Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 27, 2015shares | |
Document and Entity Information | |
Entity Registrant Name | CUMMINS INC |
Entity Central Index Key | 26,172 |
Document Type | 10-Q |
Document Period End Date | Sep. 27, 2015 |
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 | 177,621,278 |
Document Fiscal Year Focus | 2,015 |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | ||
Income Statement [Abstract] | |||||
NET SALES | [1] | $ 4,620 | $ 4,890 | $ 14,344 | $ 14,131 |
Cost of sales | 3,412 | 3,606 | 10,609 | 10,543 | |
GROSS MARGIN | 1,208 | 1,284 | 3,735 | 3,588 | |
OPERATING EXPENSES AND INCOME | |||||
Selling, general and administrative expenses | 530 | 529 | 1,584 | 1,527 | |
Research, development and engineering expenses | 197 | 198 | 558 | 567 | |
Equity, royalty and interest income from investees (Note 5) | 78 | 99 | 240 | 294 | |
Other operating (expense) income, net | (2) | 3 | (5) | (4) | |
OPERATING INCOME | 557 | 659 | 1,828 | 1,784 | |
Interest income | 9 | 6 | 20 | 17 | |
Interest expense | 16 | 15 | 47 | 47 | |
Other income, net | 11 | 19 | 12 | 68 | |
INCOME BEFORE INCOME TAXES | 561 | 669 | 1,813 | 1,822 | |
Income tax expense (Note 6) | 169 | 230 | 521 | 553 | |
CONSOLIDATED NET INCOME | 392 | 439 | 1,292 | 1,269 | |
Less: Net income attributable to noncontrolling interests | 12 | 16 | 54 | 62 | |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 380 | $ 423 | $ 1,238 | $ 1,207 | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | |||||
Basic (in dollars per share) | $ 2.15 | $ 2.32 | $ 6.92 | $ 6.59 | |
Diluted (in dollars per share) | $ 2.14 | $ 2.32 | $ 6.90 | $ 6.58 | |
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||
Basic (in shares) | 177 | 182.2 | 178.9 | 183.1 | |
Dilutive effect of stock compensation awards (in shares) | 0.4 | 0.5 | 0.4 | 0.4 | |
Diluted (in shares) | 177.4 | 182.7 | 179.3 | 183.5 | |
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.975 | $ 0.78 | $ 2.535 | $ 2.03 | |
Sales to nonconsolidated equity investees | $ 274 | $ 518 | $ 956 | $ 1,656 | |
[1] | Includes sales to nonconsolidated equity investees of $274 million and $956 million and $518 million and $1,656 million for the three and nine month periods ended September 27, 2015 and September 28, 2014, respectively. |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
CONSOLIDATED NET INCOME | $ 392 | $ 439 | $ 1,292 | $ 1,269 |
Other comprehensive (loss) income, net of tax (Note 12) | ||||
Change in pension and other postretirement defined benefit plans | 15 | 14 | 43 | 28 |
Foreign currency translation adjustments | (221) | (172) | (252) | (62) |
Unrealized loss on marketable securities | (1) | (1) | (1) | (12) |
Unrealized gain (loss) on derivatives | 7 | (5) | 15 | 0 |
Total other comprehensive loss, net of tax | (200) | (164) | (195) | (46) |
COMPREHENSIVE INCOME | 192 | 275 | 1,097 | 1,223 |
Less: Comprehensive income attributable to noncontrolling interest | (1) | 10 | 39 | 59 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 193 | $ 265 | $ 1,058 | $ 1,164 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 27, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 1,688 | $ 2,301 |
Marketable securities (Note 7) | 35 | 93 |
Total cash, cash equivalents and marketable securities | 1,723 | 2,394 |
Trade and other | 2,915 | 2,744 |
Nonconsolidated equity investees | 244 | 202 |
Inventories (Note 8) | 3,059 | 2,866 |
Prepaid expenses and other current assets | 921 | 849 |
Total current assets | 8,862 | 9,055 |
Long-term assets | ||
Property, plant and equipment | 7,262 | 7,123 |
Accumulated depreciation | (3,545) | (3,437) |
Property, plant and equipment, net | 3,717 | 3,686 |
Investments and advances related to equity method investees | 959 | 981 |
Goodwill | 481 | 479 |
Other intangible assets, net | 337 | 343 |
Pension assets | 785 | 637 |
Other assets | 656 | 595 |
Total assets | 15,797 | 15,776 |
Current liabilities | ||
Accounts payable (principally trade) | 1,824 | 1,881 |
Loans payable | 27 | 86 |
Current portion of accrued product warranty (Note 9) | 388 | 363 |
Accrued compensation, benefits and retirement costs | 505 | 508 |
Current portion of deferred revenue | 414 | 401 |
Other accrued expenses | 779 | 759 |
Current maturities of long-term debt (Note 10) | 31 | 23 |
Total current liabilities | 3,968 | 4,021 |
Long-term liabilities | ||
Long-term debt (Note 10) | 1,595 | 1,589 |
Postretirement benefits other than pensions | 347 | 369 |
Pensions | 292 | 289 |
Other liabilities and deferred revenue | 1,514 | 1,415 |
Total liabilities | $ 7,716 | $ 7,683 |
Commitments and contingencies (Note 11) | ||
Cummins Inc. shareholders' equity | ||
Common stock, $2.50 par value, 500 shares authorized, 222.3 and 222.3 shares issued | $ 2,173 | $ 2,139 |
Retained earnings | 10,331 | 9,545 |
Treasury stock, at cost, 44.7 and 40.1 shares | (3,486) | (2,844) |
Common stock held by employee benefits trust, at cost, 1.0 and 1.1 shares | (11) | (13) |
Accumulated other comprehensive loss (Note 12) | ||
Total accumulated other comprehensive loss | (1,258) | (1,078) |
Total Cummins Inc. shareholders' equity | 7,749 | 7,749 |
Noncontrolling interests | 332 | 344 |
Total equity | 8,081 | 8,093 |
Total liabilities and equity | $ 15,797 | $ 15,776 |
CONDENSED CONSOLIDATED BALANCE5
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Sep. 27, 2015 | Dec. 31, 2014 |
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 | 44.7 | 40.1 |
Common stock held by employee benefits trust, shares | 1 | 1.1 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 27, 2015 | Sep. 28, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Consolidated net income | $ 1,292 | $ 1,269 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ||
Depreciation and amortization | 383 | 330 |
Gain on fair value adjustment for consolidated investees (Note 3) | (17) | (38) |
Deferred income taxes | (120) | (37) |
Equity in income of investees, net of dividends | (68) | (103) |
Pension contributions in excess of expense | (119) | (154) |
Other post-retirement benefits payments in excess of expense | (18) | (22) |
Stock-based compensation expense | 24 | 27 |
Translation and hedging activities | 22 | (19) |
Changes in current assets and liabilities, net of acquisitions | ||
Accounts and notes receivable | (163) | (236) |
Inventories | (179) | (302) |
Other current assets | 133 | (6) |
Accounts payable | (52) | 316 |
Accrued expenses | (153) | 162 |
Changes in other liabilities and deferred revenue | 219 | 184 |
Other, net | (53) | 17 |
Net cash provided by operating activities | 1,131 | 1,388 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (393) | (409) |
Investments in internal use software | (38) | (40) |
Investments in and advances to equity investees | (9) | (39) |
Acquisitions of businesses, net of cash acquired (Note 3) | (102) | (266) |
Investments in marketable securities—acquisitions (Note 7) | (175) | (213) |
Investments in marketable securities—liquidations (Note 7) | 228 | 316 |
Cash flows from derivatives not designated as hedges | 17 | 0 |
Other, net | (5) | 11 |
Net cash used in investing activities | (477) | (640) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from borrowings | 24 | 39 |
Payments on borrowings and capital lease obligations | (64) | (72) |
Proceeds from (Repayments of) Short-term Debt | (38) | (41) |
Distributions to noncontrolling interests | (35) | (52) |
Dividend payments on common stock | (452) | (370) |
Repurchases of common stock | (650) | (605) |
Other, net | 0 | 2 |
Net cash used in financing activities | (1,215) | (1,099) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (52) | (20) |
Net decrease in cash and cash equivalents | (613) | (371) |
Cash and cash equivalents at beginning of year | 2,301 | 2,699 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,688 | $ 2,328 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Common Stock Held in Trust | Accumulated Other Comprehensive Loss | Total Cummins Inc. Shareholders' Equity | Noncontrolling Interests |
BALANCE at Dec. 31, 2013 | $ 7,870 | $ 556 | $ 1,543 | $ 8,406 | $ (2,195) | $ (16) | $ (784) | $ 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 | (2,779) | (14) | (827) | 7,748 | 349 |
BALANCE at Dec. 31, 2014 | 8,093 | $ 556 | 1,583 | 9,545 | (2,844) | (13) | (1,078) | 7,749 | 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,292 | 1,238 | 1,238 | 54 | |||||
