806 | 387 | 172 | 281 | (3) | (52 | ) | 1,594 | |||||||||||||||||
_________________________________________________________________ | |||||||||||||||||||||||||
(1) Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended September 28, 2014 and September 29, 2013. | |||||||||||||||||||||||||
(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 $2 million and $8 million for the nine months ended September 28, 2014 and September 29, 2013, respectively. | |||||||||||||||||||||||||
(3)Distribution segment EBIT included gains as disclosed in the table below. See Note 3, "ACQUISITIONS" for additional information. | |||||||||||||||||||||||||
Schedule of fair value adjustment gains resulting from the acquisition of controlling interests in North American Distributors included in EBIT | ' | ||||||||||||||||||||||||
Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors in the periods presented below: | |||||||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||||||
In millions | September 28, | September 29, | September 28, | September 29, | |||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Eastern Canada | $ | 18 | $ | — | $ | 18 | $ | — | |||||||||||||||||
Southern Plains | — | — | 13 | — | |||||||||||||||||||||
Mid-South | — | — | 7 | — | |||||||||||||||||||||
Rocky Mountain | — | — | — | 5 | |||||||||||||||||||||
Northwest | — | — | — | 7 | |||||||||||||||||||||
Total gains included in EBIT | $ | 18 | $ | — | $ | 38 | $ | 12 | |||||||||||||||||
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 | September 28, | September 29, | September 28, | September 29, | |||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||
Total EBIT | $ | 684 | $ | 536 | $ | 1,869 | $ | 1,594 | |||||||||||||||||
Less: Interest expense | 15 | 8 | 47 | 22 | |||||||||||||||||||||
Income before income taxes | $ | 669 | $ | 528 | $ | 1,822 | $ | 1,572 | |||||||||||||||||
NATURE_OF_OPERATIONS_Details
NATURE OF OPERATIONS (Details) | 9 Months Ended |
Sep. 28, 2014 | |
country | |
location | |
Nature of Operations | ' |
Company owned and independent distributor locations | 600 |
Dealer locations | 6,800 |
Countries and territories located in | 190 |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
In Millions, except Share data, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Jun. 29, 2014 | Sep. 28, 2014 | Sep. 29, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' | ' |
Prior Period Reclassification Adjustment | ' | $28 | $39 | ' | $76 |
Number of days in each interim period | '91 days | '91 days | ' | '273 days | '273 days |
Options excluded (in shares) | 225,773 | 184,775 | ' | 110,488 | 479,276 |
ACQUISITIONS_AND_DIVESTITURES_1
ACQUISITIONS AND DIVESTITURES (Details) (USD $) | 9 Months Ended | 0 Months Ended | 12 Months Ended | 0 Months Ended | 0 Months Ended | 12 Months Ended | 0 Months Ended | 3 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | 0 Months Ended | 12 Months Ended | ||||||||||||||||||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Dec. 31, 2013 | Sep. 16, 2013 | Sep. 16, 2013 | Aug. 04, 2014 | Dec. 31, 2013 | Aug. 04, 2014 | Mar. 31, 2014 | 5-May-14 | 5-May-14 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Feb. 14, 2014 | Jun. 29, 2014 | Dec. 31, 2013 | Feb. 14, 2014 | Feb. 14, 2014 | Feb. 14, 2014 | 31-May-13 | Dec. 31, 2012 | 31-May-13 | 31-May-13 | 31-May-13 | Jul. 31, 2013 | Jan. 31, 2013 | Dec. 31, 2012 | Jul. 31, 2013 | Jan. 31, 2013 |
Minimum | Maximum | Cummins Eastern Canada LP | Cummins Eastern Canada LP | Cummins Eastern Canada LP | Cummins Eastern Canada LP | Cummins Power Systems LLC | Cummins Power Systems LLC | Cummins Southern Plains LLC | Cummins Southern Plains LLC | Cummins Southern Plains LLC | Cummins Southern Plains LLC | Cummins Southern Plains LLC | Cummins Southern Plains LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Rocky Mountain LLC | Cummins Rocky Mountain LLC | Cummins Rocky Mountain LLC | Cummins Rocky Mountain LLC | Cummins Rocky Mountain LLC | Cummins Northwest | Cummins Northwest | Cummins Northwest | Cummins Northwest | Cummins Northwest | ||||
Customer | Maximum | Customer | Customer | Customer | Customer | Customer | Customer | ||||||||||||||||||||||||||
Maximum | Minimum | Maximum | Minimum | Maximum | Minimum | Maximum | |||||||||||||||||||||||||||
Business Acquisition | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Acquisition period for North American Distributors | ' | ' | ' | '3 years | '5 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Remaining interest acquired (as a percent) | ' | ' | ' | ' | ' | ' | ' | 50.00% | ' | ' | 30.00% | ' | ' | 50.00% | ' | ' | ' | ' | ' | ' | 62.20% | ' | ' | ' | ' | 67.00% | ' | ' | ' | ' | ' | 20.01% | 50.00% |
Cash paid for business acquisition | ' | ' | ' | ' | ' | $22 | ' | ' | ' | $14 | ' | $42 | ' | ' | ' | ' | ' | $32 | ' | ' | ' | ' | ' | $62 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash consideration paid to creditors to eliminate all debt related to the acquired entity | ' | ' | ' | ' | ' | ' | ' | 32 | ' | ' | ' | ' | ' | 48 | ' | ' | ' | ' | ' | ' | 61 | ' | ' | ' | ' | 74 | ' | ' | ' | ' | ' | ' | ' |
