Cummins (CMI) 8-K Cummins Announces Third Quarter 2016 Results

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: November 1, 2016

  CUMMINS INC.

(Exact name of registrant as specified in its charter)

Indiana (State or other Jurisdiction of Incorporation) 1-4949 (Commission File Number) 35-0257090 (I.R.S. Employer Identification No.)

500 Jackson Street

P. O. Box 3005

Columbus, IN  47202-3005

(Principal Executive Office)  (Zip Code)

Registrant's telephone number, including area code:  (812) 377-5000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

1

Item 2.02. Results of Operations and Financial Condition.

On November 1, 2016, Cummins Inc. (“Cummins,” “the Company,” “the registrant,” “we,” “our,” or “us”) issued the attached press release reporting its financial results for the third quarter of 2016, which is furnished herewith as Exhibit 99.

The information furnished pursuant to this Item 2.02, including Exhibit 99, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

(d) The following exhibit is furnished pursuant to Item 2.02 herewith: 

99-Press Release dated November 1, 2016

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 1, 2016

CUMMINS INC.

 /s/ Marsha L. Hunt

Marsha L. Hunt

Vice President - Corporate Controller
(Principal Accounting Officer)

2

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

	Three months ended
In millions, except per share amounts	October 2, 2016		September 27, 2015
NET SALES	$	4,187	$	4,620
Cost of sales	3,108		3,412
GROSS MARGIN	1,079		1,208
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	513		530
Research, development and engineering expenses	157		197
Equity, royalty and interest income from investees	74		78
Loss contingency	99		—
Other operating expense, net	—		(2		)
OPERATING INCOME	384		557
Interest income	6		9
Interest expense	16		16
Other income, net	8		11
INCOME BEFORE INCOME TAXES	382		561
Income tax expense	82		169
CONSOLIDATED NET INCOME	300		392
Less: Net income attributable to noncontrolling interests	11		12
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	289	$	380
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	1.72	$	2.15
Diluted	$	1.72	$	2.14
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	167.8		177.0
Diluted	168.2		177.4
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	1.025	$	0.975
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

3

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) (a)

	Nine months ended
In millions, except per share amounts	October 2, 2016			September 27, 2015
NET SALES	$	13,006		$	14,344
Cost of sales	9,674			10,609
GROSS MARGIN	3,332			3,735
OPERATING EXPENSES AND INCOME
Selling, general and administrative expenses	1,527			1,584
Research, development and engineering expenses	478			558
Equity, royalty and interest income from investees	234			240
Loss contingency	138			—
Other operating expense, net	(2		)	(5		)
OPERATING INCOME	1,421			1,828
Interest income	18			20
Interest expense	51			47
Other income, net	34			12
INCOME BEFORE INCOME TAXES	1,422			1,813
Income tax expense	362			521
CONSOLIDATED NET INCOME	1,060			1,292
Less: Net income attributable to noncontrolling interests	44			54
NET INCOME ATTRIBUTABLE TO CUMMINS INC.	$	1,016		$	1,238
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC.
Basic	$	5.99		$	6.92
Diluted	$	5.99		$	6.90
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic	169.5			178.9
Diluted	169.7			179.3
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	2.975		$	2.535
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

4

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (a)