Other comprehensive income (loss) | (195) | (180) | (180) | (15) | |||||
Issuance of shares | 7 | 7 | 7 | ||||||
Employee benefits trust activity | 23 | 21 | 2 | 23 | |||||
Acquisition of shares | (650) | (650) | (650) | ||||||
Cash dividends on common stock | (452) | (452) | (452) | ||||||
Distributions to noncontrolling interests | (46) | (46) | |||||||
Stock based awards | 4 | (4) | 8 | 4 | |||||
Other shareholder transactions | 5 | 10 | 10 | (5) | |||||
BALANCE at Sep. 27, 2015 | $ 8,081 | $ 556 | $ 1,617 | $ 10,331 | $ (3,486) | $ (11) | $ (1,258) | $ 7,749 | $ 332 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 27, 2015 | |
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 and as one of the first diesel engine manufacturers. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of approximately 600 company-owned and independent distributor locations and approximately 7,200 dealer locations in more than 190 countries and territories. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 27, 2015 | |
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. Certain 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 2015 and 2014 ended on September 27 and September 28, respectively. 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 costs, income taxes and deferred tax valuation allowances, lease classifications, restructuring actions 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 27, 2015 and September 28, 2014 , were as follows: Three months ended Nine months ended September 27, September 28, September 27, September 28, Options excluded 950,345 225,773 593,436 110,488 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, 2014 . 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. |
ACQUISITONS ACQUISITIONS
ACQUISITONS ACQUISITIONS | 9 Months Ended |
Sep. 27, 2015 | |
Business Combinations [Abstract] | |
ACQUISITIONS | 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 U.S. and Canadian distributors over a three to five year period. The Distribution segment North American distributor acquisitions for the nine months ended September 27, 2015, versus the comparable period in 2014 were as follows: Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration Type of Acquisition (1) Gain Recognized (1) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended (3) 2015 Cummins Crosspoint LLC (4) 08/03/15 50% $ 20 $ 36 $ 65 (5) COMB $ 10 $ 7 $ 2 $ 258 Cummins Atlantic LLC (4) 08/03/15 51% 14 28 48 (5) COMB 7 2 6 245 Cummins Central Power LLC 06/29/15 20.01% 8 — 8 EQUITY — — — — 2014 Cummins Eastern Canada LP 08/04/14 50% $ 30 $ 32 $ 62 COMB $ 18 $ 5 $ 4 $ 228 Cummins Power Systems LLC 05/05/14 30% 14 — 14 EQUITY — — — — Cummins Southern Plains LLC 03/31/14 50% 44 48 92 COMB 13 1 11 433 Cummins Mid-South LLC 02/14/14 62.2% 57 61 118 COMB 7 4 8 368 ____________________________________________________ (1) All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP and are included in the Condensed Consolidated Statements of Income as " Other income, net ." (2) Intangible assets acquired in business combinations were mostly customer related, the majority of which will be amortized over a period of up to five years from the date of the acquisition. (3) Sales amounts are not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. (4) Purchase accounting for these acquisitions are preliminary, awaiting customary adjustments to purchase price in accordance with the purchase agreements. (5) The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total estimated remaining consideration at September 27, 2015, was $15 million . |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 9 Months Ended |
Sep. 27, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
PENSION AND OTHER POSTRETIREMENT BENEFITS | NOTE 4. PENSION AND OTHER POSTRETIREMENT BENEFITS 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 27, September 28, September 27, September 28, September 27, September 28, Service cost $ 20 $ 16 $ 7 $ 7 $ — $ — Interest cost 25 26 14 16 4 4 Expected return on plan assets (47 ) (43 ) (23 ) (23 ) — — Recognized net actuarial loss 11 8 8 7 1 — Net periodic benefit cost $ 9 $ 7 $ 6 $ 7 $ 5 $ 4 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions September 27, September 28, September 27, September 28, September 27, September 28, Service cost $ 60 $ 50 $ 20 $ 19 $ — $ — Interest cost 76 79 42 49 12 13 Expected return on plan assets (142 ) (131 ) (68 ) (66 ) — — Recognized net actuarial loss 34 23 25 20 3 — Net periodic benefit cost $ 28 $ 21 $ 19 $ 22 $ 15 $ 13 |
EQUITY, ROYALTY AND INTEREST IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 9 Months Ended |
Sep. 27, 2015 | |
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 27, September 28, September 27, September 28, Distribution Entities North American distributors $ 9 $ 27 $ 27 $ 89 Komatsu Cummins Chile, Ltda. 8 8 23 22 All other distributors 1 — 2 2 Manufacturing Entities Beijing Foton Cummins Engine Co., Ltd 18 5 47 6 Dongfeng Cummins Engine Company, Ltd. 11 15 40 51 Chongqing Cummins Engine Company, Ltd. 9 13 32 39 All other manufacturers 13 20 41 54 Cummins share of net income 69 88 212 263 Royalty and interest income 9 11 28 31 Equity, royalty and interest income from investees $ 78 $ 99 $ 240 $ 294 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 27, 2015 | |
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, 2014 and has not yet been renewed by Congress. If the research credit is reinstated during 2015, we anticipate the 2015 effective tax rate will be reduced to 28.5 percent . 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 rate for the three and nine month periods ended September 27, 2015 , was 30.1 percent and 28.7 percent , respectively. The tax rate for the nine month period ended September 27, 2015 , included a net $14 million discrete tax benefit primarily to reflect the release of reserves for uncertain tax positions related to a favorable federal audit settlement. Our effective tax rate for the three and nine month periods ended September 28, 2014 , was 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 $2 million discrete tax benefit for the release of reserves for uncertain tax positions related to multiple state audit settlements, a $12 million discrete tax expense attributable primarily to state deferred tax adjustments, as well as a $6 million discrete net tax benefit resulting from a $70 million dividend paid from China earnings generated prior to 2012. The decrease in the effective tax rate for the three months ended September 27, 2015, versus the comparable period in 2014 was primarily due to favorable changes in the jurisdictional mix of pre-tax income and the 2014 unfavorable discrete tax items. It is reasonably possible that our existing liabilities for uncertain tax benefits may decrease in an amount ranging from $0 to $70 million within the next twelve months for U.S. and non-U.S. audits that are in process. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Sep. 27, 2015 | |
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 27, 2015 December 31, 2014 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale Level 2 (1) Debt mutual funds $ 25 $ — $ 25 $ 75 $ 1 $ 76 Equity mutual funds 9 (1 ) 8 9 — 9 Bank debentures — — — 6 — 6 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 36 $ (1 ) $ 35 $ 92 $ 1 $ 93 ____________________________________ (1) 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 between Level 2 or 3 during the first nine months of 2015 and 2014. 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 27, September 28, September 27, September 28, Proceeds from sales and maturities of marketable securities $ 73 $ 137 $ 228 $ 316 Gross realized gains from the sale of marketable securities — 1 1 14 At September 27, 2015 , 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 $ 25 1 - 5 years 1 5 - 10 years 1 Total $ 27 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 27, 2015 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 8. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 27, December 31, Finished products $ 2,001 $ 1,859 Work-in-process and raw materials 1,168 1,129 Inventories at FIFO cost 3,169 2,988 Excess of FIFO over LIFO (110 ) (122 ) Total inventories $ 3,059 $ 2,866 |
DEBT
DEBT | 9 Months Ended |