Additional Cash Paid to Acquire Business | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 23 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Purchase price distributed in future quarters | ' | ' | ' | ' | ' | ' | ' | 8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gain on remeasurement of pre-existing ownership interest in the acquiree company | 38 | 12 | ' | ' | ' | 18 | ' | ' | ' | ' | ' | 13 | ' | ' | ' | ' | ' | 6 | 1 | ' | ' | ' | ' | 5 | ' | ' | ' | ' | ' | 7 | ' | ' | ' |
Ownership interest in the acquiree company, immediately prior to acquisition (as a percent) | ' | ' | ' | ' | ' | ' | ' | 50.00% | ' | ' | ' | ' | ' | 50.00% | ' | ' | ' | ' | ' | ' | 37.80% | ' | ' | ' | ' | 33.00% | ' | ' | ' | ' | ' | ' | 50.00% |
Net sales prior to acquisition | ' | ' | ' | ' | ' | ' | 228 | ' | ' | ' | ' | ' | 433 | ' | ' | ' | ' | ' | ' | 368 | ' | ' | ' | ' | 384 | ' | ' | ' | ' | ' | 137 | ' | ' |
Weighted average amortization life | ' | ' | ' | ' | ' | ' | ' | ' | '1 year | ' | ' | ' | ' | ' | ' | '1 year | '5 years | ' | ' | ' | ' | '1 year | '5 years | ' | ' | ' | '1 year | '4 years | ' | ' | ' | ' | ' |
The preliminary purchase price allocation, subject to finalization, was as follows: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Accounts receivable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 63 | ' | ' | ' | ' | ' | ' | 71 | ' | ' | ' | ' | 48 | ' | ' | ' | ' | ' | ' | ' |
Inventory | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 59 | ' | ' | ' | ' | ' | ' | 70 | ' | ' | ' | ' | 100 | ' | ' | ' | ' | ' | ' | ' |
Fixed assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 47 | ' | ' | ' | ' | ' | ' | 37 | ' | ' | ' | ' | 34 | ' | ' | ' | ' | ' | ' | ' |
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 11 | ' | ' | ' | ' | ' | ' | 8 | ' | ' | ' | ' | 8 | ' | ' | ' | ' | ' | ' | ' |
Goodwill | 465 | ' | 461 | ' | ' | ' | ' | 5 | ' | ' | ' | ' | ' | ' | 1 | ' | ' | ' | ' | ' | 4 | ' | ' | ' | ' | 10 | ' | ' | ' | ' | ' | ' | 3 |
Other current assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9 | ' | ' | ' | ' | ' | ' | 10 | ' | ' | ' | ' | 8 | ' | ' | ' | ' | ' | ' | ' |
Current liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -53 | ' | ' | ' | ' | ' | ' | -43 | ' | ' | ' | ' | -41 | ' | ' | ' | ' | ' | ' | ' |
Noncurrent Liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -4 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total business valuation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 136 | ' | ' | ' | ' | ' | ' | 153 | ' | ' | ' | ' | 167 | ' | ' | ' | ' | ' | ' | ' |
Pre-existing ownership fair value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -44 | ' | ' | ' | ' | ' | -35 | ' | ' | ' | ' | ' | -31 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consideration Transferred | ' | ' | ' | ' | ' | $62 | ' | ' | ' | ' | ' | $92 | ' | ' | ' | ' | ' | $118 | ' | ' | ' | ' | ' | $136 | ' | ' | ' | ' | $4 | $18 | ' | ' | ' |
Other information | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership in partnership formed, post acquisition (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 79.99% |
Third party ownership in partnership formed, post acquisition (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20.01% |
PENSION_AND_OTHER_POSTRETIREME2
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Pension and other postretirement benefits | ' | ' | ' | ' |
Total defined benefit plans | $53 | $51 | $232 | $198 |
Defined contribution pension plans | 16 | 14 | 57 | 50 |
Voluntary contributions | ' | ' | ' | ' |
Pension and other postretirement benefits | ' | ' | ' | ' |
Total defined benefit plans | 34 | 33 | 109 | 110 |
Defined benefit pension plans estimated employer contributions in fiscal year | ' | ' | 111 | ' |
Mandatory contribution | ' | ' | ' | ' |
Pension and other postretirement benefits | ' | ' | ' | ' |
Total defined benefit plans | 7 | 7 | 88 | 51 |
Total contribution | ' | ' | ' | ' |
Pension and other postretirement benefits | ' | ' | ' | ' |
Total defined benefit plans | 41 | 40 | 197 | 161 |
Anticipated additional payments for the remainder of the year | ' | ' | 8 | ' |
Defined benefit pension plans estimated employer contributions in fiscal year | ' | ' | 205 | ' |
U.S. Plans | ' | ' | ' | ' |
Components of Net Periodic Benefit Cost | ' | ' | ' | ' |
Service cost | 16 | 17 | 50 | 52 |
Interest cost | 26 | 23 | 79 | 70 |
Expected return on plan assets | -43 | -42 | -131 | -126 |
Recognized net actuarial loss | 8 | 16 | 23 | 47 |
Net periodic benefit cost | 7 | 14 | 21 | 43 |
U.K. Plans | ' | ' | ' | ' |
Components of Net Periodic Benefit Cost | ' | ' | ' | ' |
Service cost | 7 | 5 | 19 | 15 |
Interest cost | 16 | 14 | 49 | 42 |
Expected return on plan assets | -23 | -17 | -66 | -53 |
Recognized net actuarial loss | 7 | 6 | 20 | 18 |
Net periodic benefit cost | 7 | 8 | 22 | 22 |
Other Postretirement Benefits | ' | ' | ' | ' |
Pension and other postretirement benefits | ' | ' | ' | ' |
Total defined benefit plans | 12 | 11 | 35 | 37 |
Anticipated additional payments for the remainder of the year | ' | ' | 11 | ' |
Components of Net Periodic Benefit Cost | ' | ' | ' | ' |
Service cost | ' | ' | 0 | 0 |
Interest cost | 4 | 4 | 13 | 12 |
Expected return on plan assets | ' | ' | 0 | 0 |
Recognized net actuarial loss | ' | 2 | ' | 5 |
Net periodic benefit cost | $4 | $6 | $13 | $17 |
EQUITY_ROYALTY_AND_INTEREST_IN2
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | $88 | $83 | $263 | $254 |
Royalty and interest income | 11 | 8 | 31 | 27 |
Equity, royalty and interest income from investees | 99 | 91 | 294 | 281 |
