Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2016 | Feb. 03, 2017 | Jul. 03, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | CUMMINS INC | ||
Entity Central Index Key | 26,172 | ||
Document Period End Date | Dec. 31, 2016 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 168,155,330 | ||
Entity Public Float | $ 19 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Millions | 12 Months Ended | |||||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||||
NET SALES | [1] | $ 17,509 | $ 19,110 | $ 19,221 | ||
Cost of sales | 13,057 | 14,163 | 14,360 | |||
GROSS MARGIN | 4,452 | 4,947 | 4,861 | |||
OPERATING EXPENSES AND INCOME | ||||||
Selling, general and administrative expenses | 2,046 | 2,092 | 2,095 | |||
Research, development and engineering expenses | 636 | 735 | 754 | |||
Equity, royalty and interest income from investees (Note 2) | 301 | 315 | 370 | |||
Loss Contingency, Loss in Period | 138 | [2] | 60 | [2] | 0 | |
Impairment of light-duty diesel assets (Note 19) | 0 | 211 | [3],[4] | 0 | ||
Restructuring actions and other charges (Note 20) | [5] | 90 | ||||
Other operating income (expense), net | (5) | (17) | (17) | |||
OPERATING INCOME | 1,928 | 2,057 | 2,365 | |||
Interest income | 23 | 24 | 23 | |||
Interest expense (Note 9) | 69 | 65 | 64 | |||
Other income, net | 48 | 9 | 110 | |||
INCOME BEFORE INCOME TAXES | 1,930 | 2,025 | 2,434 | |||
Income tax expense (Note 3) | 474 | 555 | 698 | |||
CONSOLIDATED NET INCOME | 1,456 | 1,470 | 1,736 | |||
Less: Net income attributable to noncontrolling interests | 62 | 71 | 85 | |||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 1,394 | $ 1,399 | $ 1,651 | |||
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. (Note 17) | ||||||
Basic (in dollars per share) | $ 8.25 | $ 7.86 | $ 9.04 | |||
Diluted (in dollars per share) | $ 8.23 | $ 7.84 | $ 9.02 | |||
[1] | Includes sales to nonconsolidated equity investees of $1,028 million, $1,209 million and $2,063 million for the years ended December 31, 2016, 2015 and 2014, respectively. | |||||
[2] | See Note 12, "COMMITMENTS AND CONTINGENCIES," for additional information. | |||||
[3] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. | |||||
[4] | See Note 19, "IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS," for additional information. | |||||
[5] | See Note 20, "RESTRUCTURING ACTIONS AND OTHER CHARGES," for additional information. |
CONSOLIDATED STATEMENTS OF INC3
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | |||
Sales to nonconsolidated equity investees | $ 1,028 | $ 1,209 | $ 2,063 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
CONSOLIDATED NET INCOME | $ 1,456 | $ 1,470 | $ 1,736 |
Other comprehensive (loss) income, net of tax (Note 14) | |||
Foreign currency translation adjustments | (448) | (305) | (234) |
Unrealized (loss) gain on derivatives | (12) | 6 | (1) |
Change in pension and other postretirement defined benefit plans | (31) | 15 | (58) |
Unrealized gain (loss) on marketable securities | 1 | (1) | (12) |
Total other comprehensive loss, net of tax | (490) | (285) | (305) |
COMPREHENSIVE INCOME | 966 | 1,185 | 1,431 |
Less: Comprehensive income attributable to noncontrolling interests | 45 | 56 | 74 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 921 | $ 1,129 | $ 1,357 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 1,120 | $ 1,711 |
Marketable securities (Note 4) | 260 | 100 |
Total cash, cash equivalents and marketable securities | 1,380 | 1,811 |
Accounts and notes receivable, net | ||
Trade and other | 2,803 | 2,640 |
Nonconsolidated equity investees | 222 | 180 |
Inventories (Note 5) | 2,675 | 2,707 |
Prepaid expenses and other current assets | 627 | 609 |
Total current assets | 7,707 | 7,947 |
Long-term assets | ||
Property, plant and equipment, net (Note 6) | 3,800 | 3,745 |
Investments and advances related to equity method investees (Note 2) | 946 | 975 |
Goodwill (Note 7) | 480 | 482 |
Other intangible assets, net (Note 7) | 332 | 328 |
Pension assets (Note 8) | 731 | 735 |
Other assets | 1,015 | 922 |
Total assets | 15,011 | 15,134 |
Current liabilities | ||
Accounts payable (principally trade) | 1,854 | 1,706 |
Loans payable (Note 9) | 41 | 24 |
Commercial paper (Note 9) | 212 | 0 |
Accrued compensation, benefits and retirement costs | 412 | 409 |
Current portion of accrued product warranty (Note 10) | 333 | 359 |
Current portion of deferred revenue | 468 | 403 |
Other accrued expenses | 970 | 863 |
Current maturities of long-term debt (Note 9) | 35 | 39 |
Total current liabilities | 4,325 | 3,803 |
Long-term liabilities | ||
Long-term debt (Note 9) | 1,568 | 1,576 |
Postretirement benefits other than pensions (Note 8) | 329 | 349 |
Pensions (Note 8) | 326 | 298 |
Other liabilities and deferred revenue (Note 11) | 1,289 | 1,358 |
Total liabilities | 7,837 | 7,384 |
Commitments and contingencies (Note 12) | ||
Cummins Inc. shareholders’ equity (Note 13) | ||
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | 2,153 | 2,178 |
Retained earnings | 11,040 | 10,322 |
Treasury stock, at cost, 54.2 and 47.2 shares | (4,489) | (3,735) |
Common stock held by employee benefits trust, at cost, 0.7 and 0.9 shares | (8) | (11) |
Accumulated other comprehensive loss (Note 14) | (1,821) | (1,348) |
Total Cummins Inc. shareholders' equity | 6,875 | 7,406 |
Noncontrolling interests (Note 16) | 299 | 344 |
Total equity | 7,174 | 7,750 |
Total liabilities and equity | $ 15,011 | $ 15,134 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 2.50 | $ 2.50 |
Common stock, shares authorized | 500 | 500 |
Common stock, shares issued | 222.4 | 222.4 |
Treasury stock, shares | 54.2 | 47.2 |
Common stock held by employee benefits trust, at cost, shares | 0.7 | 0.9 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Consolidated net income | $ 1,456 | $ 1,470 | $ 1,736 | |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ||||
Loss contingency charges, net of payments (Note 12) | 122 | 60 | 0 | |
Depreciation and amortization | 530 | 514 | 455 | |
Gains on fair value adjustment for consolidated investees (Note 18) | (15) | (18) | (73) | |
Deferred income taxes (Note 3) | 50 | (108) | 31 | |
Equity in income of investees, net of dividends | (46) | (36) | (100) | |
Pension contributions in excess of expense (Note 8) | (92) | (127) | (148) | |
Other post-retirement benefits payments in excess of expense (Note 8) | (25) | (23) | (28) | |
Stock-based compensation expense (Note 15) | 32 | 24 | 36 | |
Impairment of light-duty diesel assets (Note 19) | 0 | 211 | [1],[2] | 0 |
Restructuring charges and other actions, net of cash payments (Note 20) | (59) | 64 | 0 | |
Translation and hedging activities | (55) | 26 | (13) | |
Changes in current assets and liabilities, net of acquisitions | ||||
Accounts and notes receivable | (265) | 103 | (89) | |
Inventories | (4) | 150 | (256) | |
Other current assets | 14 | (151) | 1 | |
Accounts Payable | 184 | (136) | 244 | |
Accrued Expenses | (195) | (226) | 168 | |
Changes in other liabilities and deferred revenue | 200 | 292 | 282 | |
Other, net | 103 | (30) | 20 | |
Net cash provided by operating activities | 1,935 | 2,059 | 2,266 | |
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Capital expenditures | (531) | (744) | (743) | |
Investments in internal use software | (63) | (55) | (55) | |
Investments in and advances to equity investees | (41) | (7) | (60) | |
Acquisitions of businesses, net of cash acquired (Note 18) | (94) | (117) | (436) | |
Investments in marketable securities—acquisitions (Note 4) | (478) | (282) | (275) | |
Investments in marketable securities—liquidations (Note 4) | 306 | 270 | 336 | |
Proceeds from sale of equity investees (Note 2) | 60 | 4 | ||
Cash flows from derivatives not designated as hedges | (102) | 8 | (14) | |
Other, net | 26 | 9 | 9 | |
Net cash used in investing activities | (917) | (918) | (1,234) | |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Proceeds from borrowings | 111 | 44 | 55 | |
Net borrowings of commercial paper (Note 9) | 212 | 0 | 0 | |
Payments on borrowings and capital lease obligations | (163) | (76) | (94) | |
Net borrowings (payments) under short-term credit agreements | 19 | (41) | (40) | |
Distributions to noncontrolling interests | (65) | (49) | (83) | |
Dividend payments on common stock (Note 13) | (676) | (622) | (512) | |
Repurchases of common stock (Note 13) | (778) | (900) | (670) | |
Acquisitions of noncontrolling interests (Note 18) | (98) | (10) | (14) | |
Other, net | 29 | 10 | 15 | |
Net cash used in financing activities | (1,409) | (1,644) | (1,343) | |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (200) | (87) | (87) | |
Net decrease in cash and cash equivalents | (591) | (590) | (398) | |
Cash and cash equivalents at beginning of year | 1,711 | 2,301 | 2,699 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,120 | $ 1,711 | $ 2,301 | |
[1] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. | |||
[2] | See Note 19, "IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS," for additional information. |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Millions | Total | Total Cummins Inc. Shareholders' Equity | Common Stock | Additional paid-in Capital | Retained Earnings | Treasury Stock | Common Stock Held in Trust | Accumulated Other Comprehensive Loss | Noncontrolling interests |
BALANCE, AT THE BEGINNING OF THE PERIOD at Dec. 31, 2013 | $ 7,870 | $ 7,510 | $ 556 | $ 1,543 | $ 8,406 | $ (2,195) | $ (16) | $ (784) | $ 360 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,736 | 1,651 | 1,651 | 85 | |||||
Other comprehensive loss, net of tax (Note 14) | (305) | (294) | (294) | (11) | |||||
Issuance of common stock | 9 | 9 | 9 | ||||||