Sep. 27, 2015 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 10. DEBT A summary of long-term debt was as follows: In millions September 27, December 31, Long-term debt Senior notes, 3.65%, due 2023 $ 500 $ 500 Debentures, 6.75%, due 2027 58 58 Debentures, 7.125%, due 2028 250 250 Senior notes, 4.875%, due 2043 500 500 Debentures, 5.65%, due 2098 (effective interest rate 7.48%) 165 165 Credit facilities related to consolidated joint ventures 3 3 Other debt 43 31 Unamortized discount (46 ) (47 ) Fair value adjustments due to hedge on indebtedness 68 65 Capital leases 85 87 Total long-term debt 1,626 1,612 Less: Current maturities of long-term debt (31 ) (23 ) Long-term debt $ 1,595 $ 1,589 Principal payments required on long-term debt during the next five years are as follows: Required Principal Payments In millions 2015 2016 2017 2018 2019 Principal payments $ 9 $ 40 $ 16 $ 17 $ 11 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 27, December 31, Fair value of total debt (1) $ 1,859 $ 1,993 Carrying value of total debt 1,653 1,698 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 9 Months Ended |
Sep. 27, 2015 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 9. PRODUCT WARRANTY LIABILITY A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows: In millions September 27, September 28, Balance, beginning of year $ 1,283 $ 1,129 Provision for warranties issued 326 307 Deferred revenue on extended warranty contracts sold 217 175 Payments (282 ) (313 ) Amortization of deferred revenue on extended warranty contracts (132 ) (109 ) Changes in estimates for pre-existing warranties 18 28 Foreign currency translation (10 ) (4 ) Balance, end of period $ 1,420 $ 1,213 Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability on our September 27, 2015, balance sheet were as follows: In millions September 27, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 183 Deferred revenue Long-term portion 508 Other liabilities and deferred revenue Total $ 691 Receivables related to estimated supplier recoveries Current portion $ 6 Trade and other receivables Long-term portion 4 Other assets Total $ 10 Long-term portion of warranty liability $ 341 Other liabilities and deferred revenue |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 27, 2015 | |
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. Guarantees and Commitments From time to time we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of third-party obligations. As of September 27, 2015, the maximum potential loss related to these guarantees was $20 million . We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. As of September 27, 2015, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $134 million , of which $78 million relates to a contract with a components supplier that extends to 2018. These arrangements enable us to secure critical components. We do not currently anticipate paying any penalties under these contracts. During 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 27, 2015, the total commitments under these contracts were $38 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 $69 million at September 27, 2015 and $76 million at December 31, 2014 . 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. |
OTHER COMPREHENSIVE INCOME (LOS
OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 27, 2015 | |
Equity [Abstract] | |
OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 12. 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 Balance at June 29, 2014 $ (597 ) $ (76 ) $ — $ 4 $ (669 ) Other comprehensive income before reclassifications Before tax amount — (184 ) — (5 ) (189 ) $ (6 ) $ (195 ) Tax (expense) 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 ) Balance at June 28, 2015 $ (641 ) $ (435 ) $ (1 ) $ 6 $ (1,071 ) Other comprehensive income before reclassifications Before tax amount — (239 ) (1 ) 13 (227 ) $ (13 ) $ (240 ) Tax (expense) benefit — 31 — (1 ) 30 — 30 After tax amount — (208 ) (1 ) 12 (197 ) (13 ) (210 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 15 — — (5 ) 10 — 10 Net current period other comprehensive income (loss) 15 (208 ) (1 ) 7 (187 ) $ (13 ) $ (200 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive income (loss) disclosure below for further details. Nine months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total 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 (expense) 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 ) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (3 ) (290 ) — 23 (270 ) $ (15 ) $ (285 ) Tax (expense) benefit 1 53 — (3 ) 51 — 51 After tax amount (2 ) (237 ) — 20 (219 ) (15 ) (234 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 45 — (1 ) (5 ) 39 — 39 Net current period other comprehensive income (loss) 43 (237 ) (1 ) 15 (180 ) $ (15 ) $ (195 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) ____________________________________ (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 September 27, September 28, September 27, 2015 September 28, 2014 Statement of Income Location Change in pension and other postretirement defined benefit plans Recognized actuarial loss $ 22 $ 18 $ 65 $ 47 (1) Tax effect (7 ) (4 ) (20 ) (13 ) Income tax expense Net change in pensions and other postretirement defined benefit plans $ 15 $ 14 $ 45 $ 34 Realized (gain) loss on marketable securities $ — $ (1 ) $ (1 ) $ (14 ) Other income (expense), net Tax effect — — — 3 Income tax expense Net realized (gain) loss on marketable securities $ — $ (1 ) $ (1 ) $ (11 ) Realized (gain) loss on derivatives Foreign currency forward contracts $ (6 ) $ (1 ) $ (6 ) $ (6 ) Net sales Commodity swap contracts — (1 ) — 2 Cost of sales Total before taxes (6 ) (2 ) (6 ) (4 ) Tax effect 1 1 1 1 Income tax expense Net realized (gain) loss on derivatives $ (5 ) $ (1 ) $ (5 ) $ (3 ) Total reclassifications for the period $ 10 $ 12 $ 39 $ 20 ____________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
OPERATING SEGMENTS
OPERATING SEGMENTS | 9 Months Ended |
Sep. 27, 2015 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 13. OPERATING SEGMENTS Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker, 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, Distribution, Components and Power Generation. This reporting structure is organized according to the products and markets each segment serves . 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 Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers and fuel systems. The Power Generation segment is an integrated provider of power systems, which sells engines, generator sets and alternators. We use segment EBIT (defined as earnings before interest expense, income taxes and noncontrolling interests) as a primary basis for the CODM to evaluate the performance of each of our operating segments. Segment amounts exclude certain expenses not specifically identifiable to segments. The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We 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 or income taxes to individual segments. Segment EBIT may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments for the three and nine month periods is shown in the table below: In millions Engine Distribution Components Power Generation Non-segment Items (1) Total Three months ended September 27, 2015 External sales $ 1,800 $ 1,543 $ 891 $ 386 $ — $ 4,620 Intersegment sales 728 8 349 273 (1,358 ) — Total sales 2,528 1,551 1,240 659 (1,358 ) 4,620 Depreciation and amortization (2) 60 26 28 14 — 128 Research, development and engineering expenses 116 2 65 14 — 197 Equity, royalty and interest income from investees 40 19 9 10 — 78 Interest income 6 1 1 1 — 9 Segment EBIT 252 123 (3) 156 42 4 577 Three months ended September 28, 2014 External sales $ 2,181 $ 1,282 $ 946 $ 481 $ — $ 4,890 Intersegment sales 635 10 341 273 (1,259 ) — Total sales 2,816 1,292 1,287 754 (1,259 ) 4,890 Depreciation and amortization (2) 50 22 27 13 — 112 Research, development and engineering expenses 114 2 64 18 — 198 Equity, royalty and interest income from investees 40 37 9 13 — 99 Interest income 3 1 1 1 — 6 Segment EBIT 330 131 (3) 172 60 (9 ) 684 Nine months ended September 27, 2015 External sales $ 5,747 $ 4,499 $ 2,839 $ 1,259 $ — $ 14,344 Intersegment sales 2,174 23 1,097 827 (4,121 ) — Total sales 7,921 4,522 3,936 2,086 (4,121 ) 14,344 Depreciation and amortization (2) 178 78 82 43 — 381 Research, development and engineering expenses 321 8 183 46 — 558 Equity, royalty and interest income from investees 127 60 26 27 — 240 Interest income 11 3 3 3 — 20 Segment EBIT 846 324 (3) 574 148 (32 ) 1,860 Nine months ended September 28, 