In millions, except par value	October 2, 2016			December 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$	1,251		$	1,711
Marketable securities	250			100
Total cash, cash equivalents and marketable securities	1,501			1,811
Accounts and notes receivable, net	2,873			2,820
Inventories	2,820			2,707
Prepaid expenses and other current assets	600			609
Total current assets	7,794			7,947
Long-term assets
Property, plant and equipment	7,460			7,322
Accumulated depreciation	(3,783		)	(3,577		)
Property, plant and equipment, net	3,677			3,745
Investments and advances related to equity method investees	1,077			975
Goodwill	482			482
Other intangible assets, net	319			328
Pension assets	773			735
Other assets	1,014			922
Total assets	$	15,136		$	15,134
LIABILITIES
Current liabilities
Accounts payable (principally trade)	$	1,781		$	1,706
Loans payable	48			24
Commercial paper	273			—
Accrued compensation, benefits and retirement costs	393			409
Current portion of accrued product warranty	333			359
Current portion of deferred revenue	460			403
Other accrued expenses	985			863
Current maturities of long-term debt	35			39
Total current liabilities	4,308			3,803
Long-term liabilities
Long-term debt	1,593			1,576
Postretirement benefits other than pensions	326			349
Pensions	301			298
Other liabilities and deferred revenue	1,344			1,358
Total liabilities	$	7,872		$	7,384
EQUITY
Cummins Inc. shareholders’ equity
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued	$	2,209		$	2,178
Retained earnings	10,833			10,322
Treasury stock, at cost, 54.1 and 47.2 shares	(4,468		)	(3,735		)
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares	(8		)	(11		)
Accumulated other comprehensive loss	(1,632		)	(1,348		)
Total Cummins Inc. shareholders’ equity	6,934			7,406
Noncontrolling interests	330			344
Total equity	$	7,264		$	7,750
Total liabilities and equity	$	15,136		$	15,134
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

5

CUMMINS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) (a)

	Nine months ended
In millions	October 2, 2016			September 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income	$	1,060		$	1,292
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Restructuring payments	(53		)	—
Loss contingency	138			—
Depreciation and amortization	391			383
Gain on fair value adjustment for consolidated investees	—			(17		)
Deferred income taxes	60			(120		)
Equity in income of investees, net of dividends	(94		)	(68		)
Pension contributions in excess of expense	(92		)	(119		)
Other post-retirement benefits payments in excess of expense	(16		)	(18		)
Stock-based compensation expense	28			24
Translation and hedging activities	(39		)	22
Changes in current assets and liabilities, net of acquisitions
Accounts and notes receivable	(112		)	(163		)
Inventories	(150		)	(179		)
Other current assets	138			133
Accounts payable	97			(52		)
Accrued expenses	(279		)	(153		)
Changes in other liabilities and deferred revenue	188			219
Other, net	45			(53		)
Net cash provided by operating activities	1,310			1,131
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(312		)	(393		)
Investments in internal use software	(42		)	(38		)
Investments in and advances to equity investees	(29		)	(9		)
Acquisitions of businesses, net of cash acquired	(1		)	(102		)
Investments in marketable securities—acquisitions	(447		)	(175		)
Investments in marketable securities—liquidations	291			228
Cash flows from derivatives not designated as hedges	(64		)	17
Other, net	14			(5		)
Net cash used in investing activities	(590		)	(477		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings	111			24
Net borrowings of commercial paper	273			—
Payments on borrowings and capital lease obligations	(156		)	(64		)
Net borrowings (payments) under short-term credit agreements	25			(38		)
Distributions to noncontrolling interests	(42		)	(35		)
Dividend payments on common stock	(505		)	(452		)
Repurchases of common stock	(745		)	(650		)
Other, net	(2		)	—
Net cash used in financing activities	(1,041		)	(1,215		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(139		)	(52		)
Net decrease in cash and cash equivalents	(460		)	(613		)
Cash and cash equivalents at beginning of year	1,711			2,301
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,251		$	1,688
(a)  Prepared on an unaudited basis in accordance with accounting principles generally accepted in the United States of America.

6

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

As previously announced, beginning with the second quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how the Chief Operating Decision Maker monitors the performance of our segments. We reorganized our business to combine our Power Generation segment and our high horsepower engine business to create the new Power Systems segment. Our reportable operating segments consist of Engine, Distribution, Components and Power Systems. We began to report results for our new reporting structure in the second quarter of 2016 and also reflected this change for historical periods.