Distribution - North American distributors | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 27 | 34 | 89 | 98 |
Distribution - Komatsu Cummins Chile, Ltda. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 8 | 6 | 22 | 17 |
Distribution - All other distributors | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | ' | 1 | 2 | 1 |
Manufacturing - Dongfeng Cummins Engine Company, Ltd. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 15 | 13 | 51 | 45 |
Manufacturing - Chongqing Cummins Engine Company, Ltd. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 13 | 15 | 39 | 44 |
Manufacturing - Beijing Foton Cummins Engine Company (Light-Duty) | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 10 | 4 | 24 | 14 |
Manufacturing - Shanghai Fleetguard Filter Co., Ltd. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 3 | 4 | 9 | 11 |
Manufacturing - Tata Cummins, Ltd. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 2 | 1 | 6 | 4 |
Manufacturing - Cummins Westport, Inc. | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | 2 | 2 | 3 | 5 |
Manufacturing - Beijing Foton Cummins Engine Company (Heavy-Duty) | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | -5 | -4 | -18 | -14 |
Manufacturing - All other manufacturers | ' | ' | ' | ' |
Equity, royalty and interest income from investees | ' | ' | ' | ' |
Cummins share of net income | $13 | $7 | $36 | $29 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | |||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Mar. 30, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Oct. 29, 2014 | Oct. 29, 2014 | Oct. 29, 2014 |
Estimate | Minimum | Maximum | ||||||
Estimate | Estimate | |||||||
Income tax disclosures | ' | ' | ' | ' | ' | ' | ' | ' |
Effective tax rate (as a percent) | 34.40% | ' | 29.20% | 30.40% | 28.30% | 29.50% | ' | ' |
Decrease of unrecognized tax benefits resulting from prior period tax positions | ' | ' | ' | ' | ' | ' | $0 | $75 |
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | 19 | ' | 4 | ' | ' | ' | ' | ' |
Tax Adjustments, Settlements, and Unusual Provisions | ' | 12 | 4 | -2 | ' | ' | ' | ' |
U.S. statutory rate, (as a percent) | ' | ' | ' | 35.00% | ' | ' | ' | ' |
Effective Income Tax Rate Reconciliation, Deduction, Dividends, Amount | ' | 6 | ' | ' | ' | ' | ' | ' |
Cash dividends paid from China earnings | ' | ' | ' | 70 | ' | ' | ' | ' |
Net discrete income tax expense (benefit) adjustment | ' | ' | 7 | ' | ' | ' | ' | ' |
Discrete tax charge for enactment of U.K. law changes | ' | ' | -1 | ' | ' | ' | ' | ' |
Net discrete income tax benefit (expense) attributable to 2012 research credit | ' | ' | ' | ' | 28 | ' | ' | ' |
Net discrete income tax expense related to the write-off of a deferred tax asset deemed unrecoverable | ' | ' | ' | ' | $17 | ' | ' | ' |
MARKETABLE_SECURITIES_Details
MARKETABLE SECURITIES (Details) (USD $) | Sep. 28, 2014 | Dec. 31, 2013 | ||
In Millions, unless otherwise specified | ||||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | $53 | $136 | ||
Gross unrealized gains/(losses) | 0 | 14 | ||
Estimated fair value | 53 | 150 | ||
Quoted prices in active markets for identical assets (Level 1) | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 33 | [1] | 82 | [1] |
Gross unrealized gains/(losses) | ' | 13 | [1] | |
Estimated fair value | 33 | [1] | 95 | [1] |
Quoted prices in active markets for identical assets (Level 1) | Debt mutual funds | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 26 | [1] | 72 | [1] |
Gross unrealized gains/(losses) | ' | ' | [1] | |
Estimated fair value | 26 | [1] | 72 | [1] |
Quoted prices in active markets for identical assets (Level 1) | Equity securities and other | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 7 | [1] | 10 | [1] |
Gross unrealized gains/(losses) | ' | 13 | [1] | |
Estimated fair value | 7 | [1] | 23 | [1] |
Significant other observable inputs (Level 2) | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 20 | [2] | 54 | [2] |
Gross unrealized gains/(losses) | 0 | [2] | 1 | [2] |
Estimated fair value | 20 | [2] | 55 | [2] |
Significant other observable inputs (Level 2) | Debt mutual funds | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 14 | [2] | 27 | [2] |
Gross unrealized gains/(losses) | 1 | [2] | 2 | [2] |
Estimated fair value | 15 | [2] | 29 | [2] |
Significant other observable inputs (Level 2) | Bank debentures | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 3 | [2] | 2 | [2] |
Estimated fair value | 3 | [2] | 2 | [2] |
Significant other observable inputs (Level 2) | Certificates of deposit | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | ' | 22 | [2] | |
Gross unrealized gains/(losses) | ' | [2] | ' | |
Estimated fair value | ' | [2] | 22 | [2] |
Significant other observable inputs (Level 2) | Government debt securities-non-U.S. | ' | ' | ||
Schedule of Available-for-sale Securities | ' | ' | ||
Cost | 3 | [2] | 3 | [2] |
Gross unrealized gains/(losses) | -1 | [2] | -1 | [2] |
Estimated fair value | $2 | [2] | $2 | [2] |
[1] | The fair value of Level 1 securities is estimated primarily by referencing quoted prices in active markets for identical assets. | |||
[2] | The fair value of Level 2 securities is estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 securities, and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. |
MARKETABLE_SECURITIES_Details_