Employee benefits trust activity (Note 13) | 27 | 27 | 24 | 3 | |||||
Repurchases of common stock | (670) | (670) | (670) | ||||||
Cash dividends on common stock (Note 13) | (512) | (512) | (512) | ||||||
Distribution to noncontrolling interests | (83) | (83) | |||||||
Stock based awards | 16 | 16 | (5) | 21 | |||||
Acquisition of noncontrolling interests | (14) | (7) | (7) | (7) | |||||
Other shareholder transactions | 19 | 19 | 19 | 0 | |||||
BALANCE, AT THE END OF THE PERIOD at Dec. 31, 2014 | 8,093 | 7,749 | 556 | 1,583 | 9,545 | (2,844) | (13) | (1,078) | 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,470 | 1,399 | 1,399 | 71 | |||||
Other comprehensive loss, net of tax (Note 14) | (285) | (270) | (270) | (15) | |||||
Issuance of common stock | 9 | 9 | 9 | ||||||
Employee benefits trust activity (Note 13) | 27 | 27 | 25 | 2 | |||||
Repurchases of common stock | (900) | (900) | (900) | ||||||
Cash dividends on common stock (Note 13) | (622) | (622) | (622) | ||||||
Distribution to noncontrolling interests | (49) | (49) | |||||||
Stock based awards | 5 | 5 | (4) | 9 | |||||
Acquisition of noncontrolling interests | (10) | (3) | (3) | (7) | |||||
Other shareholder transactions | 12 | 12 | 12 | 0 | |||||
BALANCE, AT THE END OF THE PERIOD at Dec. 31, 2015 | 7,750 | 7,406 | 556 | 1,622 | 10,322 | (3,735) | (11) | (1,348) | 344 |
Increase (Decrease) in Shareholders' Equity | |||||||||
Net income | 1,456 | 1,394 | 1,394 | 62 | |||||
Other comprehensive loss, net of tax (Note 14) | (490) | (473) | (473) | (17) | |||||
Issuance of common stock | 6 | 6 | 6 | ||||||
Employee benefits trust activity (Note 13) | 26 | 26 | 23 | 3 | |||||
Repurchases of common stock | (778) | (778) | (778) | ||||||
Cash dividends on common stock (Note 13) | (676) | (676) | (676) | ||||||
Distribution to noncontrolling interests | (65) | (65) | |||||||
Stock based awards | 19 | 19 | (5) | 24 | |||||
Acquisition of noncontrolling interests | (98) | (73) | (73) | (25) | |||||
Other shareholder transactions | 24 | 24 | 24 | 0 | |||||
BALANCE, AT THE END OF THE PERIOD at Dec. 31, 2016 | $ 7,174 | $ 6,875 | $ 556 | $ 1,597 | $ 11,040 | $ (4,489) | $ (8) | $ (1,821) | $ 299 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations We were founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana. We were one of the first diesel engine manufacturers. We changed our name to Cummins Inc. in 2001. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products, including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and electric power generation systems. We sell our products to original equipment manufacturers (OEMs), distributors and other customers worldwide. We serve our customers through a network of approximately 600 wholly-owned and independent distributor locations and over 7,400 dealer locations in more than 190 countries and territories. Principles of Consolidation Our Consolidated Financial Statements include the accounts of all wholly-owned and majority-owned domestic and foreign subsidiaries where our ownership is more than 50 percent of outstanding equity interests except for majority-owned subsidiaries that are considered variable interest entities (VIEs) where we are not deemed to have a controlling financial interest. In addition, we also consolidate, regardless of our ownership percentage, VIEs for which we are deemed to have a controlling financial interest. Intercompany balances and transactions are eliminated in consolidation. Where our ownership interest is less than 100 percent, the noncontrolling ownership interests are reported in our Consolidated Balance Sheets . The noncontrolling ownership interest in our income, net of tax, is classified as "Net income attributable to noncontrolling interests" in our Consolidated Statements of Income . We have variable interests in several businesses accounted for under the equity method of accounting that are deemed to be VIEs and are subject to generally accepted accounting principles in the United States of America (GAAP) for variable interest entities. Most of these VIEs are unconsolidated. Reclassifications Certain amounts for 2015 and 2014 have been reclassified to conform to the current year presentation. Investments in Equity Investees We use the equity method to account for our investments in joint ventures, affiliated companies and alliances in which we have the ability to exercise significant influence, generally represented by equity ownership or partnership equity of at least 20 percent but not more than 50 percent . Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition. Investment amounts in excess of our share of an investee's net assets are amortized over the life of the related asset creating the excess. If the excess is goodwill, then it is not amortized. Equity in income or losses of each investee is recorded according to our level of ownership; if losses accumulate, we record our share of losses until our investment has been fully depleted. If our investment has been fully depleted, we recognize additional losses only when we are the primary funding source. We eliminate (to the extent of our ownership percentage) in our Consolidated Financial Statements the profit in inventory held by our equity method investees that has not yet been sold to a third-party. Our investments are classified as "Investments and advances related to equity method investees" in our Consolidated Balance Sheets. Our share of the results from joint ventures, affiliated companies and alliances is reported in our Consolidated Statements of Income as "Equity, royalty and interest income from investees," and is reported net of all applicable income taxes. Our foreign equity investees are presented net of applicable foreign income taxes in our Consolidated Statements of Income . Our remaining United States (U.S.) equity investees are partnerships (non-taxable), thus there is no difference between gross or net of tax presentation as the investees are not taxed. See NOTE 2 , " INVESTMENTS IN EQUITY INVESTEES ," for additional information. Use of Estimates in the Preparation of the Financial Statements Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Consolidated Financial Statements . Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pension and other postretirement benefit costs, impairment charges, restructuring costs, income taxes and deferred tax valuation allowances, lease classification and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. Revenue Recognition We recognize revenue, net of estimated costs of returns, allowances and sales incentives, when it is realized or realizable, which generally occurs when: • Persuasive evidence of an arrangement exists; • The product has been shipped and legal title and all risks of ownership have been transferred; • The sales price is fixed or determinable; and • Payment is reasonably assured. Products are generally sold on open account under credit terms customary to the geographic region of distribution. We perform ongoing credit evaluations of our customers and generally do not require collateral to secure our accounts receivable. For engines, service parts, service tools and other items sold to independent distributors and to partially-owned distributors accounted for under the equity method, revenues are recorded when title and risk of ownership transfers. This transfer is based on the agreement in effect with the respective distributor, which generally occurs when the products are shipped. To the extent of our ownership percentage, margins on sales to distributors accounted for under the equity method are deferred until the distributor sells the product to unrelated parties. We provide various sales incentives to both our distribution network and our OEM customers. These programs are designed to promote the sale of our product in the channel or encourage the usage of our products by OEM customers. Sales incentives primarily fall into three categories: • Volume rebates; • Market share rebates; and • Aftermarket rebates. For volume rebates, we provide certain customers with rebate opportunities for attaining specified volumes during a particular quarter or year. We accrue for the expected amount of these rebates at the time of the original sale and update our accruals quarterly based on our best estimate of the volume levels the customer will reach during the measurement period. For market share rebates, we provide certain customers with rebate opportunities based on the percentage of their production that utilizes our product. These rebates are typically measured either quarterly or annually and are accrued at the time of the original sale based on the current market shares, with adjustments made as the level changes. For aftermarket rebates, we provide incentives to promote sales to certain dealers and end-markets. These rebates are typically paid on a quarterly, or more frequent, basis and estimates are made at the end of each quarter as to the amount yet to be paid. These estimates are based on historical experience with the particular program. The incentives are classified as a reduction in sales in our Consolidated Statements of Income . We classify shipping and handling billed to customers as sales in our Consolidated Statements of Income . Substantially all shipping and handling costs are included in "Cost of sales." Rights of return do not exist for the majority of our sales, other than for quality issues. We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return small amounts of parts and filters each year and in our power systems business, which sells portable generators to retail customers. An estimate of future returns is accrued at the time