We allocate certain common costs and expenses, primarily corporate functions, among segments. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. In addition to the reorganization noted above, we reevaluated the allocation of these costs, considering the new segment structure created in April 2016 and adjusted our allocation methodology accordingly. The revised methodology, which is based on a combination of relative segment sales and relative service usage levels, is effective for the periods beginning after January 1, 2016 and resulted in the revision of our segment operating results, including segment earnings before interest, income taxes and noncontrolling interests (EBIT), for all four segments for the first quarter of 2016 with a greater share of costs allocated to the Distribution and Components segments than in previous years. Prior periods were not revised for the new allocation methodology. These changes had no impact on our consolidated results.

		In millions	Engine			Distribution			Components			Power Systems			Non-segment Items (1)			Total
		Three months ended October 2, 2016
		External sales	$	1,357		$	1,497		$	824		$	509		$	—		$	4,187
		Intersegment sales	502			7			319			347			(1,175		)	—
		Total sales	1,859			1,504			1,143			856			(1,175		)	4,187
		Depreciation and amortization(2)	42			28			32			29			—			131
		Research, development and engineering expenses	56			3			54			44			—			157
		Equity, royalty and interest income from investees	38			19			9			8			—			74
		Loss contingency	99			—			—			—			—			99
		Interest income	3			1			1			1			—			6
		Segment EBIT	89			96			148			59			6			398
		Segment EBIT as a percentage of total sales	4.8		%	6.4		%	12.9		%	6.9		%				9.5		%
		Three months ended September 27, 2015
		External sales	$	1,627		$	1,543		$	891		$	559		$	—		$	4,620
		Intersegment sales	475			8			349			423			(1,255		)	—
		Total sales	2,102			1,551			1,240			982			(1,255		)	4,620
		Depreciation and amortization(2)	47			26			28			27			—			128
		Research, development and engineering expenses	73			2			65			57			—			197
		Equity, royalty and interest income from investees	33			19			9			17			—			78
		Interest income	6			1			1			1			—			9
		Segment EBIT	217			123			156			74			7			577
		Segment EBIT as a percentage of total sales	10.3		%	7.9		%	12.6		%	7.5		%				12.5		%
(1	)	Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended October 2, 2016 and September 27, 2015.
(2	)	Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense."

7

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

		In millions	Engine			Distribution			Components			Power Systems			Non-segment Items (1)			Total
		Nine months ended October 2, 2016
		External sales	$	4,350		$	4,493		$	2,654		$	1,509		$	—		$	13,006
		Intersegment sales	1,487			18			1,005			1,076			(3,586		)	—
		Total sales	5,837			4,511			3,659			2,585			(3,586		)	13,006
		Depreciation and amortization(2)	121			86			95			87			—			389
		Research, development and engineering expenses	166			10			161			141			—			478
		Equity, royalty and interest income from investees	120			56			29			29			—			234
		Loss contingency	138			—			—			—			—			138
		Interest income	8			3			3			4			—			18
		Segment EBIT	492			270			501			195			15			1,473
		Segment EBIT as a percentage of total sales	8.4		%	6.0		%	13.7		%	7.5		%				11.3		%
		Nine months ended September 27, 2015
		External sales	$	5,150		$	4,499		$	2,839		$	1,856		$	—		$	14,344
		Intersegment sales	1,422			23			1,097			1,225			(3,767		)	—
		Total sales	6,572			4,522			3,936			3,081			(3,767		)	14,344
		Depreciation and amortization(2)	140			78			82			81			—			381
		Research, development and engineering expenses	195			8			183			172			—			558
		Equity, royalty and interest income from investees	107			60			26			47			—			240
		Interest income	10			3			3			4			—			20
		Segment EBIT	695			324			574			302			(35		)	1,860
		Segment EBIT as a percentage of total sales	10.6		%	7.2		%	14.6		%	9.8		%				13.0		%
(1	)	Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended October 2, 2016 and September 27, 2015.
(2	)	Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million for the nine months ended October 2, 2016 and September 27, 2015.