MARKETABLE SECURITIES (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Investments, Debt and Equity Securities [Abstract] | ' | ' | ' | ' |
Proceeds from Sale and Maturity of Marketable Securities | $137 | $153 | $316 | $433 |
Gross realized gains from the sale of available-for-sale securities | $1 | $1 | $14 | $12 |
MARKETABLE_SECURITIES_Details_1
MARKETABLE SECURITIES (Details 3) (USD $) | Sep. 28, 2014 |
In Millions, unless otherwise specified | |
Fair value of available-for-sale investments by contractual maturity | ' |
1 year or less | $16 |
1-5 years | 3 |
5-10 years | 1 |
Total | $20 |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Sep. 28, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Inventory Disclosure [Abstract] | ' | ' |
Finished products | $1,775 | $1,487 |
Work-in-process and raw materials | 1,182 | 1,005 |
Inventories at FIFO cost | 2,957 | 2,492 |
Excess of FIFO over LIFO | -124 | -111 |
Total inventories | $2,833 | $2,381 |
DEBT_Details
DEBT (Details) (USD $) | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 19, 2013 | Feb. 28, 2014 | Nov. 30, 2005 | Feb. 28, 2014 | Nov. 30, 2005 | ||||||
In Millions, unless otherwise specified | Senior notes, 3.65%, due 2023 (1) | Senior notes, 3.65%, due 2023 (1) | Debentures, 6.75%, due 2027 | Debentures, 6.75%, due 2027 | Debentures, 7.125%, due 2028 (1) | Debentures, 7.125%, due 2028 (1) | Senior notes, 4.875%, due 2043 | Senior notes, 4.875%, due 2043 | Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | Credit facilities related to consolidated joint ventures | Credit facilities related to consolidated joint ventures | Other long-term debt | Other long-term debt | Interest rate contracts | Interest rate contracts | Interest rate contracts | London Interbank Offered Rate (LIBOR) | London Interbank Offered Rate (LIBOR) | ||||||||
Senior notes, 3.65%, due 2023 (1) | Debentures, 7.125%, due 2028 (1) | Debentures, 7.125%, due 2028 (1) | Interest rate contracts | Interest rate contracts | |||||||||||||||||||||||
Senior notes, 3.65%, due 2023 (1) | Debentures, 7.125%, due 2028 (1) | ||||||||||||||||||||||||||
Long-term debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Debt face amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $500 | ' | $250 | ' | ' | ||||||
Debt instrument interest rate (as a percent) | ' | ' | 3.65% | ' | 6.75% | ' | 7.13% | ' | 4.88% | ' | 5.65% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Effective interest rate (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.48% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Long-term debt facilities | 1,518 | 1,630 | 500 | [1] | 500 | [1] | 58 | 58 | 250 | [1] | 250 | [1] | 500 | 500 | 165 | 165 | 7 | 92 | 38 | 65 | ' | ' | ' | ' | ' | ||
Unamortized discount | -47 | -48 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Fair value adjustment due to hedge on indebtedness | 51 | [1] | 49 | [1] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||
Capital leases | 89 | 92 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Total long-term debt | 1,611 | 1,723 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Less: Current maturities of long-term debt | -27 | -51 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Long-term debt | 1,584 | 1,672 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Fixed rate on debt issue, due in 2023 (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3.65% | ' | ' | ' | ' | ||||||
Debt Instrument, Description of Variable Rate Basis | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'one-month LIBOR | 'LIBOR | ||||||
Gain realized upon settlement of interest rate hedge | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 52 | ' | ' | ' | ||||||
Amortization period of deferred gain from interest rate hedge | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '14 years | ' | ' | ' | ||||||
Principal payments required on long-term debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
2014 | 11 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
2015 | 22 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
2016 | 32 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
2017 | 12 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
2018 | 16 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Fair value | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
Fair value of total debt | 1,922 | [2] | 1,877 | [2] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||
Carrying value of total debt | $1,689 | $1,740 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||
[1] | In February 2014, we settled our November 2005 interest rate swap which previously converted our $250 million debt issue, due in 2028, from a fixed rate to a floating rate based on a LIBOR spread. We are amortizing the $52 million gain realized upon settlement over the remaining 14-year term of related debt. Also, in February 2014, we entered into a series of interest rate swaps to effectively convert our September 2013, $500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread. See Note 12, "DERIVATIVES" for further details. | ||||||||||||||||||||||||||
[2] | The fair value of debt is derived from Level 2 inputs. |
PRODUCT_WARRANTY_LIABILITY_Det
PRODUCT WARRANTY LIABILITY (Details) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 |
Product Warranty Liability: | ' | ' |
Balance, beginning of year | $1,129 | $1,088 |