2014 External sales $ 6,449 $ 3,453 $ 2,821 $ 1,408 $ — $ 14,131 Intersegment sales 1,674 27 976 728 (3,405 ) — Total sales 8,123 3,480 3,797 2,136 (3,405 ) 14,131 Depreciation and amortization (2) 153 58 79 38 — 328 Research, development and engineering expenses 335 7 170 55 — 567 Equity, royalty and interest income from investees 117 120 27 30 — 294 Interest income 9 2 3 3 — 17 Segment EBIT 910 333 (3) 524 146 (44 ) 1,869 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended September 27, 2015 and September 28, 2014 . (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 $2 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. (3) Distribution segment EBIT included gains of $17 million for both the three and nine month periods ended September 27, 2015 and $18 million and $38 million for the three and nine month periods ended September 28, 2014 , respectively, on the fair value adjustments resulting from the acquisition of the controlling interests in North American distributors. See Note 3, " ACQUISITIONS ," for additional information. A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below: Three months ended Nine months ended In millions September 27, September 28, September 27, September 28, Total EBIT $ 577 $ 684 $ 1,860 $ 1,869 Less: Interest expense 16 15 47 47 Income before income taxes $ 561 $ 669 $ 1,813 $ 1,822 |
RECENTLY ADOPTED ACCOUNTING PRO
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 27, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | NOTE 14. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB amended its standards related to revenue recognition. This amendment replaces all existing revenue recognition guidance and provides a single, comprehensive revenue recognition model for all contracts with customers. The standard contains principles that we will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that we will recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that we expect to be entitled to in exchange for those goods or services. The standard allows either full or modified retrospective adoption. 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 would have become effective for annual and interim periods beginning January 1, 2017. In July 2015, the FASB approved a one year delay of the effective date of the standard to January 1, 2018, to provide adequate time for implementation. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements , and we are further considering the impact of each method of adoption. |
SUBSEQUENT EVENT SUBSEQUENT EVE
SUBSEQUENT EVENT SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 27, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15. SUBSEQUENT EVENTS On October 27, 2015, we announced we will reduce our worldwide professional work force by up to 2,000 employees in response to lower demand for our products in the United States and key markets around the world. The employee reductions will come from all parts of the company. We will incur a pre-tax fourth quarter charge in the range of $70 million to $90 million for the headcount reductions. In addition to these reductions, we expect to close or restructure several manufacturing facilities over time which could increase the fourth quarter charge and may result in additional charges in the future. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
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 27, 2015 and September 28, 2014 , were as follows: Three months ended Nine months ended September 27, September 28, September 27, September 28, Options excluded 950,345 225,773 593,436 110,488 |
ACQUISITONS ACQUISITIONS (Table
ACQUISITONS ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | The Distribution segment North American distributor acquisitions for the nine months ended September 27, 2015, versus the comparable period in 2014 were as follows: Entity Acquired (Dollars in millions) Date of Acquisition Additional Percent Interest Acquired Payments to Former Owners Acquisition Related Debt Retirements Total Purchase Consideration Type of Acquisition (1) Gain Recognized (1) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended (3) 2015 Cummins Crosspoint LLC (4) 08/03/15 50% $ 20 $ 36 $ 65 (5) COMB $ 10 $ 7 $ 2 $ 258 Cummins Atlantic LLC (4) 08/03/15 51% 14 28 48 (5) COMB 7 2 6 245 Cummins Central Power LLC 06/29/15 20.01% 8 — 8 EQUITY — — — — 2014 Cummins Eastern Canada LP 08/04/14 50% $ 30 $ 32 $ 62 COMB $ 18 $ 5 $ 4 $ 228 Cummins Power Systems LLC 05/05/14 30% 14 — 14 EQUITY — — — — Cummins Southern Plains LLC 03/31/14 50% 44 48 92 COMB 13 1 11 433 Cummins Mid-South LLC 02/14/14 62.2% 57 61 118 COMB 7 4 8 368 ____________________________________________________ (1) All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP and are included in the Condensed Consolidated Statements of Income as " Other income, net ." (2) Intangible assets acquired in business combinations were mostly customer related, the majority of which will be amortized over a period of up to five years from the date of the acquisition. (3) Sales amounts are not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. (4) Purchase accounting for these acquisitions are preliminary, awaiting customary adjustments to purchase price in accordance with the purchase agreements. (5) The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total estimated remaining consideration at September 27, 2015, was $15 million . |
PENSION AND OTHER POSTRETIREM25
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
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 27, September 28, September 27, September 28, September 27, September 28, Service cost $ 20 $ 16 $ 7 $ 7 $ — $ — Interest cost 25 26 14 16 4 4 Expected return on plan assets (47 ) (43 ) (23 ) (23 ) — — Recognized net actuarial loss 11 8 8 7 1 — Net periodic benefit cost $ 9 $ 7 $ 6 $ 7 $ 5 $ 4 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions September 27, September 28, September 27, September 28, September 27, September 28, Service cost $ 60 $ 50 $ 20 $ 19 $ — $ — Interest cost 76 79 42 49 12 13 Expected return on plan assets (142 ) (131 ) (68 ) (66 ) — — Recognized net actuarial loss 34 23 25 20 3 — Net periodic benefit cost $ 28 $ 21 $ 19 $ 22 $ 15 $ 13 |
EQUITY, ROYALTY AND INTEREST 26
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
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 27, September 28, September 27, September 28, Distribution Entities North American distributors $ 9 $ 27 $ 27 $ 89 Komatsu Cummins Chile, Ltda. 8 8 23 22 All other distributors 1 — 2 2 Manufacturing Entities Beijing Foton Cummins Engine Co., Ltd 18 5 47 6 Dongfeng Cummins Engine Company, Ltd. 11 15 40 51 Chongqing Cummins Engine Company, Ltd. 9 13 32 39 All other manufacturers 13 20 41 54 Cummins share of net income 69 88 212 263 Royalty and interest income 9 11 28 31 Equity, royalty and interest income from investees $ 78 $ 99 $ 240 $ 294 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
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 27, 2015 December 31, 2014 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale Level 2 (1) Debt mutual funds $ 25 $ — $ 25 $ 75 $ 1 $ 76 Equity mutual funds 9 (1 ) 8 9 — 9 Bank debentures — — — 6 — 6 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 36 $ (1 ) $ 35 $ 92 $ 1 $ 93 ____________________________________ (1) 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 between Level 2 or 3 during the first nine months of 2015 and 2014. |
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 27, September 28, September 27, September 28, Proceeds from sales and maturities of marketable securities $ 73 $ 137 $ 228 $ 316 Gross realized gains from the sale of marketable securities — 1 1 14 |
Summary of fair value of available-for-sale investments with contractual maturities | At September 27, 2015 , 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 $ 25 1 - 5 years 1 5 - 10 years 1 Total $ 27 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 27, December 31, Finished products $ 2,001 $ 1,859 Work-in-process and raw materials 1,168 1,129 Inventories at FIFO cost 3,169 2,988 Excess of FIFO over LIFO (110 ) (122 ) Total inventories $ 3,059 $ 2,866 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Debt Disclosure [Abstract] | |