of sale based on historical return rates. Foreign Currency Transactions and Translation We translate assets and liabilities of foreign entities to U.S. dollars, where the local currency is the functional currency, at year-end exchange rates. We translate income and expenses to U.S. dollars using weighted-average exchange rates for the year. We record adjustments resulting from translation in a separate component of accumulated other comprehensive loss (AOCL) and include the adjustments in net income only upon sale, loss of controlling financial interest or liquidation of the underlying foreign investment. Foreign currency transaction gains and losses are included in current net income. For foreign entities where the U.S. dollar is the functional currency, including those operating in highly inflationary economies when applicable, we remeasure non-monetary balances and the related income statement using historical exchange rates. We include in income the resulting gains and losses, including the effect of derivatives in our Consolidated Statements of Income , which combined with transaction gains and losses amounted to a net loss of $12 million , $18 million and $6 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. Fair Value Measurements A three-level valuation hierarchy, based upon the observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy: • Level 1 - Quoted prices for identical instruments in active markets; • Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose significant inputs are observable; and • Level 3 - Instruments whose significant inputs are unobservable . Derivative Instruments We make use of derivative instruments in foreign exchange, commodity price and interest rate hedging programs. Derivatives currently in use are foreign currency forward contracts, commodity physical forward contracts and zero-cost collars and interest rate swaps. These contracts are used strictly for hedging and not for speculative purposes. We are exposed to market risk from fluctuations in interest rates. We manage our exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk. The gain or loss on these derivative instruments as well as the offsetting gain or loss on the hedged item are recognized in current income as "Interest expense." For more detail on our interest rate swaps see NOTE 9 , " DEBT ." Due to our international business presence, we are exposed to foreign currency exchange risk. We transact in foreign currencies and have assets and liabilities denominated in foreign currencies. Consequently, our income experiences some volatility related to movements in foreign currency exchange rates. In order to benefit from global diversification and after considering naturally offsetting currency positions, we enter into foreign currency forward contracts to minimize our existing exposures (recognized assets and liabilities) and hedge forecasted transactions. Foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges under GAAP. The effective portion of the unrealized gain or loss on the forward contract is deferred and reported as a component of AOCL. When the hedged forecasted transaction (sale or purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income. To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, we enter into foreign currency forward contracts, which are considered economic hedges. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract. These derivative instruments are not designated as hedges under GAAP. We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers. In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity physical forward contracts and zero-cost collar contracts with designated banks and other counterparties to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations. The physical forward contracts qualify for the normal purchases scope exceptions and are treated as purchase commitments. The commodity zero-cost collar contracts that represent an economic hedge, but are not designated for hedge accounting, are marked to market through earnings. Income Tax Accounting We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. A valuation allowance is recorded to reduce the tax assets to the net value management believes is more likely than not to be realized. In the event our operating performance deteriorates, future assessments could conclude that a larger valuation allowance will be needed to further reduce the deferred tax assets. In addition, we operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We have taken and we believe we have made adequate provision for income taxes for all years that are subject to audit based upon the latest information available. A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in NOTE 3 , " INCOME TAXES ." Cash and Cash Equivalents Cash equivalents are defined as short-term, highly liquid investments with an original maturity of 90 days or less at the time of purchase. The carrying amounts reflected in our Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to the short-term maturity of these investments. Years ended December 31, In millions 2016 2015 2014 Cash payments for income taxes, net of refunds $ 430 $ 732 $ 659 Cash payments for interest, net of capitalized interest 68 65 65 Marketable Securities We account for marketable securities in accordance with GAAP for investments in debt and equity securities. We determine the appropriate classification of all marketable securities as "held-to-maturity," "available-for-sale" or "trading" at the time of purchase, and re-evaluate such classifications at each balance sheet date. At December 31, 2016 and 2015 , all of our investments were classified as available-for-sale. Available-for-sale (AFS) securities are carried at fair value with the unrealized gain or loss, net of tax, reported in other comprehensive income. Unrealized losses considered to be "other-than-temporary" are recognized currently in income. The cost of securities sold is based on the specific identification method. The fair value of most investment securities is determined by currently available market prices. Where quoted market prices are not available, we use the market price of similar types of securities that are traded in the market to estimate fair value. See NOTE 4 , " MARKETABLE SECURITIES ," for a detailed description of our investments in marketable securities. Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount, which approximates net realizable value, and generally do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on our historical collection experience and by performing an analysis of our accounts receivable in light of the current economic environment. We review our allowance for doubtful accounts on a regular basis. In addition, when necessary, we provide an allowance for the full amount of specific accounts deemed to be uncollectible. Account balances are charged off against the allowance in the period in which we determine that it is probable the receivable will not be recovered. The allowance for doubtful accounts balances for the years ended December 31, 2016 and 2015 were $16 million and $15 million , respectively. Inventories Our inventories are stated at the lower of cost or market. For the years ended December 31, 2016 and 2015 , approximately 13 percent and 13 percent , respectively, of our consolidated inventories (primarily heavy-duty and high-horsepower engines and parts) were valued using the last-in, first-out (LIFO) cost method. The cost of other inventories is generally valued using the first-in, first-out (FIFO) cost method. Our inventories at interim and year-end reporting dates include estimates for adjustments related to annual physical inventory results and for inventory cost changes under the LIFO cost method. Due to significant movements of partially-manufactured components and parts between manufacturing plants, we do not internally measure, nor do our accounting systems provide, a meaningful segregation between raw materials and work-in-process. See NOTE 5 , " INVENTORIES ," for additional information. Property, Plant and Equipment We record property, plant and equipment, inclusive of assets under capital leases, at cost. We depreciate the cost of the majority of our equipment using the straight-line method with depreciable lives ranging from 20 to 40 years for buildings and 3 to 20 years for machinery, equipment and fixtures. Capital lease amortization is recorded in depreciation expense. We expense normal maintenance and repair costs as incurred. Depreciation expense totaled $434 million , $419 million and $351 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. See NOTE 6 , " PROPERTY, PLANT AND EQUIPMENT ," for additional information. Impairment of Long-Lived Assets We review our long-lived assets for possible impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We assess the recoverability of the carrying value of the long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment of a long-lived asset or asset group exists when the expected future pre-tax cash flows (undiscounted and without interest charges) estimated to be generated by the asset or asset group is less than its carrying value. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is measured based on the difference between the estimated fair value and carrying value of the asset or asset group. Assumptions and estimates used to estimate cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge. See NOTE 19 , " IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS ," for additional information. Goodwill Under GAAP for goodwill, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual two-step goodwill impairment test. We have elected this option on certain reporting units. The two-step impairment test is now only required if an entity determines through this qualitative analysis that it is more likely than not that the fair value of the reporting unit is less than its carrying value. In addition, the carrying value of goodwill must be tested for impairment on an interim basis in certain circumstances where impairment may be indicated. When we are required or opt to perform the two-step impairment test, the fair value of each reporting unit is estimated by discounting the after tax future cash flows less requirements for working capital and fixed asset additions. Our reporting units are generally defined as one level below an operating segment. However, there are two situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes. These two situations are described further below: • Within our Components segment, our emission solutions and filtration businesses have been aggregated into a single reporting unit. • Our Distribution segment is considered a single reporting unit as it is managed geographically and all regions share similar economic characteristics and provide similar products and services. Goodwill in other reporting units is immaterial for separate disclosure. Our valuation method requires us to make projections of revenue, operating expenses, working capital investment and fixed asset additions for the reporting units over a multi-year period. Additionally, management must estimate a weighted-average cost of capital, which reflects a market rate, for each reporting unit for use as a discount rate. The discounted cash flows are compared to the carrying value of the reporting unit and, if less than the carrying value, a separate valuation of the goodwill is required to determine if an impairment loss has occurred. In addition, we also perform a sensitivity analysis to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount. We performed the required procedures as of the end of our fiscal third quarter and determined that our goodwill was not impaired. At December 31, 2016 , our recorded goodwill was $480 million , approximately 79 percent of which resided in the aggregated emission solutions and filtration reporting unit. For this reporting unit, the fair value exceeded its carrying value by a substantial margin when we last performed step one of the two-step impairment test. Changes in our projections or estimates, a deterioration of our operating results and the related cash flow effect or a significant increase in the discount rate could decrease the estimated fair value of our reporting units and result in a future impairment of goodwill. See NOTE 7 , " GOODWILL AND OTHER INTANGIBLE ASSETS ," for additional information. Software We capitalize software that is developed or obtained for internal use. Software costs are amortized on a straight-line basis over their estimated useful lives generally ranging from 3 to 12 years. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. Upgrades and enhancements are capitalized if they result in significant modifications that enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion and business process reengineering costs are expensed in the period in which they are incurred. See NOTE 7 , " GOODWILL AND OTHER INTANGIBLE ASSETS ," for additional information. Warranty We charge the estimated costs of warranty programs, other than product recalls, to cost of sales at the time products are sold and revenue is recognized. We use historical experience to develop the estimated liability for our various warranty programs. As a result of the uncertainty surrounding the nature and frequency of product recall programs, the liability for such programs is recorded when we commit to a recall action or when a recall becomes probable and estimable, which generally occurs when it is announced. The liability for these programs is reflected in the provision for warranties issued. We review and assess the liability for these programs on a quarterly basis. We also assess our ability to recover certain costs from our suppliers and record a receivable when we believe a recovery is probable. In addition to costs incurred on warranty and recall programs, from time to time we also incur costs related to customer satisfaction programs for items not covered by warranty. We accrue for these costs when agreement is reached with a specific customer. These costs are not included in the provision for warranties, but are included in cost of sales. In addition, we sell extended warranty coverage on most of our engines. The revenue collected is initially deferred and is recognized as revenue in proportion to the costs expected to be incurred in performing services over the contract period. We compare the remaining deferred revenue balance quarterly to the estimated amount of future claims under extended warranty programs and provide an additional accrual when the deferred revenue balance is less than expected future costs. See NOTE 10 , " PRODUCT WARRANTY LIABILITY ," for additional information. Research and Development Our research and development program is focused on product improvements, product extensions, innovations and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred. From time to time, we enter into agreements with customers and government agencies to fund a portion of the research and development costs of a particular project. We generally account for these reimbursements as an offset to the related research and development expenditure. Research and development expenses, net of contract reimbursements, were $616 million in 2016 , $718 million in 2015 and $737 million in 2014 . Contract reimbursements were $131 million in 2016 , $98 million in 2015 and $121 million in 2014 . Related Party Transactions In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value. Our related party sales are presented on the face of our Consolidated Statements of Income . Our related party purchases were not material to our financial position or results of operations. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In August 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the classification of certain cash receipts and cash payments. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. We are in the process of evaluating the impact this standard will have on our Consolidated Statements of Cash Flows. In June 2016, the FASB amended its standards related to the accounting for credit losses on financial instruments. This amendment introduces new guidance for accounting for credit losses on instruments including trade receivables and held-to-maturity debt securities. The new rules are effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process of evaluating the impact the amendment will have on our Consolidated Financial Statements. In March 2016, the FASB amended its standards related to the accounting for stock compensation. This amendment addresses several aspects of the accounting for share-based payment transactions that could impact us including, but not limited to, recognition of excess tax benefits or deficiencies in the income statement each period and classification of the excess tax benefits or deficiencies as operating activities in the cash flow statement. The new standard is effective for annual periods beginning after December 15, 2016. The adoption of this standard could result in future volatility in our income tax expense since all excess tax benefits and deficiencies are now recorded in the income statement. We are unable to estimate this impact since the amount of excess benefits and deficiencies are dependent on our stock price at the time a stock award vests or is exercised. In February 2016, the FASB amended its standards related to the accounting for leases. Under the new standard, lessees will now be required to recognize substantially all leases on the balance sheet as both a right-of-use-asset and a liability. The standard will continue to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases will result in the recognition of a single lease expense on a straight-line basis over the lease term similar to the treatment for operating leases under today's standards. Finance leases will result in an accelerated expense similar to the accounting for capital leases under today's standards. The determination of a lease classification as operating or finance will be done in a manner similar to today's standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components in an arrangement. The new standard is effective on January 1, 2019, with early adoption permitted. We are still evaluating the impact the standard could have on our Consolidated Financial Statements ; however, while we have not yet quantified the amount, we do expect the standard will have a material impact on our Consolidated Balance Sheets due to the recognition of additional assets and liabilities for operating leases. In January 2016, the FASB amended its standards related to the accounting for certain financial instruments. This amendment addresses certain aspects of recognition, measurement, presentation and disclosure. The new rules will become effective for annual and interim periods beginning after December 15, 2017. Early adoption is not permitted. We are in the proc |
INVESTMENTS IN EQUITY INVESTEES
INVESTMENTS IN EQUITY INVESTEES | 12 Months Ended |