Provision for warranties issued | 307 | 317 |
Deferred revenue on extended warranty contracts sold | 175 | 138 |
Payments | -313 | -312 |
Amortization of deferred revenue on extended warranty contracts | -109 | -84 |
Changes in estimates for pre-existing warranties | 28 | -26 |
Foreign currency translation | -4 | -3 |
Balance, end of period | 1,213 | 1,118 |
Product Warranty Liability | ' | ' |
Total deferred revenue related to extended coverage programs | 560 | ' |
Total receivables related to estimated supplier recoveries | 12 | ' |
Deferred revenue | ' | ' |
Product Warranty Liability | ' | ' |
Deferred revenue related to extended coverage programs, Current portion | 159 | ' |
Other liabilities and deferred revenue | ' | ' |
Product Warranty Liability | ' | ' |
Deferred revenue related to extended coverage programs, Noncurrent portion | 401 | ' |
Long-term portion of warranty liability | 302 | ' |
Trade and other receivables | ' | ' |
Product Warranty Liability | ' | ' |
Receivables related to estimated supplier recoveries, Current portion | 9 | ' |
Other assets | ' | ' |
Product Warranty Liability | ' | ' |
Receivables related to estimated supplier recoveries, Long-term portion | $3 | ' |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 9 Months Ended | 9 Months Ended | |||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 28, 2014 | Dec. 31, 2013 | Sep. 28, 2014 |
Maximum | U.S. Distributor Commitments | Other Guarantees and Commitments | Engine parts supplier | Performance bonds and other performance-related guarantees | Performance bonds and other performance-related guarantees | Joint Venture Commitments | |
Commitments and contingencies: | ' | ' | ' | ' | ' | ' | ' |
Licensing agreement term | ' | '3 years | ' | ' | ' | ' | ' |
Number of days in which distributors can terminate agreements without cause | ' | '60 days | ' | ' | ' | ' | ' |
Number of days in which distributors can terminate agreements with cause | ' | '30 days | ' | ' | ' | ' | ' |
Guarantor obligations, maximum potential loss | ' | ' | $8 | ' | ' | ' | ' |
Long-term purchase commitment, penalty exposure | ' | ' | 86 | 47 | ' | ' | ' |
Forward contract, term | '2 years | ' | ' | ' | ' | ' | ' |
Total commitments under commodity contracts | ' | ' | 51 | ' | ' | ' | ' |
Guarantee obligations, current carrying value | ' | ' | ' | ' | 80 | 66 | ' |
Guarantee obligations JV investment commitment | ' | ' | ' | ' | ' | ' | 4 |
Joint venture estimated commitment to be funded this year | ' | ' | ' | ' | ' | ' | $1 |
DERIVATIVES_Details
DERIVATIVES (Details) (USD $) | Jun. 29, 2014 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Feb. 28, 2014 | Nov. 30, 2005 | Sep. 19, 2013 | ||||
In Millions, unless otherwise specified | Commodity contract | Interest rate contracts | Interest rate contracts | Interest rate contracts | Interest rate contracts | Interest rate contracts | Interest rate contracts | Interest rate contracts | ||||
Interest expense | Interest expense | Interest expense | Interest expense | Debentures, 7.125%, due 2028 (1) | Debentures, 7.125%, due 2028 (1) | Senior notes, 3.65%, due 2023 (1) | ||||||
Derivatives | ' | ' | ' | ' | ' | ' | ' | ' | ||||
Unrealized net gain in AOCL for discontinuation of commodity price risk hedges | $2 | ' | ' | ' | ' | ' | ' | ' | ||||
Debt face amount | ' | ' | ' | ' | ' | ' | 250 | 500 | ||||
Gain realized upon settlement of interest rate hedge | ' | ' | ' | ' | ' | 52 | ' | ' | ||||
Amortization period of deferred gain from interest rate hedge | ' | ' | ' | ' | ' | '14 years | ' | ' | ||||
Fixed rate on debt issue, due in 2023 (as a percent) | ' | ' | ' | ' | ' | ' | ' | 3.65% | ||||
Gain/(Loss) on Swaps | ' | 0 | [1] | -6 | [1] | 8 | [1] | -34 | [1] | ' | ' | ' |
Gain/(Loss) on Borrowings | ' | $2 | [1] | $6 | [1] | ($5) | [1] | $34 | [1] | ' | ' | ' |
[1] | The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. |
DERIVATIVES_Details_2
DERIVATIVES (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | ||||
Derivatives in Cash Flow Hedging Relationships | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Reclassified from AOCL into Income (Effective Portion) | $2 | [1] | ($4) | [1] | $4 | [1] | ($3) | [1] |
Derivatives Not Designated as Hedging Instruments | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Recognized in Income on Derivatives | -11 | 18 | -7 | -5 | ||||
Net sales | ' | ' | ' | ' | ||||
Derivatives in Cash Flow Hedging Relationships | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Reclassified from AOCL into Income (Effective Portion) | 1 | [1],[2] | -2 | [1],[2] | 6 | [1],[2] | -4 | [1],[2] |
Cost of sales | ' | ' | ' | ' | ||||
Derivatives in Cash Flow Hedging Relationships | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Reclassified from AOCL into Income (Effective Portion) | 1 | [1],[3] | -2 | [1],[3] | -2 | [1],[3] | 1 | [1],[3] |
Derivatives Not Designated as Hedging Instruments | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Recognized in Income on Derivatives | 1 | [4] | -1 | [4] | -2 | [4] | -2 | [4] |
Other income (expense), net | ' | ' | ' | ' | ||||
Derivatives Not Designated as Hedging Instruments | ' | ' | ' | ' | ||||
Amount of Gain/(Loss) Recognized in Income on Derivatives | ($12) | [2] | $19 | [2] | ($5) | [2] | ($3) | [2] |