Summary of long-term debt | A summary of long-term debt was as follows: In millions September 27, December 31, Long-term debt Senior notes, 3.65%, due 2023 $ 500 $ 500 Debentures, 6.75%, due 2027 58 58 Debentures, 7.125%, due 2028 250 250 Senior notes, 4.875%, due 2043 500 500 Debentures, 5.65%, due 2098 (effective interest rate 7.48%) 165 165 Credit facilities related to consolidated joint ventures 3 3 Other debt 43 31 Unamortized discount (46 ) (47 ) Fair value adjustments due to hedge on indebtedness 68 65 Capital leases 85 87 Total long-term debt 1,626 1,612 Less: Current maturities of long-term debt (31 ) (23 ) Long-term debt $ 1,595 $ 1,589 |
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 2015 2016 2017 2018 2019 Principal payments $ 9 $ 40 $ 16 $ 17 $ 11 |
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 27, December 31, Fair value of total debt (1) $ 1,859 $ 1,993 Carrying value of total debt 1,653 1,698 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Product Warranties Disclosures [Abstract] | |
Summary of activity in the product warranty account | A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows: In millions September 27, September 28, Balance, beginning of year $ 1,283 $ 1,129 Provision for warranties issued 326 307 Deferred revenue on extended warranty contracts sold 217 175 Payments (282 ) (313 ) Amortization of deferred revenue on extended warranty contracts (132 ) (109 ) Changes in estimates for pre-existing warranties 18 28 Foreign currency translation (10 ) (4 ) Balance, end of period $ 1,420 $ 1,213 |
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 27, 2015, balance sheet were as follows: In millions September 27, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 183 Deferred revenue Long-term portion 508 Other liabilities and deferred revenue Total $ 691 Receivables related to estimated supplier recoveries Current portion $ 6 Trade and other receivables Long-term portion 4 Other assets Total $ 10 Long-term portion of warranty liability $ 341 Other liabilities and deferred revenue |
OTHER COMPREHENSIVE INCOME (L31
OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
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 Balance at June 29, 2014 $ (597 ) $ (76 ) $ — $ 4 $ (669 ) Other comprehensive income before reclassifications Before tax amount — (184 ) — (5 ) (189 ) $ (6 ) $ (195 ) Tax (expense) 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 ) Balance at June 28, 2015 $ (641 ) $ (435 ) $ (1 ) $ 6 $ (1,071 ) Other comprehensive income before reclassifications Before tax amount — (239 ) (1 ) 13 (227 ) $ (13 ) $ (240 ) Tax (expense) benefit — 31 — (1 ) 30 — 30 After tax amount — (208 ) (1 ) 12 (197 ) (13 ) (210 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 15 — — (5 ) 10 — 10 Net current period other comprehensive income (loss) 15 (208 ) (1 ) 7 (187 ) $ (13 ) $ (200 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) ____________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive income (loss) disclosure below for further details. Nine months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total 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 (expense) 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 ) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (3 ) (290 ) — 23 (270 ) $ (15 ) $ (285 ) Tax (expense) benefit 1 53 — (3 ) 51 — 51 After tax amount (2 ) (237 ) — 20 (219 ) (15 ) (234 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 45 — (1 ) (5 ) 39 — 39 Net current period other comprehensive income (loss) 43 (237 ) (1 ) 15 (180 ) $ (15 ) $ (195 ) Balance at September 27, 2015 $ (626 ) $ (643 ) $ (2 ) $ 13 $ (1,258 ) ____________________________________ (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 September 27, September 28, September 27, 2015 September 28, 2014 Statement of Income Location Change in pension and other postretirement defined benefit plans Recognized actuarial loss $ 22 $ 18 $ 65 $ 47 (1) Tax effect (7 ) (4 ) (20 ) (13 ) Income tax expense Net change in pensions and other postretirement defined benefit plans $ 15 $ 14 $ 45 $ 34 Realized (gain) loss on marketable securities $ — $ (1 ) $ (1 ) $ (14 ) Other income (expense), net Tax effect — — — 3 Income tax expense Net realized (gain) loss on marketable securities $ — $ (1 ) $ (1 ) $ (11 ) Realized (gain) loss on derivatives Foreign currency forward contracts $ (6 ) $ (1 ) $ (6 ) $ (6 ) Net sales Commodity swap contracts — (1 ) — 2 Cost of sales Total before taxes (6 ) (2 ) (6 ) (4 ) Tax effect 1 1 1 1 Income tax expense Net realized (gain) loss on derivatives $ (5 ) $ (1 ) $ (5 ) $ (3 ) Total reclassifications for the period $ 10 $ 12 $ 39 $ 20 ____________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 9 Months Ended |
Sep. 27, 2015 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments for the three and nine month periods is shown in the table below: In millions Engine Distribution Components Power Generation Non-segment Items (1) Total Three months ended September 27, 2015 External sales $ 1,800 $ 1,543 $ 891 $ 386 $ — $ 4,620 Intersegment sales 728 8 349 273 (1,358 ) — Total sales 2,528 1,551 1,240 659 (1,358 ) 4,620 Depreciation and amortization (2) 60 26 28 14 — 128 Research, development and engineering expenses 116 2 65 14 — 197 Equity, royalty and interest income from investees 40 19 9 10 — 78 Interest income 6 1 1 1 — 9 Segment EBIT 252 123 (3) 156 42 4 577 Three months ended September 28, 2014 External sales $ 2,181 $ 1,282 $ 946 $ 481 $ — $ 4,890 Intersegment sales 635 10 341 273 (1,259 ) — Total sales 2,816 1,292 1,287 754 (1,259 ) 4,890 Depreciation and amortization (2) 50 22 27 13 — 112 Research, development and engineering expenses 114 2 64 18 — 198 Equity, royalty and interest income from investees 40 37 9 13 — 99 Interest income 3 1 1 1 — 6 Segment EBIT 330 131 (3) 172 60 (9 ) 684 Nine months ended September 27, 2015 External sales $ 5,747 $ 4,499 $ 2,839 $ 1,259 $ — $ 14,344 Intersegment sales 2,174 23 1,097 827 (4,121 ) — Total sales 7,921 4,522 3,936 2,086 (4,121 ) 14,344 Depreciation and amortization (2) 178 78 82 43 — 381 Research, development and engineering expenses 321 8 183 46 — 558 Equity, royalty and interest income from investees 127 60 26 27 — 240 Interest income 11 3 3 3 — 20 Segment EBIT 846 324 (3) 574 148 (32 ) 1,860 Nine months ended September 28, 2014 External sales $ 6,449 $ 3,453 $ 2,821 $ 1,408 $ — $ 14,131 Intersegment sales 1,674 27 976 728 (3,405 ) — Total sales 8,123 3,480 3,797 2,136 (3,405 ) 14,131 Depreciation and amortization (2) 153 58 79 38 — 328 Research, development and engineering expenses 335 7 170 55 — 567 Equity, royalty and interest income from investees 117 120 27 30 — 294 Interest income 9 2 3 3 — 17 Segment EBIT 910 333 (3) 524 146 (44 ) 1,869 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended September 27, 2015 and September 28, 2014 . (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 $2 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. (3) Distribution segment EBIT included gains of $17 million for both the three and nine month periods ended September 27, 2015 and $18 million and $38 million for the three and nine month periods ended September 28, 2014 , respectively, on the fair value adjustments resulting from the acquisition of the controlling interests in North American distributors. See Note 3, " ACQUISITIONS ," for additional information. |
Reconciliation of segment information | A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below: Three months ended Nine months ended In millions September 27, September 28, September 27, September 28, Total EBIT $ 577 $ 684 $ 1,860 $ 1,869 Less: Interest expense 16 15 47 47 Income before income taxes $ 561 $ 669 $ 1,813 $ 1,822 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | Dec. 31, 2014countrylocation |
Nature of Operations | |
Company owned and independent distributor locations | 600 |
Dealer locations | 7,200 |
Countries and territories located in | country | 190 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Options excluded (in shares) | 950,345 | 225,773 | 593,436 | 110,488 |
ACQUISITONS ACQUISITIONS (Detai
ACQUISITONS ACQUISITIONS (Details) - USD ($) $ in Millions | Aug. 03, 2015 | Jun. 29, 2015 | Aug. 04, 2014 | May. 05, 2014 | Mar. 31, 2014 | Feb. 14, 2014 | Sep. 16, 2013 | Sep. 27, 2015 | Sep. 28, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Business Acquisition | ||||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | $ 17 | $ 38 | ||||||||||
Business Combination Purchase Price Distributed in Future Quarters | 15 | |||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | $ 481 | $ 479 | ||||||||||