Dec. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENTS IN EQUITY INVESTEES | NOTE 2. INVESTMENTS IN EQUITY INVESTEES Investments and advances related to equity method investees and our ownership percentage was as follows: December 31, In millions Ownership % 2016 2015 Komatsu alliances 20-50% $ 197 $ 173 Beijing Foton Cummins Engine Co., Ltd. 50% 163 172 Dongfeng Cummins Engine Company, Ltd. 50% 111 118 Chongqing Cummins Engine Company, Ltd. 50% 73 80 Cummins-Scania XPI Manufacturing, LLC 50% 82 66 Tata Cummins, Ltd. 50% 63 60 North American distributors (1) 50% — 15 Other Various 257 291 Investments and advances related to equity method investees $ 946 $ 975 ____________________________________ (1) Ownership percentage of North American distributor investments at December 31, 2015. Equity, royalty and interest income from investees, net of applicable taxes, was as follows: Years ended December 31, In millions 2016 2015 2014 Distribution entities Komatsu Cummins Chile, Ltda. $ 34 $ 31 $ 29 North American distributors 21 33 107 All other distributors — 3 4 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 52 62 (2 ) Dongfeng Cummins Engine Company, Ltd. 46 51 67 Chongqing Cummins Engine Company, Ltd. 38 41 51 All other manufacturers 69 52 74 Cummins share of net income 260 273 330 Royalty and interest income 41 42 40 Equity, royalty and interest income from investees $ 301 $ 315 $ 370 Distribution Entities We have an extensive worldwide distributor and dealer network through which we sell and distribute our products and services. Generally, our distributors are divided by geographic region with some of our distributors being wholly-owned by Cummins, some partially-owned and some independently owned. We consolidate all wholly-owned distributors and partially-owned distributors where we are the primary beneficiary and account for other partially-owned distributors using the equity method of accounting. • Komatsu Cummins Chile, Ltda. - Komatsu Cummins Chile, Ltda. is a joint venture with Komatsu America Corporation. The joint venture is a distributor that offers the full range of our products and services to customers and end-users in the Chilean and Peruvian markets. • North American Distributors - During 2016, we acquired the remaining interest in the final unconsolidated North American distributor joint venture. In certain cases where we own a partial interest in a distributor, we may be obligated to purchase the other equity holders' interests if certain events occur (such as the death or resignation of the distributor principal or a change in control of Cummins Inc.). The purchase consideration of the equity interests may be determined based on the fair vale of the distributor's assets. Repurchase obligations and practices vary by geographic region. All distributors that are partially-owned are considered to be related parties in our Consolidated Financial Statements . Manufacturing Entities Our manufacturing joint ventures have generally been formed with customers and generally are intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and are included in the list below. Our engine manufacturing joint ventures are supplied by our Components segment in the same manner as it supplies our wholly-owned Engine segment and Power Systems segment manufacturing facilities. Our Components segment joint ventures and wholly owned entities provide fuel systems, filtration, aftertreatment systems and turbocharger products that are used in our engines as well as some competitors' products. The results and investments in our joint ventures in which we have 50 percent or less ownership interest are included in “Equity, royalty and interest income from investees” and “Investments and advances related to equity method investees” in our Consolidated Statements of Income and Consolidated Balance Sheets , respectively. • Beijing Foton Cummins Engine Co., Ltd. - Beijing Foton Cummins Engine Co., Ltd. is a joint venture in China with Beiqi Foton Motor Co., Ltd., a commercial vehicle manufacturer, which consists of two distinct lines of business, a light-duty business and a heavy-duty business. The light-duty business produces ISF 2.8 liter and ISF 3.8 liter families of our high performance light-duty diesel engines in Beijing. These engines are used in light-duty commercial trucks, pickup trucks, buses, multipurpose and sport utility vehicles with main markets in China, Brazil and Russia. Certain types of marine, small construction equipment and industrial applications are also served by these engine families. The heavy-duty business produces ISG 10.5 liter and ISG 11.8 liter families of our high performance heavy-duty diesel engines in Beijing. These engines are used in heavy-duty commercial trucks in China and will be used in world wide markets. Certain types of construction equipment and industrial applications are also served by these engine families. • Dongfeng Cummins Engine Company, Ltd. - Dongfeng Cummins Engine Company, Ltd. (DCEC) is a joint venture in China with Dongfeng Automotive Co. Ltd., a subsidiary of Dongfeng Motor Corporation (Dongfeng), one of the largest medium-duty and heavy-duty truck manufacturers in China. DCEC produces Cummins 4 - to 13 -liter mechanical engines, full-electric diesel engines, with a power range from 125 to 545 horsepower, and natural gas engines. • Chongqing Cummins Engine Company, Ltd. - Chongqing Cummins Engine Company, Ltd. is a joint venture in China with Chongqing Machinery and Electric Co. Ltd. This joint venture manufactures several models of our heavy-duty and high-horsepower diesel engines, primarily serving the industrial and stationary power markets in China. Equity Investee Financial Summary We have approximately $525 million in our investment account at December 31, 2016 , that represents cumulative undistributed income in our equity investees. Dividends received from our unconsolidated equity investees were $212 million , $248 million and $227 million in 2016 , 2015 and 2014 , respectively. Summary financial information for our equity investees was as follows: At and for the years ended December 31, In millions 2016 2015 2014 Net sales $ 5,654 $ 5,946 $ 7,426 Gross margin 1,182 1,265 1,539 Net income 499 521 630 Cummins share of net income $ 260 $ 273 $ 330 Royalty and interest income 41 42 40 Total equity, royalty and interest from investees $ 301 $ 315 $ 370 Current assets $ 2,602 $ 2,458 Non-current assets 1,377 1,539 Current liabilities (1,938 ) (1,796 ) Non-current liabilities (232 ) (284 ) Net assets $ 1,809 $ 1,917 Cummins share of net assets $ 927 $ 958 Sale of Equity Investee In the fourth quarter of 2016, we sold our remaining 49 percent interest in Cummins Olayan Energy for $61 million and recognized a gain of $17 million . We received cash of $58 million with the remaining balance receivable in future periods. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 3. INCOME TAXES The following table summarizes income before income taxes: Years ended December 31, In millions 2016 2015 2014 U.S. income $ 995 $ 1,275 $ 1,407 Foreign income 935 750 1,027 Income before income taxes $ 1,930 $ 2,025 $ 2,434 Income tax expense consists of the following: Years ended December 31, In millions 2016 2015 2014 Current U.S. federal and state $ 211 $ 516 $ 470 Foreign 213 147 197 Total current 424 663 667 Deferred U.S. federal and state 57 (151 ) 39 Foreign (7 ) 43 (8 ) Total deferred 50 (108 ) 31 Income tax expense $ 474 $ 555 $ 698 A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows: Years ended December 31, 2016 2015 2014 Statutory U.S. federal income tax rate 35.0 % 35.0 % 35.0 % State income tax, net of federal effect 0.8 1.2 1.1 Differences in rates and taxability of foreign subsidiaries and joint ventures (7.2 ) (6.6 ) (5.7 ) Research tax credits (1.7 ) (1.4 ) (1.5 ) Other, net (2.3 ) (0.8 ) (0.2 ) Effective tax rate 24.6 % 27.4 % 28.7 % Our income tax rates are generally less than the 35 percent U.S. statutory income tax rate primarily because of lower taxes on foreign earnings and research tax credits. Our effective tax rate for 2016 was 24.6 percent compared to 27.4 percent for 2015 . The 2.8 percent decrease in the effective tax rate from 2015 to 2016 is primarily due to favorable changes in the jurisdictional mix of pre-tax income. Retained earnings of our U.K. domiciled subsidiaries and certain Singapore, German, Indian and Mexican subsidiaries are considered to be permanently reinvested. In addition, earnings of our China operations generated after December 31, 2011, are considered to be permanently reinvested. U.S. deferred tax is not provided on these permanently reinvested earnings. Our permanently reinvested foreign earnings are expected to be used for items such as capital expenditures and to fund joint ventures outside of the U.S. The total permanently reinvested retained earnings and related cumulative translation adjustment balances for these entities were $3.4 billion , $3.3 billion and $3.8 billion for the years ended December 31, 2016 , 2015 and 2014 , respectively. These amounts were determined primarily based on book retained earnings balances for these subsidiaries translated at historical rates. The determination of the deferred tax liability related to these retained earnings and cumulative translation adjustment balances, which are considered to be permanently reinvested outside the U.S., is not practicable. For our remaining subsidiary companies and joint ventures outside the U.S., we provide for the additional taxes that would be due upon the dividend distribution of the income of those foreign subsidiaries and joint ventures assuming the full utilization of foreign tax credits. Deferred tax liabilities on unremitted earnings of foreign subsidiaries and joint ventures, including those in China generated in years prior to 2012, were $59 million and $69 million at December 31, 2016 and 2015 , respectively. We have $616 million of retained earnings and related cumulative translation adjustments in our China operations generated prior to December 31, 2011, for which we have provided a U.S. deferred tax liability of $139 million . Income before income taxes included equity income of foreign joint ventures of $225 million , $213 million and $212 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. This equity income is recorded net of foreign taxes. Additional U.S. income taxes of $13 million , $20 million and $14 million for the years ended December 31, 2016 , 2015 and 2014 , respectively, were provided for the additional U.S. taxes that will ultimately be due upon the distribution of the foreign joint venture equity income. Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets were as follows: December 31, In millions 2016 2015 Deferred tax assets U.S. state carryforward benefits $ 159 $ 133 Foreign carryforward benefits 154 103 Employee benefit plans 401 377 Warranty expenses 405 369 Accrued expenses 107 76 Other 64 78 Gross deferred tax assets 1,290 1,136 Valuation allowance (307 ) (209 ) Total deferred tax assets 983 927 Deferred tax liabilities Property, plant and equipment (319 ) (269 ) Unremitted income of foreign subsidiaries and joint ventures (59 ) (69 ) Employee benefit plans (213 ) (212 ) Other (48 ) (21 ) Total deferred tax liabilities (639 ) (571 ) Net deferred tax assets $ 344 $ 356 Our 2016 U.S. carryforward benefits include $159 million of state credit and net operating loss carryforward benefits that begin to expire in 2017. Our foreign carryforward benefits include $154 million of net operating loss carryforwards that begin to expire in 2017. A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized. The valuation allowance increase d in 2016 by a net $98 million and increase d in 2015 by a net $65 million . The valuation allowance is primarily attributable to the uncertainty regarding the realization of a portion of the U.S. state and foreign net operating loss and tax credit carryforward benefits. Our Consolidated Balance Sheets contain the following tax related items: December 31, In millions 2016 2015 Prepaid and other current assets Refundable income taxes $ 192 $ 176 Other assets Deferred tax assets 420 390 Long-term refundable income taxes 22 18 Other liabilities and deferred revenue Deferred tax liabilities 76 34 A reconciliation of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 was as follows: December 31, In millions 2016 2015 2014 Balance at beginning of year $ 135 $ 174 $ 169 Additions to current year tax positions 10 8 8 Additions to prior years tax positions 18 24 5 Reductions to prior years tax positions — — (2 ) Reductions for tax positions due to settlements with taxing authorities (104 ) (71 ) (5 ) Reductions for tax positions due to lapse of statute of limitations — — (1 ) Balance at end of year $ 59 $ 135 $ 174 Included in the December 31, 2016 and 2015 , balances are $31 million and $78 million , respectively, related to tax positions that, if recognized, would favorably impact the effective tax rate in future periods. Also, we had accrued interest expense related to the unrecognized tax benefits of $3 million , $8 million and $7 million as of December 31, 2016 , 2015 and 2014 , respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the years ended December 31, 2016 , 2015 and 2014 , we recognized $2 million , $5 million and $4 million in net interest expense, respectively. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings. As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the U.K. and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2012. The U.S. examinations related to tax years 2011-2012 concluded during 2016. The U.S. examinations related to tax years 2013-2015 commenced during 2016. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 12 Months Ended |
Dec. 31, 2016 | |
Marketable Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 4. MARKETABLE SECURITIES A summary of marketable securities, all of which are classified as current, was as follows: December 31, 2016 2015 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale (1) Debt mutual funds $ 132 $ — $ 132 $ 88 $ — $ 88 Bank debentures 114 — 114 — — — Equity mutual funds 12 — 12 11 (1 ) 10 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 260 $ — $ 260 $ 101 $ (1 ) $ 100 ______________________________________________________ (1) All marketable securities are classified as Level 2 securities. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during 2016 and 2015. A description of the valuation techniques and inputs used for our Level 2 fair value measures was as follows: • Debt mutual funds — The fair value measure for these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input. • Bank debentures — These investments provide us with a contractual rate of return and generally range in maturity from three months to five years . The counterparties to these investments are reputable financial institutions with investment grade credit ratings. Since these instruments are not tradable and must be settled directly by us with the respective financial institution, our fair value measure is the financial institutions’ month-end statement. • Equity mutual funds — The fair value measure for these investments is the net asset value published by the issuing brokerage. Daily quoted prices are available from reputable third party pricing services and are used on a test basis to corroborate this Level 2 input measure. • Government debt securities — The fair value measure for these securities is broker quotes received from reputable firms. These securities are infrequently traded on a national stock exchange and these values are used on a test basis to corroborate our Level 2 input measure. The proceeds from sales and maturities of marketable securities and gross realized gains from the sale of AFS securities were as follows: Years ended December 31, In millions 2016 2015 2014 Proceeds from sales and maturities of marketable securities $ 306 $ 270 $ 336 Gross realized gains from the sale of available-for-sale securities (1) — 1 14 ____________________________________________________ (1) Gross realized losses from the sale of available-for-sale securities were immaterial. At December 31, 2016 , the fair value of AFS investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below: Maturity date (in millions) 1 year or less $ 247 5 - 10 years 1 Total $ 248 |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 5. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: December 31, In millions 2016 2015 Finished products $ 1,779 $ 1,796 Work-in-process and raw materials 1,005 1,022 Inventories at FIFO cost 2,784 2,818 Excess of FIFO over LIFO (109 ) (111 ) Total inventories $ 2,675 $ 2,707 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 6. PROPERTY, PLANT AND EQUIPMENT Details of our property, plant and equipment balance were as follows: December 31, In millions 2016 2015 Land and buildings $ 2,075 $ 1,978 Machinery, equipment and fixtures 4,898 4,739 Construction in process 662 605 Property, plant and equipment, gross 7,635 7,322 Less: Accumulated depreciation (3,835 ) (3,577 ) Property, plant and equipment, net $ 3,800 $ 3,745 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 : In millions Components Distribution Power Systems Engine Total Balance at December 31, 2014 $ 400 $ 62 $ 11 $ 6 $ 479 Acquisitions — 12 — — 12 Translation and other (9 ) 1 (1 ) — (9 ) Balance at December 31, 2015 391 75 10 6 482 Acquisitions — 4 — — 4 Translation and other (5 ) — (1 ) — (6 ) Balance at December 31, 2016 $ 386 $ 79 $ 9 $ 6 $ 480 Intangible assets that have finite useful lives are amortized over their estimated useful lives. The following table summarizes our other intangible assets with finite useful lives that are subject to amortization: December 31, In millions 2016 2015 Software $ 617 $ 536 Less: Accumulated amortization (330 ) (269 ) Software, net 287 267 Trademarks, patents and other 164 165 Less: Accumulated amortization (119 ) (104 ) Trademarks, patents and other, net 45 61 Total other intangible assets, net $ 332 $ 328 Amortization expense for software and other intangibles totaled $92 million , $90 million and $99 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. Internal and external software costs (excluding those related to research, re-engineering and training), trademarks and patents are amortized generally over a 3 to 12 year period. The projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions, is as follows: In millions 2017 2018 2019 2020 2021 Projected amortization expense $ 83 $ 66 $ 56 $ 43 $ 28 |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 12 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Pension and Other Postretirement Benefits Disclosure [Text Block] | NOTE 8. PENSION AND OTHER POSTRETIREMENT BENEFITS Pension Plans We sponsor several contributory and noncontributory pension plans covering substantially all employees. Generally, hourly employee pension benefits are earned based on years of service and compensation during active employment while future benefits for salaried employees are determined using a cash balance formula. However, the level of benefits and terms of vesting may vary among plans. Pension plan assets are administered by trustees and are principally invested in fixed income securities and equity securities. It is our policy to make contributions to our various qualified plans in accordance with statutory and contractual funding requirements and any additional contributions we determine are appropriate. Obligations, Assets and Funded Status Benefit obligation balances presented below