A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Income is shown in the table below:

	Three months ended				Nine months ended
In millions	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Total segment EBIT	$	398	$	577	$	1,473	$	1,860
Less: Interest expense	16		16		51		47
Income before income taxes	$	382	$	561	$	1,422	$	1,813

8

CUMMINS INC. AND SUBSIDIARIES

SELECT FOOTNOTE DATA

(Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Income for the reporting periods was as follows:

	Three months ended				Nine months ended
In millions	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Distribution entities
Komatsu Cummins Chile, Ltda.	$	8	$	8	$	26	$	23
North American distributors	7		9		18		27
All other distributors	1		1		2		2
Manufacturing entities
Beijing Foton Cummins Engine Co., Ltd.	19		18		59		47
Chongqing Cummins Engine Company, Ltd.	11		9		28		32
Dongfeng Cummins Engine Company, Ltd.	10		11		32		40
All other manufacturers	8		13		40		41
Cummins share of net income	64		69		205		212
Royalty and interest income	10		9		29		28
Equity, royalty and interest income from investees	$	74	$	78	$	234	$	240

LOSS CONTINGENCY

In the fourth quarter of 2015, we disclosed the request by one customer to participate in the design and bear the financial cost of a field campaign (Campaign) associated with quality issues in certain third party aftertreatment systems causing some of our inter-related engines to fail in-use emission testing. We established a reserve in the fourth quarter of 2015. In the second quarter of 2016, we recoded an additional accrual of $39 million based upon the Campaign design at the time. Additional in-use emission testing performed in the third quarter of 2016 has indicated that the Campaign should be expanded to include a larger population of vehicles. Our third quarter results include an additional accrual of $99 million to reflect the higher estimated cost of the expanded Campaign. We have not reached a cost sharing agreement with our customer related to this matter and our final cost could differ from what we have recorded.

9

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Net income and diluted earnings per share (EPS) attributable to Cummins Inc. excluding special items

We believe these are useful measures of our operating performance for the periods presented as they illustrate our operating performance without regard to special items including tax adjustments. These measures are not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America (GAAP) and may not be consistent with measures used by other companies. It should be considered supplemental data. The following table reconciles net income attributable to Cummins Inc. to net income attributable to Cummins Inc. excluding special items for the following periods:

	Three months ended
	October 2, 2016				September 27, 2015
In millions	Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc.	$	289	$	1.72	$	380	$	2.14
Add
Loss contingency, net (1)	50		0.30		—		—
Net income attributable to Cummins Inc. excluding special items	$	339	$	2.02	$	380	$	2.14

	Nine months ended
	October 2, 2016				September 27, 2015
In millions	Net Income		Diluted EPS		Net Income		Diluted EPS
Net income attributable to Cummins Inc.	$	1,016	$	5.99	$	1,238	$	6.90
Add
Loss contingency, net (1)	$	74	$	0.44	—		—
Less
Tax benefit	—		—		18		0.10
Net income attributable to Cummins Inc. excluding special items	$	1,090	$	6.43	$	1,220	$	6.80

____________________________________

⁽¹⁾ The loss contingency is net of the favorable variable compensation impact.

Earnings before interest, income taxes and noncontrolling interests

We define EBIT as earnings before interest expense, income tax expense and noncontrolling interests in income of consolidated subsidiaries. We use EBIT to assess and measure the performance of our operating segments and also as a component in measuring our variable compensation programs. This measure is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data. Below is a reconciliation of EBIT to “Net income attributable to Cummins Inc.” for each of the applicable periods:

	Three months ended						Nine months ended
In millions	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Earnings before interest expense and income taxes	$	398		$	577		$	1,473		$	1,860
EBIT as a percentage of net sales	9.5		%	12.5		%	11.3		%	13.0		%
Less
Interest expense	16			16			51			47
Income tax expense	82			169			362			521
Consolidated net income	300			392			1,060			1,292
Less
Net income attributable to noncontrolling interests	11			12			44			54
Net income attributable to Cummins Inc.	$	289		$	380		$	1,016		$	1,238
Net income attributable to Cummins Inc. as a percentage of net sales	6.9		%	8.2		%	7.8		%	8.6		%

10

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Engine Segment Sales by Market and Unit Shipments by Engine Classification

In the second quarter of 2016, in conjunction with the reorganization of our segments, our Engine segment reorganized its reporting structure as follows:

• Heavy-duty truck - We manufacture diesel engines that range from 310 to 600 horsepower serving global heavy-duty truck customers worldwide, primarily in North America.

• Medium-duty truck and bus - We manufacture diesel engines ranging from 200 to 450 horsepower serving medium-duty truck and bus customers worldwide, with key markets including North America, Latin America, Europe and Mexico. We also provide diesel and natural gas engines for school buses, transit buses and shuttle buses worldwide, with key markets including North America, Europe, Latin America and Asia, and diesel engines for Class A motor homes (RVs), primarily in North America.

• Light-duty automotive (Pickup and Light Commercial Vehicle (LCV)) - We manufacture 105 to 385 horsepower diesel engines, including engines for the pickup truck market for Chrysler and Nissan in North America, and LCV markets in Europe, Latin America and Asia.

• Off-highway - We provide diesel engines that range from 60 to 755 horsepower to key global markets including construction, mining, rail, defense, agriculture, marine, and oil and gas equipment and also to the power generation business for standby, mobile and distributed power generation solutions throughout the world.

Sales for our Engine segment by market were as follows:

2016
In millions	Q1		Q2		Q3		Q4		YTD
Heavy-duty truck	$	631	$	622	$	625	$	—	$	1,878
Medium-duty truck and bus	549		600		517		—		1,666
Light-duty automotive	433		394		345		—		1,172
Off-highway	363		386		372		—		1,121
Total sales	$	1,976	$	2,002	$	1,859	$	—	$	5,837
2015
In millions	Q1		Q2		Q3		Q4		YTD
Heavy-duty truck	$	757	$	875	$	784	$	700	$	3,116
Medium-duty truck and bus	608		674		585		640		2,507
Light-duty automotive	381		354		339		401		1,475
Off-highway	399		422		394		357		1,572
Total sales	$	2,145	$	2,325	$	2,102	$	2,098	$	8,670
2014
In millions	YTD
Heavy-duty truck	$	3,072
Medium-duty truck and bus	2,431
Light-duty automotive	1,567
Off-highway	1,897
Total sales	$	8,967

11

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Unit shipments by engine classification (including unit shipments to Power Systems and off-highway engine units included in their respective classification) were as follows:

2016
Units	Q1	Q2	Q3	Q4	YTD
Heavy-duty	19,700	20,700	20,100	—	60,500
Medium-duty	55,400	62,300	53,400	—	171,100
Light-duty	61,700	57,100	49,800	—	168,600
Total units	136,800	140,100	123,300	—	400,200
2015
Units	Q1	Q2	Q3	Q4	YTD
Heavy-duty	28,700	32,800	28,600	24,300	114,400
Medium-duty	61,200	66,600	59,600	59,700	247,100
Light-duty	51,200	53,400	47,800	56,900	209,300
Total units	141,100	152,800	136,000	140,900	570,800
2014
Units	YTD
Heavy-duty	122,100
Medium-duty	266,800
Light-duty	204,400
Total units	593,300

Distribution Segment Sales by Product Line

2016
In millions	Q1		Q2		Q3		Q4		YTD
Parts	$	648	$	642	$	643	$	—	$	1,933
Service	299		297		299		—		895
Power generation	275		326		291		—		892
Engines	241		279		271		—		791
Total sales	$	1,463	$	1,544	$	1,504	$	—	$	4,511
2015
In millions	Q1		Q2		Q3		Q4		YTD
Parts	$	573	$	598	$	604	$	648	$	2,423
Service	284		307		301		330		1,222
Power generation	298		272		323		397		1,290
Engines	321		318		323		332		1,294
Total sales	$	1,476	$	1,495	$	1,551	$	1,707	$	6,229