Cummins Crosspoint LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||
Cash Paid for Business Acquisitions | [1] | $ 20 | ||||||||||
Payments to Acquire Businesses Liabilities Paid | 36 | |||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | [1],[2] | 10 | ||||||||||
Net Sales Prior to Acquisition | [3] | 258 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | [1] | 7 | ||||||||||
Intangible assets, other than goodwill | [1],[4] | 2 | ||||||||||
Consideration Transferred | [1],[5] | $ 65 | ||||||||||
Cummins Atlantic LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 51.00% | |||||||||||
Cash Paid for Business Acquisitions | [1] | $ 14 | ||||||||||
Payments to Acquire Businesses Liabilities Paid | 28 | |||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | [1],[2] | 7 | ||||||||||
Net Sales Prior to Acquisition | [3] | $ 245 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | [1] | 2 | ||||||||||
Intangible assets, other than goodwill | [1],[4] | 6 | ||||||||||
Consideration Transferred | [1],[5] | $ 48 | ||||||||||
Cummins Central Power LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 20.01% | |||||||||||
Cash Paid for Business Acquisitions | [1] | $ 8 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Intangible assets, other than goodwill | 0 | |||||||||||
Consideration Transferred | [1],[5] | $ 8 | ||||||||||
Cummins Eastern Canada LP | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||
Cash Paid for Business Acquisitions | $ 30 | |||||||||||
Payments to Acquire Businesses Liabilities Paid | 32 | |||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | [2] | 18 | ||||||||||
Net Sales Prior to Acquisition | [3] | $ 228 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | 5 | |||||||||||
Intangible assets, other than goodwill | [4] | 4 | ||||||||||
Consideration Transferred | [5] | $ 62 | ||||||||||
Cummins Power Systems LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 30.00% | |||||||||||
Cash Paid for Business Acquisitions | $ 14 | |||||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||||
The purchase price was allocated as follows: | ||||||||||||
Consideration Transferred | $ 14 | |||||||||||
Cummins Southern Plains LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||
Cash Paid for Business Acquisitions | $ 44 | |||||||||||
Payments to Acquire Businesses Liabilities Paid | 48 | |||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | [2] | 13 | ||||||||||
Net Sales Prior to Acquisition | [3] | 433 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | 1 | |||||||||||
Intangible assets, other than goodwill | [4] | 11 | ||||||||||
Consideration Transferred | [5] | $ 92 | ||||||||||
Cummins Mid-South LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 62.20% | |||||||||||
Cash Paid for Business Acquisitions | $ 57 | |||||||||||
Payments to Acquire Businesses Liabilities Paid | 61 | |||||||||||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain | [2] | 7 | ||||||||||
Net Sales Prior to Acquisition | [3] | $ 368 | ||||||||||
The purchase price was allocated as follows: | ||||||||||||
Goodwill | 4 | |||||||||||
Intangible assets, other than goodwill | [4] | 8 | ||||||||||
Consideration Transferred | [5] | $ 118 | ||||||||||
Minimum | ||||||||||||
Business Acquisition | ||||||||||||
Acquisition Period for North American Distributors | 3 years | |||||||||||
Maximum | ||||||||||||
Business Acquisition | ||||||||||||
Acquisition Period for North American Distributors | 5 years | |||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | |||||||||||
[1] | Purchase accounting for these acquisitions are preliminary, awaiting customary adjustments to purchase price in accordance with the purchase agreements. | |||||||||||
[2] | All results from acquired entities were included in Distribution segment results subsequent to the acquisition date. Previously consolidated entities were accounted for as equity transactions (EQUITY). Newly consolidated entities were accounted for as business combinations (COMB) with gains recognized based on the requirement to remeasure our pre-existing ownership to fair value in accordance with GAAP and are included in the Condensed Consolidated Statements of Income as "Other income, net." | |||||||||||
[3] | Sales amounts are not fully incremental to our consolidated sales as the amount would be reduced by the elimination of sales to the previously unconsolidated entity. | |||||||||||
[4] | Intangible assets acquired in business combinations were mostly customer related, the majority of which will be amortized over a period of up to five years from the date of the acquisition. | |||||||||||
[5] | The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. In some instances a portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. The total estimated remaining consideration at September 27, 2015, was $15 million. |
PENSION AND OTHER POSTRETIREM36
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Pension - U.S. Plans | ||||
Components of Net Periodic Benefit Cost | ||||
Service cost | $ 20 | $ 16 | $ 60 | $ 50 |
Interest cost | 25 | 26 | 76 | 79 |
Expected return on plan assets | (47) | (43) | (142) | (131) |
Recognized net actuarial loss | 11 | 8 | 34 | 23 |
Net periodic benefit cost | 9 | 7 | 28 | 21 |
Pension - U.K. Plans | ||||
Components of Net Periodic Benefit Cost | ||||
Service cost | 7 | 7 | 20 | 19 |
Interest cost | 14 | 16 | 42 | 49 |
Expected return on plan assets | (23) | (23) | (68) | (66) |
Recognized net actuarial loss | 8 | 7 | 25 | 20 |
Net periodic benefit cost | 6 | 7 | 19 | 22 |
Other Postretirement Benefits | ||||
Components of Net Periodic Benefit Cost | ||||
Service cost | 0 | 0 | ||
Interest cost | 4 | 4 | 12 | 13 |
Expected return on plan assets | 0 | 0 | ||
Recognized net actuarial loss | 1 | 3 | ||
Net periodic benefit cost | $ 5 | $ 4 | $ 15 | $ 13 |
EQUITY, ROYALTY AND INTEREST 37
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | |
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 69 | $ 88 | $ 212 | $ 263 |
Royalty and interest income | 9 | 11 | 28 | 31 |
Equity, royalty and interest income from investees | 78 | 99 | 240 | 294 |
Distribution - North American distributors | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 9 | 27 | 27 | 89 |
Distribution - Komatsu Cummins Chile, Ltda. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 8 | 8 | 23 | 22 |
Distribution - All other distributors | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 1 | 0 | 2 | 2 |
Manufacturing - Beijing Foton Cummins Engine Company | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 18 | 5 | 47 | 6 |
Manufacturing - Dongfeng Cummins Engine Company, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 11 | 15 | 40 | 51 |
Manufacturing - Chongqing Cummins Engine Company, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 9 | 13 | 32 | 39 |
Manufacturing - All other manufacturers | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 13 | $ 20 | $ 41 | $ 54 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | Sep. 28, 2015 | Sep. 27, 2015 | Sep. 28, 2014 | Jun. 29, 2014 | Mar. 30, 2014 | Sep. 27, 2015 | Sep. 28, 2014 |
Income Tax [Line Items] | |||||||
Effective tax rate (as a percent) | 30.10% | 34.40% | 28.70% | 30.40% | |||
U.S. statutory rate, (as a percent) | 35.00% | ||||||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 19 | ||||||
Tax Adjustments, Settlements, and Unusual Provisions | $ 2 | $ 12 | $ 14 | ||||
Effective Income Tax Rate Reconciliation, Deduction, Dividends, Amount | 6 | ||||||
Cash dividends paid from China earnings | $ 70 | ||||||
Estimate | |||||||
Income Tax [Line Items] | |||||||
Effective tax rate (as a percent) | 29.50% | ||||||
Alternate Estimate | |||||||
Income Tax [Line Items] | |||||||
Effective tax rate (as a percent) | 28.50% | ||||||
Minimum | Estimate | |||||||
Income Tax [Line Items] | |||||||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit | $ 0 | ||||||
Maximum | Estimate | |||||||
Income Tax [Line Items] | |||||||
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit | $ 70 |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | Dec. 31, 2014 | ||
Schedule of Available-for-sale Securities | ||||||
Cost | $ 36 | $ 36 | $ 92 | |||
Gross unrealized gains/(losses) | (1) | (1) | 1 | |||
Estimated fair value | 35 | 35 | 93 | |||
Proceeds from sale and maturity of marketable securities | 73 | $ 137 | 228 | $ 316 | ||