[1] | The table does not include amounts related to ineffectiveness or the effective portion of gain (loss) recognized in AOCL as they were not material for the periods presented. | |||||||
[2] | Includes foreign currency forward contracts. | |||||||
[3] | Includes commodity swap contracts. | |||||||
[4] | Includes foreign currency forward contracts and commodity zero-cost collars. |
DERIVATIVES_Details_3
DERIVATIVES (Details 3) (USD $) | Sep. 28, 2014 | Dec. 31, 2013 | ||
In Millions, unless otherwise specified | ||||
Derivatives, Fair Value | ' | ' | ||
Derivative net asset position | $4 | $53 | ||
Derivative net liability position | 2 | 3 | ||
Derivatives designated as hedging instruments | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Notional amount of derivatives | 603 | [1] | 425 | [1] |
Derivative assets | 5 | [2] | 54 | [2] |
Derivative liabilities | 2 | [2] | 5 | [2] |
Derivatives designated as hedging instruments | Prepaid expenses and other current assets | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative assets | 0 | 5 | ||
Derivatives designated as hedging instruments | Other assets | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative assets | 5 | 49 | ||
Derivatives designated as hedging instruments | Other accrued expenses | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative liabilities | 2 | 5 | ||
Derivatives not designated as hedging instruments | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Notional amount of derivatives | 747 | [1] | 547 | [1] |
Derivative assets | 0 | [2] | 6 | [2] |
Derivative liabilities | 1 | [2] | 5 | [2] |
Derivatives not designated as hedging instruments | Prepaid expenses and other current assets | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative assets | 0 | 6 | ||
Derivatives not designated as hedging instruments | Other assets | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative assets | ' | ' | ||
Derivatives not designated as hedging instruments | Other accrued expenses | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Derivative liabilities | $1 | $5 | ||
Derivatives not designated as hedging instruments | Commodity zero cost collars | Copper | ' | ' | ||
Derivatives, Fair Value | ' | ' | ||
Non-monetary notional amount (in units) | 4,578 | 5,421 | ||
Average Cap Price | 7,265 | 7,639 | ||
Average Floor Price | 6,619 | 6,978 | ||
[1] | Commodity zero-cost collars are not designated as hedging instruments and had a notional quantity of 4,578 and 5,421 metric tons of copper at September 28, 2014 and December 31, 2013, respectively. These instruments are not included in the notional amounts above as they were subject to a USD denominated cap and floor; however, they are included in the total asset and liability balances as appropriate. The average cap and floor at September 28, 2014 and December 31, 2013 were $7,265 and $6,619 and $7,639 and $6,978, respectively. | |||
[2] | Estimates of the fair value of all derivative assets and liabilities above are derived from Level 2 inputs, which are estimated primarily using actively quoted prices for similar instruments from brokers and observable inputs, including market transactions and third-party pricing services. We do not currently have any Level 3 input measures and there were no transfers into or out of Level 2 or 3 during the first nine months of 2014 and 2013. |
OTHER_COMPREHENSIVE_INCOME_LOS2
OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Balance at the beginning of the period | ' | ' | ($784) | ' | ||||
Before tax amount | -195 | 108 | -79 | -98 | ||||
Tax (provision) benefit | 19 | -3 | 13 | 9 | ||||
After tax amount | -176 | 105 | -66 | -89 | ||||
Amounts reclassified from accumulated other comprehensive income | 12 | [1],[2] | 17 | [1],[2] | 20 | [1],[2] | 40 | [1],[2] |
Total other comprehensive income (loss), net of tax | -164 | 122 | -46 | -49 | ||||
Balance at the end of the period | -827 | ' | -827 | ' | ||||
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 | -597 | -754 | -611 | -794 | ||||
Before tax amount | ' | ' | -7 | 13 | ||||
Tax (provision) benefit | ' | ' | 1 | -5 | ||||
After tax amount | ' | 0 | -6 | 8 | ||||
Amounts reclassified from accumulated other comprehensive income | 14 | [1],[2] | 16 | [1],[2] | 34 | [1],[2] | 48 | [1],[2] |
Total other comprehensive income (loss), net of tax | 14 | 16 | 28 | 56 | ||||
Balance at the end of the period | -583 | -738 | -583 | -738 | ||||
Foreign currency translation adjustment | ' | ' | ' | ' | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Balance at the beginning of the period | -76 | -338 | -179 | -161 | ||||
Before tax amount | -184 | 105 | -77 | -86 | ||||
Tax (provision) benefit | 18 | -1 | 14 | 13 | ||||
After tax amount | -166 | 104 | -63 | -73 | ||||
Amounts reclassified from accumulated other comprehensive income | ' | [1],[2] | 0 | [1],[2] | ' | [1],[2] | ' | [1],[2] |
Total other comprehensive income (loss), net of tax | -166 | 104 | -63 | -73 | ||||
Balance at the end of the period | -242 | -234 | -242 | -234 | ||||
Unrealized gain (loss) on marketable securities | ' | ' | ' | ' | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Balance at the beginning of the period | 0 | 5 | 7 | 5 | ||||
Before tax amount | ' | 2 | -1 | 10 | ||||
Tax (provision) benefit | ' | 1 | ' | -1 | ||||
After tax amount | ' | 3 | -1 | 9 | ||||
Amounts reclassified from accumulated other comprehensive income | -1 | [1],[2] | -2 | [1],[2] | -7 | [1],[2] | -8 | [1],[2] |