12

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Component Segment Sales by Business

2016
In millions	Q1		Q2		Q3		Q4		YTD
Emission solutions	$	607	$	624	$	540	$	—	$	1,771
Turbo technologies	265		276		241		—		782
Filtration	252		262		244		—		758
Fuel systems	113		117		118		—		348
Total sales	$	1,237	$	1,279	$	1,143	$	—	$	3,659
2015
In millions	Q1		Q2		Q3		Q4		YTD
Emission solutions	$	613	$	679	$	607	$	600	$	2,499
Turbo technologies	301		307		266		267		1,141
Filtration	255		266		240		249		1,010
Fuel systems	130		145		127		120		522
Total sales	$	1,299	$	1,397	$	1,240	$	1,236	$	5,172

Power Systems Segment Sales by Product Line and Unit Shipments by Engine Classification

In the second quarter of 2016, in conjunction with the reorganization of our segments, our Power Systems segment reorganized its reporting structure into the following product lines:

• Power generation - We design, manufacture, sell and support generators ranging from 2 kilowatts to 3.5 megawatts, as well as paralleling systems and transfer switches, for applications such as residential, commercial, industrial, data centers, health care, telecommunications and waste water treatment plants. We also provide turnkey solutions for distributed generation and energy management applications using natural gas or biogas as a fuel. We also serves global rental accounts for diesel and gas generator sets.

• Industrial - We design, manufacture, sell and support diesel and natural gas high-horsepower engines up to 5,500 horsepower for a wide variety of equipment in the mining, rail, defense, oil and gas, and commercial marine applications throughout the world. Across these markets, we have major customers in North America, Europe, Middle East, Africa, China, Korea, Japan, Latin America, India, Russia, Southeast Asia, South Pacific and Mexico.

• Generator technologies - We design, manufacture, sell and support A/C generator/alternator products for internal consumption and for external generator set assemblers. Our products are sold under the Stamford, AVK and Markon brands and range in output from 3 kilovolt-amperes (kVA) to 12,000 kVA.

13

CUMMINS INC. AND SUBSIDIARIES

BUSINESS UNIT SALES DATA

(Unaudited)

Sales for our Power Systems segment by product line were as follows:

2016
In millions	Q1		Q2		Q3		Q4		YTD
Power generation	$	520	$	597	$	545	$	—	$	1,662
Industrial	215		240		233		—		688
Generator technologies	73		84		78		—		235
Total sales	$	808	$	921	$	856	$	—	$	2,585
2015
In millions	Q1		Q2		Q3		Q4		YTD
Power generation	$	624	$	710	$	621	$	615	$	2,570
Industrial	280		295		275		287		1,137
Generator technologies	98		92		86		84		360
Total sales	$	1,002	$	1,097	$	982	$	986	$	4,067
2014
In millions	YTD
Power generation	$	2,633
Industrial	1,331
Generator technologies	450
Total sales	$	4,414

High-horsepower unit shipments by engine classification were as follows: 

2016
Units	Q1	Q2	Q3	Q4	YTD
Power generation	1,800	2,200	2,000	—	6,000
Industrial	1,000	1,100	1,000	—	3,100
Total units	2,800	3,300	3,000	—	9,100
2015
Units	Q1	Q2	Q3	Q4	YTD
Power generation	2,200	2,500	2,000	1,900	8,600
Industrial	1,300	1,200	1,200	1,500	5,200
Total units	3,500	3,700	3,200	3,400	13,800
2014
Units	YTD
Power generation	8,700
Industrial	6,100
Total units	14,800

14