Gross realized gains from the sale of marketable securities | 0 | $ 1 | 1 | $ 14 | ||
Fair value of available-for-sale investments by contractual maturity | ||||||
1 year or less | 25 | 25 | ||||
1-5 years | 1 | 1 | ||||
5-10 years | 1 | 1 | ||||
Total | 27 | 27 | ||||
Significant other observable inputs (Level 2) | Debt mutual funds | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 25 | 25 | 75 | |||
Gross unrealized gains/(losses) | 0 | 0 | 1 | |||
Estimated fair value | [1] | 25 | 25 | 76 | ||
Significant other observable inputs (Level 2) | Equity Funds | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 9 | 9 | 9 | |||
Gross unrealized gains/(losses) | (1) | (1) | 0 | |||
Estimated fair value | [1] | 8 | 8 | 9 | ||
Significant other observable inputs (Level 2) | Bank debentures | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 0 | 0 | 6 | |||
Gross unrealized gains/(losses) | 0 | 0 | 0 | |||
Estimated fair value | [1] | 6 | ||||
Significant other observable inputs (Level 2) | Government debt securities-non-U.S. | ||||||
Schedule of Available-for-sale Securities | ||||||
Cost | 2 | 2 | 2 | |||
Gross unrealized gains/(losses) | 0 | 0 | 0 | |||
Estimated fair value | [1] | $ 2 | $ 2 | $ 2 | ||
[1] | 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 between Level 2 or 3 during the first nine months of 2015 and 2014. |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Sep. 27, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 2,001 | $ 1,859 |
Work-in-process and raw materials | 1,168 | 1,129 |
Inventories at FIFO cost | 3,169 | 2,988 |
Excess of FIFO over LIFO | (110) | (122) |
Total inventories | $ 3,059 | $ 2,866 |
DEBT (Details)
DEBT (Details) - USD ($) $ in Millions | Sep. 27, 2015 | Dec. 31, 2014 | |
Long-term debt | |||
Unamortized discount | $ (46) | $ (47) | |
Fair value adjustment due to hedge on indebtedness | 68 | 65 | |
Capital leases | 85 | 87 | |
Total long-term debt | 1,626 | 1,612 | |
Less: Current maturities of long-term debt | (31) | (23) | |
Long-term debt | 1,595 | 1,589 | |
Principal payments required on long-term debt | |||
2,015 | 9 | ||
2,016 | 40 | ||
2,017 | 16 | ||
2,018 | 17 | ||
2,019 | 11 | ||
Fair value | |||
Fair value of total debt | [1] | 1,859 | 1,993 |
Carrying value of total debt | 1,653 | 1,698 | |
Senior notes, 3.65%, due 2023 | |||
Long-term debt | |||
Long-term debt facilities | $ 500 | 500 | |
Debt instrument interest rate (as a percent) | 3.65% | ||
Debentures, 6.75%, due 2027 | |||
Long-term debt | |||
Long-term debt facilities | $ 58 | 58 | |
Debt instrument interest rate (as a percent) | 6.75% | ||
Debentures, 7.125%, due 2028 | |||
Long-term debt | |||
Long-term debt facilities | $ 250 | 250 | |
Debt instrument interest rate (as a percent) | 7.125% | ||
Senior notes, 4.875%, due 2043 | |||
Long-term debt | |||
Long-term debt facilities | $ 500 | 500 | |
Debt instrument interest rate (as a percent) | 4.875% | ||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | |||
Long-term debt | |||
Long-term debt facilities | $ 165 | 165 | |
Debt instrument interest rate (as a percent) | 5.65% | ||
Effective interest rate (as a percent) | 7.48% | ||
Credit facilities related to consolidated joint ventures | |||
Long-term debt | |||
Long-term debt facilities | $ 3 | 3 | |
Other long-term debt | |||
Long-term debt | |||
Long-term debt facilities | $ 43 | $ 31 | |
[1] | The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 27, 2015 | Sep. 28, 2014 | Dec. 31, 2014 | |
Product Warranty Liability: | |||
Balance, beginning of year | $ 1,283 | $ 1,129 | |
Provision for warranties issued | 326 | 307 | |
Deferred revenue on extended warranty contracts sold | 217 | 175 | |
Payments | (282) | (313) | |
Amortization of deferred revenue on extended warranty contracts | (132) | (109) | |
Changes in estimates for pre-existing warranties | 18 | 28 | |
Foreign currency translation | (10) | (4) | |
Balance, end of period | 1,420 | $ 1,213 | |
Product Warranty Liability | |||
Current portion of deferred revenue | 414 | $ 401 | |
Total deferred revenue related to extended coverage programs | 691 | ||
Total receivables related to estimated supplier recoveries | 10 | ||
Deferred revenue | |||
Product Warranty Liability | |||
Current portion of deferred revenue | 183 | ||
Other liabilities and deferred revenue | |||
Product Warranty Liability | |||
Deferred revenue related to extended coverage programs, Noncurrent portion | 508 | ||
Long-term portion of warranty liability | 341 | ||
Trade and other receivables | |||
Product Warranty Liability | |||
Receivables related to estimated supplier recoveries, Current portion | 6 | ||
Other assets | |||
Product Warranty Liability | |||
Receivables related to estimated supplier recoveries, Long-term portion | $ 4 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 27, 2015 | Dec. 31, 2014 | |
Maximum | ||
Guarantee Obligations | ||
Forward contract, term | 2 years | |
Other Guarantees and Commitments | ||
Guarantee Obligations | ||
Guarantor obligations, maximum potential loss | $ 20 | |
Long-term purchase commitment, penalty exposure | 134 | |
Total commitments under commodity contracts | 38 | |
Components Supplier | ||
Guarantee Obligations | ||
Long-term purchase commitment, penalty exposure | 78 | |
Performance bonds and other performance-related guarantees | ||
Guarantee Obligations | ||
Guarantee obligations, current carrying value | $ 69 | $ 76 |
OTHER COMPREHENSIVE INCOME (L44
OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | ||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Balance at the beginning of the period | $ (1,078) | ||||
Before tax amount | $ (240) | $ (195) | (285) | $ (79) | |
Tax (expense) benefit | 30 | 19 | 51 | 13 | |
After tax amount | (210) | (176) | (234) | (66) | |
Net current period other comprehensive income (loss) | (200) | (164) | (195) | (46) | |
Balance at the end of the period | (1,258) | (1,258) | |||
Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 10 | 12 | 39 | 20 |
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 | (641) | (597) | (669) | (611) | |
Before tax amount | 0 | 0 | (3) | (7) | |
Tax (expense) benefit | 0 | 0 | 1 | 1 | |
After tax amount | 0 | 0 | (2) | (6) | |
Net current period other comprehensive income (loss) | 15 | 14 | 43 | 28 | |
Balance at the end of the period | (626) | (583) | (626) | (583) | |
Change in pensions and other postretirement defined benefit plans | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 15 | 14 | 45 | 34 |
Foreign currency translation adjustment | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Balance at the beginning of the period | (435) | (76) | (406) | (179) | |
Before tax amount | (239) | (184) | (290) | (77) | |
Tax (expense) benefit | 31 | 18 | 53 | 14 | |
After tax amount | (208) | (166) | (237) | (63) | |
Net current period other comprehensive income (loss) | (208) | (166) | (237) | (63) | |
Balance at the end of the period | (643) | (242) | (643) | (242) | |
Foreign currency translation adjustment | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 0 | 0 | ||
Unrealized gain (loss) on marketable securities | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Balance at the beginning of the period | (1) | 0 | (1) | 7 | |
Before tax amount | (1) | 0 | (1) | ||
Tax (expense) benefit | 0 | 0 | 0 | ||
After tax amount | (1) | 0 | 0 | (1) | |
Net current period other comprehensive income (loss) | (1) | (1) | (1) | (8) | |
Balance at the end of the period | (2) | (1) | (2) | (1) | |
Unrealized gain (loss) on marketable securities | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 0 | (1) | (1) | (7) |
Unrealized gain (loss) on derivatives | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Balance at the beginning of the period | 6 | 4 | (2) | (1) | |
Before tax amount | 13 | (5) | 23 | 5 | |
Tax (expense) benefit | (1) | 1 | (3) | (2) | |
After tax amount | 12 | (4) | 20 | 3 | |
Net current period other comprehensive income (loss) | 7 | (5) | 15 | 0 | |
Balance at the end of the period | 13 | (1) | 13 | (1) | |
Unrealized gain (loss) on derivatives | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | (5) | (1) | (5) | (3) |
Total attributable to Cummins Inc. | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Balance at the beginning of the period | (1,071) | (669) | (1,078) | (784) | |
Before tax amount | (227) | (189) | (270) | (80) | |
Tax (expense) benefit | 30 | 19 | 51 | 13 | |