Total other comprehensive income (loss), net of tax | -1 | 1 | -8 | 1 | ||||
Balance at the end of the period | -1 | 6 | -1 | 6 | ||||
Unrealized gain (loss) on derivatives | ' | ' | ' | ' | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Balance at the beginning of the period | 4 | -12 | -1 | 0 | ||||
Before tax amount | -5 | 10 | 5 | -7 | ||||
Tax (provision) benefit | 1 | -3 | -2 | 2 | ||||
After tax amount | -4 | 7 | 3 | -5 | ||||
Amounts reclassified from accumulated other comprehensive income | -1 | [1],[2] | 3 | [1],[2] | -3 | [1],[2] | 3 | [1],[2] |
Total other comprehensive income (loss), net of tax | -5 | 10 | 0 | -2 | ||||
Balance at the end of the period | -1 | -2 | -1 | -2 | ||||
Total attributable to Cummins Inc. | ' | ' | ' | ' | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Balance at the beginning of the period | -669 | -1,099 | -784 | -950 | ||||
Before tax amount | -189 | 117 | -80 | -70 | ||||
Tax (provision) benefit | 19 | -3 | 13 | 9 | ||||
After tax amount | -170 | 114 | -67 | -61 | ||||
Amounts reclassified from accumulated other comprehensive income | 12 | [1],[2] | 17 | [1],[2] | 24 | [1],[2] | 43 | [1],[2] |
Total other comprehensive income (loss), net of tax | -158 | 131 | -43 | -18 | ||||
Balance at the end of the period | -827 | -968 | -827 | -968 | ||||
Noncontrolling interests | ' | ' | ' | ' | ||||
Changes in accumulated other comprehensive income (loss) by component: | ' | ' | ' | ' | ||||
Before tax amount | -6 | -9 | 1 | -28 | ||||
After tax amount | -6 | -9 | 1 | -28 | ||||
Amounts reclassified from accumulated other comprehensive income | ' | [1],[2] | 0 | [1],[2] | -4 | [1],[2] | -3 | [1],[2] |
Total other comprehensive income (loss), net of tax | ($6) | ($9) | ($3) | ($31) | ||||
[1] | See reclassifications out of accumulated other comprehensive income (loss) disclosure below for further details. | |||||||
[2] | Amounts are net of tax. |
OTHER_COMPREHENSIVE_INCOME_LOS3
OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | ||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ' | ' | ' | ' | ||||
Other income (expense), net | $19 | $6 | $68 | $25 | ||||
NET SALES | 4,890 | [1] | 4,266 | [1] | 14,131 | [1] | 12,713 | [1] |
Cost of sales | 3,606 | 3,185 | 10,543 | 9,570 | ||||
Total before taxes | 669 | 528 | 1,822 | 1,572 | ||||
Income tax expense | -230 | -154 | -553 | -445 | ||||
CONSOLIDATED NET INCOME | 439 | 374 | 1,269 | 1,127 | ||||
Reclassified out of accumulated other comprehensive income (loss) | ' | ' | ' | ' | ||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ' | ' | ' | ' | ||||
CONSOLIDATED NET INCOME | 12 | 17 | 20 | 40 | ||||
Realized (gain) loss on marketable securities | Reclassified out of accumulated other comprehensive income (loss) | ' | ' | ' | ' | ||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ' | ' | ' | ' | ||||
Other income (expense), net | -1 | -1 | -14 | -12 | ||||
Income tax expense | ' | -1 | 3 | 1 | ||||
CONSOLIDATED NET INCOME | -1 | -2 | -11 | -11 | ||||
Realized (gain) loss on derivatives | Reclassified out of accumulated other comprehensive income (loss) | ' | ' | ' | ' | ||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ' | ' | ' | ' | ||||
Total before taxes | -2 | 4 | -4 | 3 | ||||
Income tax expense | 1 | -1 | 1 | ' | ||||
CONSOLIDATED NET INCOME | -1 | 3 | -3 | 3 | ||||
Realized (gain) loss 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 | -1 | 2 | -6 | 4 | ||||
Realized (gain) loss on derivatives | Commodity swap contracts | Reclassified out of accumulated other comprehensive income (loss) | ' | ' | ' | ' | ||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | ' | ' | ' | ' | ||||
Cost of sales | -1 | 2 | 2 | -1 | ||||
Pension 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 | 18 | [2] | 24 | [2] | 47 | [2] | 71 | [2] |
Total before taxes | 18 | 24 | 47 | 71 | ||||
Income tax expense | -4 | -8 | -13 | -23 | ||||
CONSOLIDATED NET INCOME | $14 | $16 | $34 | $48 | ||||
[1] | Includes sales to nonconsolidated equity investees of $518 million and $1,656 million and $553 million and $1,681 million for the three and nine month periods ended September 28, 2014 and September 29, 2013, respectively. | |||||||
[2] | These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4). |
OPERATING_SEGMENTS_Details
OPERATING SEGMENTS (Details) (USD $) | 3 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In Millions, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Aug. 04, 2014 | Mar. 31, 2014 | Feb. 14, 2014 | Jun. 29, 2014 | 31-May-13 | Jan. 31, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | ||||||||||||||||||||||||||||||||
Cummins Eastern Canada LP | Cummins Southern Plains LLC | Cummins Mid-South LLC | Cummins Mid-South LLC | Cummins Rocky Mountain LLC | Cummins Northwest | Engine | Engine | Engine | Engine | Components | Components | Components | Components | Power Generation | Power Generation | Power Generation | Power Generation | Distribution | Distribution | Distribution | Distribution | Distribution | Distribution | Distribution | Distribution | Distribution | Distribution | Non-segment items | Non-segment items | Non-segment items | Non-segment items | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | External Sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Intersegment sales | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | Reportable segment | |||||||||||||||||||||||||||||||||||||
Cummins Eastern Canada LP | Cummins Eastern Canada LP | Cummins Southern Plains LLC | Cummins Mid-South LLC | Cummins Rocky Mountain LLC | Cummins Northwest | Engine | Engine | Engine | Engine | Components | Components | Components | Components | Power Generation | Power Generation | Power Generation | Power Generation | Distribution | Distribution | Distribution | Distribution | Engine | Engine | Engine | Engine | Components | Components | Components | Components | Power Generation | Power Generation | Power Generation | Power Generation | Distribution | Distribution | Distribution | Distribution | Non-segment items | Non-segment items | Non-segment items | Non-segment items | Engine | Engine | Engine | Engine | Components | Components | Components | Components | Power Generation | Power Generation | Power Generation | Power Generation | Distribution | Distribution | Distribution | Distribution | Non-segment items | Non-segment items | Non-segment items | Non-segment items | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating results: | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Total sales | $4,890 | [1] | $4,266 | [1] | $14,131 | [1] | $12,713 | [1] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $4,890 | $4,266 | $14,131 | $12,713 | $2,181 | $2,045 | $6,449 | $6,139 | $946 | $784 | $2,821 | $2,292 | $481 | $499 | $1,408 | $1,621 | $1,282 | $938 | $3,453 | $2,661 | $635 | $447 | $1,674 | $1,312 | $341 | $288 | $976 | $915 | $273 | $213 | $728 | $651 | $10 | $6 | $27 | $15 | ($1,259) | [2] | ($954) | [2] | ($3,405) | [2] | ($2,893) | [2] | $2,816 | $2,492 | $8,123 | $7,451 | $1,287 | $1,072 | $3,797 | $3,207 | $754 | $712 | $2,136 | $2,272 | $1,292 | $944 | $3,480 | $2,676 | ($1,259) | [2] | ($954) | [2] | ($3,405) | [2] | ($2,893) | [2] | ||||||||||||||||||||
Depreciation and amortization | 112 | [3] | 105 | [3] | 328 | [3] | 304 | [3] | ' | ' | ' | ' | ' | ' | 50 | [3] | 53 | [3] | 153 | [3] | 156 | [3] | 27 | [3] | 24 | [3] | 79 | [3] | 71 | [3] | 13 | [3] | 13 | [3] | 38 | [3] | 37 | [3] | 22 | [3] | 15 | [3] | 58 | [3] | 40 | [3] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||
Research, development and engineering expenses | 198 | 173 | 567 | 532 | ' | ' | ' | ' | ' | ' | 114 | 103 | 335 | 310 | 64 | 51 | 170 | 165 | 18 | 18 | 55 | 53 | 2 | 1 | 7 | 4 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Equity, royalty and interest income from investees | 99 | 91 | 294 | 281 | ' | ' | ' | ' | ' | ' | 40 | 31 | 117 | 106 | 9 | 5 | 27 | 21 | 13 | 13 | 30 | 30 | 37 | 42 | 120 | 124 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Interest income | 6 | 6 | 17 | 21 | ' | ' | ' | ' | ' | ' | 3 | 4 | 9 | 13 | 1 | 1 | 3 | 2 | 1 | 1 | 3 | 5 | 1 | 0 | 2 | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Segment EBIT | 684 | 536 | 1,869 | 1,594 | ' | ' | ' | ' | ' | ' | 330 | 272 | 910 | 806 | 172 | 132 | 524 | 387 | 60 | 45 | 146 | 172 | 131 | [4] | 86 | [4] | 333 | [4] | 281 | [4] | ' | ' | ' | ' | ' | ' | -9 | [2] | 1 | [2] | -44 | [2] | -52 | [2] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||
Less: Interest expense | 15 | 8 | 47 | 22 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
INCOME BEFORE INCOME TAXES | 669 | 528 | 1,822 | 1,572 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Amortization of debt discount and deferred costs excluded | ' | ' | 2 | 8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | ' | ' | $38 | $12 | $18 | $13 | $6 | $1 | $5 | $7 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $18 | $0 | $38 | $12 | $18 | $18 | $13 | $7 | $5 | $7 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||||||||||||||||||||||||||
[1] | Includes sales to nonconsolidated equity investees of $518 million and $1,656 million and $553 million and $1,681 million for the three and nine month periods ended September 28, 2014 and September 29, 2013, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
[2] | Includes intersegment sales and profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended SeptemberB 28, 2014 and SeptemberB 29, 2013. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
[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 $2 million and $8 million for the nine months ended September 28, 2014 and September 29, 2013, respectively. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
[4] | Distribution segment EBIT included gains as disclosed in the table below. See Note 3, "ACQUISITIONS" for additional information. |
SUBSEQUENT_EVENT_SUBSEQUENT_EV1
SUBSEQUENT EVENT SUBSEQUENT EVENTS (Details) (Subsequent Event, USD $) | 0 Months Ended | |
In Millions, unless otherwise specified | Sep. 29, 2014 | Sep. 29, 2014 |
Cummins Power South LLC | ' | ' |
Subsequent Event [Line Items] | ' | ' |
Remaining interest acquired (as a percent) | ' | 50.00% |
Cash paid for business acquisition | $19 | ' |
Cash consideration paid to creditors to eliminate all debt related to the acquired entity | ' | 16 |
Consideration Transferred | 35 | ' |
Cummins Npower LLC | ' | ' |
Subsequent Event [Line Items] | ' | ' |
Remaining interest acquired (as a percent) | ' | 50.00% |
Cash paid for business acquisition | 39 | ' |
Cash consideration paid to creditors to eliminate all debt related to the acquired entity | ' | 33 |
Consideration Transferred | $72 | ' |