After tax amount | (197) | (170) | (219) | (67) | |
Net current period other comprehensive income (loss) | (187) | (158) | (180) | (43) | |
Balance at the end of the period | (1,258) | (827) | (1,258) | (827) | |
Total attributable to Cummins Inc. | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 10 | 12 | 39 | 24 |
Noncontrolling interests | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Before tax amount | (13) | (6) | (15) | 1 | |
After tax amount | (13) | (6) | (15) | 1 | |
Net current period other comprehensive income (loss) | $ (13) | (6) | (15) | (3) | |
Noncontrolling interests | Reclassified out of accumulated other comprehensive income (loss) | |||||
Changes in accumulated other comprehensive income (loss) by component: | |||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | $ 0 | $ 0 | $ (4) | |
[1] | Amounts are net of tax. | ||||
[2] | See reclassifications out of accumulated other comprehensive income (loss) disclosure below for further details. |
OTHER COMPREHENSIVE INCOME (L45
OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | ||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||
Other income (expense), net | $ (11) | $ (19) | $ (12) | $ (68) | |
NET SALES | [1] | (4,620) | (4,890) | (14,344) | (14,131) |
Cost of sales | 3,412 | 3,606 | 10,609 | 10,543 | |
Total before taxes | (561) | (669) | (1,813) | (1,822) | |
Income tax expense | 169 | 230 | 521 | 553 | |
Total Reclassifications for the Period | (392) | (439) | (1,292) | (1,269) | |
Reclassified out of accumulated other comprehensive income (loss) | |||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||
Total Reclassifications for the Period | 10 | 12 | 39 | 20 | |
Change in pensions and other postretirement defined benefit plans | Reclassified out of accumulated other comprehensive income (loss) | |||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||
Recognized actuarial loss | [2] | 22 | 18 | 65 | 47 |
Income tax expense | (7) | (4) | (20) | (13) | |
Total Reclassifications for the Period | 15 | 14 | 45 | 34 | |
Unrealized 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 | 0 | (1) | (1) | (14) | |
Income tax expense | 0 | 0 | 3 | ||
Total Reclassifications for the Period | 0 | (1) | (1) | (11) | |
Unrealized 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 | (6) | (2) | (6) | (4) | |
Income tax expense | 1 | 1 | 1 | 1 | |
Total Reclassifications for the Period | (5) | (1) | (5) | (3) | |
Unrealized 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 | $ (6) | (1) | $ (6) | (6) | |
Unrealized 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 | |||
[1] | Includes sales to nonconsolidated equity investees of $274 million and $956 million and $518 million and $1,656 million for the three and nine month periods ended September 27, 2015 and September 28, 2014, respectively. | ||||
[2] | These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 4, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 27, 2015 | Sep. 28, 2014 | Sep. 27, 2015 | Sep. 28, 2014 | ||
Operating results: | |||||
Total sales | [1] | $ 4,620 | $ 4,890 | $ 14,344 | $ 14,131 |
Depreciation and amortization | [2] | 128 | 112 | 381 | 328 |
Research, development and engineering expenses | 197 | 198 | 558 | 567 | |
Equity, royalty and interest income from investees | 78 | 99 | 240 | 294 | |
Interest income | 9 | 6 | 20 | 17 | |
Segment EBIT | 577 | 684 | 1,860 | 1,869 | |
Less: Interest expense | 16 | 15 | 47 | 47 | |
INCOME BEFORE INCOME TAXES | 561 | 669 | 1,813 | 1,822 | |
Gain on remeasurement of pre-existing ownership interest in the acquiree company | 17 | 38 | |||
Amortization of debt discount and deferred costs excluded | 2 | ||||
Minimum | |||||
Operating results: | |||||
Amortization of debt discount and deferred costs excluded | 2 | ||||
Engine | |||||
Operating results: | |||||
Depreciation and amortization | [2] | 60 | 50 | 178 | 153 |
Research, development and engineering expenses | 116 | 114 | 321 | 335 | |
Equity, royalty and interest income from investees | 40 | 40 | 127 | 117 | |
Interest income | 6 | 3 | 11 | 9 | |
Segment EBIT | 252 | 330 | 846 | 910 | |
Distribution | |||||
Operating results: | |||||
Depreciation and amortization | [2] | 26 | 22 | 78 | 58 |
Research, development and engineering expenses | 2 | 2 | 8 | 7 | |
Equity, royalty and interest income from investees | 19 | 37 | 60 | 120 | |
Interest income | 1 | 1 | 3 | 2 | |
Segment EBIT | [3] | 123 | 131 | 324 | 333 |
Gain on remeasurement of pre-existing ownership interest in the acquiree company | 17 | 18 | 17 | 38 | |
Components | |||||
Operating results: | |||||
Depreciation and amortization | [2] | 28 | 27 | 82 | 79 |
Research, development and engineering expenses | 65 | 64 | 183 | 170 | |
Equity, royalty and interest income from investees | 9 | 9 | 26 | 27 | |
Interest income | 1 | 1 | 3 | 3 | |
Segment EBIT | 156 | 172 | 574 | 524 | |
Power Generation | |||||
Operating results: | |||||
Depreciation and amortization | [2] | 14 | 13 | 43 | 38 |
Research, development and engineering expenses | 14 | 18 | 46 | 55 | |
Equity, royalty and interest income from investees | 10 | 13 | 27 | 30 | |
Interest income | 1 | 1 | 3 | 3 | |
Segment EBIT | 42 | 60 | 148 | 146 | |
Non-segment items | |||||
Operating results: | |||||
Segment EBIT | [4] | 4 | (9) | (32) | (44) |
External Sales | |||||
Operating results: | |||||
Total sales | 4,620 | 4,890 | 14,344 | 14,131 | |
External Sales | Engine | |||||
Operating results: | |||||
Total sales | 1,800 | 2,181 | 5,747 | 6,449 | |
External Sales | Distribution | |||||
Operating results: | |||||
Total sales | 1,543 | 1,282 | 4,499 | 3,453 | |
External Sales | Components | |||||
Operating results: | |||||
Total sales | 891 | 946 | 2,839 | 2,821 | |
External Sales | Power Generation | |||||
Operating results: | |||||
Total sales | 386 | 481 | 1,259 | 1,408 | |
Intersegment sales | Engine | |||||
Operating results: | |||||
Total sales | 728 | 635 | 2,174 | 1,674 | |
Intersegment sales | Distribution | |||||
Operating results: | |||||
Total sales | 8 | 10 | 23 | 27 | |
Intersegment sales | Components | |||||
Operating results: | |||||
Total sales | 349 | 341 | 1,097 | 976 | |
Intersegment sales | Power Generation | |||||
Operating results: | |||||
Total sales | 273 | 273 | 827 | 728 | |
Intersegment sales | Non-segment items | |||||
Operating results: | |||||
Total sales | [4] | (1,358) | (1,259) | (4,121) | (3,405) |
Reportable segment | |||||
Operating results: | |||||
Total sales | 4,620 | 4,890 | |||
Reportable segment | Engine | |||||
Operating results: | |||||
Total sales | 2,528 | 2,816 | 7,921 | 8,123 | |
Reportable segment | Distribution | |||||
Operating results: | |||||
Total sales | 1,551 | 1,292 | 4,522 | 3,480 | |
Reportable segment | Components | |||||
Operating results: | |||||
Total sales | 1,240 | 1,287 | 3,936 | 3,797 | |
Reportable segment | Power Generation | |||||
Operating results: | |||||
Total sales | 659 | 754 | 2,086 | 2,136 | |
Reportable segment | Non-segment items | |||||
Operating results: | |||||
Total sales | [4] | $ (1,358) | $ (1,259) | $ (4,121) | $ (3,405) |
[1] | Includes sales to nonconsolidated equity investees of $274 million and $956 million and $518 million and $1,656 million for the three and nine month periods ended September 27, 2015 and September 28, 2014, respectively. | ||||
[2] | Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $2 million and $2 million for the nine months ended September 27, 2015 and September 28, 2014, respectively. | ||||
[3] | Distribution segment EBIT included gains of $17 million for both the three and nine month periods ended September 27, 2015 and $18 million and $38 million for the three and nine month periods ended September 28, 2014, respectively, on the fair value adjustments resulting from the acquisition of the controlling interests in North American distributors. See Note 3, "ACQUISITIONS," for additional information. | ||||
[4] | Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three and nine months ended September 27, 2015 and September 28, 2014. |
SUBSEQUENT EVENT SUBSEQUENT E47
SUBSEQUENT EVENT SUBSEQUENT EVENTS (Details) - Estimate $ in Millions | Sep. 28, 2015USD ($)employee |
Subsequent Event [Line Items] | |
Restructuring and Related Cost, Number of Positions Eliminated | employee | 2,000 |
Minimum | |
Subsequent Event [Line Items] | |
Restructuring Charges | $ 70 |
Maximum | |
Subsequent Event [Line Items] | |
Restructuring Charges | $ 90 |