reflect the projected benefit obligation (PBO) for our pension plans. The changes in the benefit obligations, the various plan assets, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans at December 31 were as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2016 2015 Change in benefit obligation Benefit obligation at the beginning of the year $ 2,533 $ 2,579 $ 1,390 $ 1,522 Service cost 90 80 21 27 Interest cost 109 102 50 56 Actuarial loss (gain) 111 (76 ) 316 (88 ) Benefits paid from fund (175 ) (139 ) (55 ) (53 ) Benefits paid directly by employer (16 ) (13 ) — — Plan amendments 9 — — — Exchange rate changes — — (271 ) (74 ) Benefit obligation at end of year $ 2,661 $ 2,533 $ 1,451 $ 1,390 Change in plan assets Fair value of plan assets at beginning of year $ 2,636 $ 2,713 $ 1,712 $ 1,724 Actual return on plan assets 200 (8 ) 402 20 Employer contributions 90 70 28 107 Benefits paid (175 ) (139 ) (55 ) (53 ) Exchange rate changes — — (334 ) (86 ) Fair value of plan assets at end of year $ 2,751 $ 2,636 $ 1,753 $ 1,712 Funded status (including underfunded and nonfunded plans) at end of year $ 90 $ 103 $ 302 $ 322 Amounts recognized in consolidated balance sheets Pension assets - long-term $ 429 $ 413 $ 302 $ 322 Accrued compensation, benefits and retirement costs - current liabilities (13 ) (12 ) — — Pensions - long-term liabilities (326 ) (298 ) — — Net amount recognized $ 90 $ 103 $ 302 $ 322 Amounts recognized in accumulated other comprehensive loss Net actuarial loss $ 770 $ 689 $ 172 $ 228 Prior service cost (credit) 9 (1 ) — — Net amount recognized $ 779 $ 688 $ 172 $ 228 In addition to the pension plans in the above table, we also maintain less significant defined benefit pension plans primarily in 14 other countries outside of the U.S. and the U.K. that comprise approximately 3 percent and 4 percent of our pension plan assets and obligations at December 31, 2016 and 2015, respectively. These plans are reflected in "Other liabilities and deferred revenue" on our Consolidated Balance Sheets . In 2016, we made $54 million of contributions to these plans including a contribution of $44 million to our German plans. The following table presents information regarding total accumulated benefit obligation, PBO's and underfunded pension plans that are included in the preceding table: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2016 2015 Total accumulated benefit obligation $ 2,625 $ 2,499 $ 1,366 $ 1,311 Plans with accumulated benefit obligation in excess of plan assets Accumulated benefit obligation 304 276 — — Plans with projected benefit obligation in excess of plan assets Projected benefit obligation 339 311 — — Components of Net Periodic Pension Cost The following table presents the net periodic pension cost under our plans for the years ended December 31: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2014 2016 2015 2014 Service cost $ 90 $ 80 $ 66 $ 21 $ 27 $ 24 Interest cost 109 102 105 50 56 63 Expected return on plan assets (201 ) (189 ) (173 ) (71 ) (91 ) (84 ) Amortization of prior service credit — (1 ) (1 ) — — — Recognized net actuarial loss 29 45 31 15 34 26 Net periodic pension cost $ 27 $ 37 $ 28 $ 15 $ 26 $ 29 Other changes in benefit obligations and plan assets recognized in other comprehensive income for the years ended December 31 were as follows: In millions 2016 2015 2014 Amortization of prior service credit $ — $ 1 $ 1 Recognized net actuarial loss (44 ) (79 ) (57 ) Incurred actuarial loss 107 105 133 Foreign exchange translation adjustments (28 ) (7 ) (18 ) Total recognized in other comprehensive income $ 35 $ 20 $ 59 Total recognized in net periodic pension cost and other comprehensive income $ 77 $ 83 $ 116 The amount in accumulated other comprehensive loss expected to be recognized as a component of net periodic pension cost during the next fiscal year is a net actuarial loss of $77 million . Assumptions The table below presents various assumptions used in determining the PBO for each year and reflects weighted-average percentages for the various plans as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans 2016 2015 2016 2015 Discount rate 4.12 % 4.47 % 2.70 % 3.95 % Compensation increase rate 4.87 % 4.88 % 3.75 % 3.75 % The table below presents various assumptions used in determining the net periodic pension cost and reflects weighted-average percentages for the various plans as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans 2016 2015 2014 2016 2015 2014 Discount rate 4.47 % 4.07 % 4.83 % 3.95 % 3.80 % 4.60 % Expected return on plan assets 7.50 % 7.50 % 7.50 % 4.70 % 5.80 % 5.80 % Compensation increase rate 4.87 % 4.88 % 4.91 % 3.75 % 4.25 % 4.50 % Plan Assets Our investment policies in the U.S. and U.K. provide for the rebalancing of assets to maintain our long-term strategic asset allocation. We are committed to its long-term strategy and do not attempt to time the market given empirical evidence that asset allocation is more critical than individual asset or investment manager selection. Rebalancing of the assets has and continues to occur. The rebalancing is critical to having the proper weighting of assets to achieve the expected total portfolio returns. We believe that our portfolio is highly diversified and does not have any significant exposure to concentration risk. The plan assets for our defined benefit pension plans do not include any of our common stock. U.S. Plan Assets For the U.S. qualified pension plans, our assumption for the expected return on assets was 7.5 percent in 2016 . Projected returns are based primarily on broad, publicly traded equity and fixed income indices and forward-looking estimates of active portfolio and investment management. We expect additional positive returns from this active investment management. Based on the historical returns and forward-looking return expectations in a rising interest rate environment, we have elected to reduce our assumption to 7.25 percent in 2017 . The primary investment objective is to exceed, on a net-of-fee basis, the rate of return of a policy portfolio comprised of the following: Asset Class Target Range U.S. equities 13.0 % +/-5.0% Non-U.S. equities 5.0 % +/-3.0% Global equities 6.0 % +/-3.0% Total equities 24.0 % Real estate 7.5 % +2.5/-7.5% Private equity/venture capital 7.5 % +2.5/-7.5% Opportunistic credit 4.0 % +6.0/-4.0% Fixed income 57.0 % +/-5.0% Total 100.0 % The fixed income component is structured to represent a custom bond benchmark that will closely hedge the change in the value of our liabilities. This component is structured in such a way that its benchmark covers approximately 100 percent of the plan's exposure to changes in its discount rate (AA corporate bond yields). In order to achieve a hedge on more than the targeted 57 percent of plan assets invested in fixed income securities, our Benefits Policy Committee (BPC) permits the fixed income managers, other managers or the custodian/trustee to utilize derivative securities, as part of a liability driven investment strategy to further reduce the plan's risk of declining interest rates. However, all managers hired to manage assets for the trust are prohibited from using leverage unless specifically discussed with the BPC and approved in their guidelines. U.K. Plan Assets For the U.K. qualified pension plans, our assumption for the expected return on assets was 4.7 percent in 2016 . The methodology used to determine the rate of return on pension plan assets in the U.K. was based on establishing an equity-risk premium over current long-term bond yields adjusted based on target asset allocations. Our strategy with respect to our investments in these assets is to be invested in a suitable mixture of return-seeking assets such as equities and real estate and liability matching assets such as bonds with a long-term outlook. Therefore, the risk and return balance of our U.K. asset portfolio should reflect a long-term horizon. To achieve these objectives we have established the following targets: Asset Class Target Global equities 23.0 % Real estate 5.0 % Re-insurance 8.0 % Corporate credit instruments 7.5 % Fixed income 56.5 % Total 100.0 % As part of our strategy in the U.K. we have not prohibited the use of any financial instrument, including derivatives. Based on the above discussion, we have elected an assumption of 4.5 percent in 2017 . Fair Value of U.S. Plan Assets The fair values of U.S. pension plan assets by asset category were as follows: Fair Value Measurements at December 31, 2016 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ 145 $ — $ — $ 145 Non-U.S. 125 — — 125 Fixed income Government debt — 570 — 570 Corporate debt U.S. — 497 — 497 Non-U.S. — 84 — 84 Asset/mortgaged backed securities — 58 — 58 Net cash equivalents (1) 18 20 — 38 Derivative instruments (2) — 9 — 9 Private equity and real estate (3) — — 212 212 Net plan assets subject to leveling $ 288 $ 1,238 $ 212 $ 1,738 Pending trade/purchases/sales (83 ) Accruals (4) 12 Investments measured at net asset value 1,084 Net plan assets $ 2,751 Fair Value Measurements at December 31, 2015 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ 96 $ — $ — $ 96 Non-U.S. 130 — — 130 Fixed income Government debt — 533 — 533 Corporate debt U.S. — 406 — 406 Non-U.S. — 80 — 80 Asset/mortgaged backed securities — 56 — 56 Net cash equivalents (1) 42 10 — 52 Derivative instruments (2) — 3 — 3 Private equity and real estate (3) — — 203 203 Net plan assets subject to leveling $ 268 $ 1,088 $ 203 $ 1,559 Pending trade/purchases/sales (27 ) Accruals (4) 10 Investments measured at net asset value 1,094 Net plan assets $ 2,636 ____________________________________________________ (1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. (2) Derivative instruments include interest rate swaps and credit default swaps. (3) The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. (4) Accruals include interest or dividends that were not settled at December 31. Certain of our assets are valued based on their respective net asset value (NAV) (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows: • U.S. and Non-U.S. Equities ( $511 million and $335 million at December 31, 2016 and 2015 , respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days. • Government Debt ( $178 million and $287 million at December 31, 2016 and 2015 , respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days. • U.S. and Non-U.S. Corporate Debt ( $265 million and $346 million at December 31, 2016 and 2015 , respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days. • Real Estate ( $129 million and $119 million at December 31, 2016 and 2015 , respectively) - This asset type represents different types of real estate including development property, industrial property, individual mortgages, office property, property investment companies, and retail property. These funds are valued using NAVs and allow quarterly or more frequent redemptions. • Asset/Mortgage Backed Securities ( $1 million and $7 million at December 31, 2016 and 2015 , respectively) - This asset type represents investments in fixed- and floating-rate loans. These funds are valued using NAVs and allow quarterly or more frequent redemptions. The reconciliation of Level 3 assets was as follows: Fair Value Measurements In millions Private Equity Real Estate Total Balance at December 31, 2014 $ 148 $ 54 $ 202 Actual return on plan assets Unrealized gains on assets still held at the reporting date 17 8 25 Purchases, sales and settlements, net (22 ) (2 ) (24 ) Balance at December 31, 2015 143 60 203 Actual return on plan assets Unrealized gains on assets still held at the reporting date 6 6 12 Purchases, sales and settlements, net (1 ) (2 ) (3 ) Balance at December 31, 2016 $ 148 $ 64 $ 212 Fair Value of U.K. Plan Assets In July 2012, the U.K. pension plan purchased an insurance contract that will guarantee payment of specified pension liabilities. The contract defers payment for 10 years and is included in the table below in Level 3 for years ended December 31, 2016 and 2015 at a value of $439 million and $445 million , respectively. The fair values of U.K. pension plan assets by asset category were as follows: Fair Value Measurements at December 31, 2016 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ — $ 174 $ — $ 174 Non-U.S. — 193 — 193 Fixed income Net cash equivalents (1) 24 — — 24 Private equity, real estate and insurance (2) — — 613 613 Net plan assets subject to leveling $ 24 $ 367 $ 613 $ 1,004 Investments measured at net asset value 749 Net plan assets $ 1,753 Fair Value Measurements at December 31, 2015 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ — $ 250 $ — $ 250 Non-U.S. — 269 — 269 Fixed income Corporate debt non-U.S. — 45 — 45 Net cash equivalents (1) 33 — — 33 Private equity, real estate and insurance (2) — — 601 601 Net plan assets subject to leveling $ 33 $ 564 $ 601 $ 1,198 Investments measured at net asset value 514 Net plan assets $ 1,712 _____________________________________________________ (1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. (2) The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. Certain of our assets are valued based on their respective NAV (or its equivalent), as an alternative to estimated fair value due to the absence of readily available market prices. The fair value of each such investment category was as follows: • U.S. and Non-U.S. Corporate Debt ( $655 million and $458 million at December 31, 2016 and 2015 , respectively) - These commingled funds have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days. • Re-insurance ( $56 million and $56 million at December 31, 2016 and 2015 , respectively) - This commingled fund has a NAVs that is determined on a monthly basis and the investment may be sold at that value. • Managed Futures Funds ( $38 million and $0 million at December 31, 2016 and 2015 , respectively) - These commingled funds invest in commodities, fixed income and equity securities. They have observable NAVs provided to investors and provide for liquidity either immediately or within a couple of days. The reconciliation of Level 3 assets was as follows: Fair Value Measurements In millions Insurance Real Estate Private Equity Total Balance at December 31, 2014 $ 462 $ 61 $ 81 $ 604 Actual return on plan assets Unrealized gains on assets still held at the reporting date 6 7 10 23 Purchases, sales and settlements, net (23 ) (11 ) 8 (26 ) Balance at December 31, 2015 445 57 99 601 Actual return on plan assets Unrealized (losses) gains on assets still held at the reporting date (6 ) (7 ) 15 2 Purchases, sales and settlements, net — 7 3 10 Balance at December 31, 2016 $ 439 $ 57 $ 117 $ 613 Level 3 Assets The investments in an insurance contract, venture capital, private equity, opportunistic credit and real estate funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by quarterly financial statements of the funds. These financial statements are audited at least annually. In conjunction with our investment consultant, we monitor the fair value of the insurance contract as periodically reported by our insurer and their counterparty risk. The fair value of all real estate properties, held in the partnerships, are valued at least once per year by an independent professional real estate valuation firm. Fair value generally represents the fund's proportionate share of the net assets of the investment partnerships as reported by the general partners of the underlying partnerships. Some securities with no readily available market are initially valued at cost, utilizing independent professional valuation firms as well as market comparisons with subsequent adjustments to values which reflect either the basis of meaningful third-party transactions in the private market or the fair value deemed appropriate by the general partners of the underlying investment partnerships. In such instances, consideration is also given to the financial condition and operating results of the issuer, the amount that the investment partnerships can reasonably expect to realize upon the sale of the securities and any other factors deemed relevant. The estimated fair values are subject to uncertainty and therefore may differ from the values that would have been used had a ready market for such investments existed and such differences could be material. Estimated Future Contributions and Benefit Payments We plan to contribute approximately $134 million to our defined benefit pension plans in 2017 . The table below presents expected future benefit payments under our pension plans: Qualified and Non-Qualified Pension Plans In millions 2017 2018 2019 2020 2021 2022 - 2026 Expected benefit payments $ 241 $ 237 $ 243 $ 249 $ 254 $ 1,322 Other Pension Plans We also sponsor defined contribution plans for certain hourly and salaried employees. Our contributions to these plans were $68 million , $74 million and $73 million for the years ended December 31, 2016 , 2015 and 2014 . Other Postretirement Benefits Our other postretirement benefit plans provide various health care and life insurance benefits to eligible employees, who retire and satisfy certain age and service requirements, and their dependents. The plans are contributory and contain cost-sharing features such as caps, deductibles, coinsurance and spousal contributions. Employer contributions are limited by formulas in each plan. Retiree contributions for health care benefits are adjusted annually, and we reserve the right to change benefits covered under these plans. There were no plan assets for the postretirement benefit plans as our policy is to fund benefits and expenses for these plans as claims and premiums are incurred. Obligations and Funded Status Benefit obligation balances presented below reflect the accumulated postretirement benefit obligations (APBO) for our other postretirement benefit plans. The changes in the benefit obligations, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant other postretirement benefit plans were as follows: Years ended December 31, In millions 2016 2015 Change in benefit obligation Benefit obligation at the beginning of the year $ 385 $ 408 Interest cost 16 15 Plan participants' contributions 14 10 Actuarial loss 9 5 Benefits paid directly by employer (60 ) (53 ) Benefit obligation at end of year $ 364 $ 385 Funded status at end of year $ (364 ) $ (385 ) Amounts recognized in consolidated balance sheets Accrued compensation, benefits and retirement costs - current liabilities $ (35 ) $ (36 ) Postretirement benefits other than pensions-long-term liabilities (329 ) (349 ) Net amount recognized $ (364 ) $ (385 ) Amounts recognized in accumulated other comprehensive loss: Net actuarial loss $ 69 $ 66 Prior service credit (5 ) (5 ) Net amount recognized $ 64 $ 61 In addition to the other postretirement plans in the above table, we also maintain less significant postretirement plans in four other countries outside the U.S. that comprise approximately 5 percent and 3 percent of our postretirement obligations at December 31, 2016 and 2015 , respectively. These plans are reflected in "Other liabilities and deferred revenue" in our Consolidated Balance Sheets . Components of Net Periodic Other Postretirement Benefits Cost The following table presents the net periodic other postretirement benefits cost under our plans: Years ended December 31, In millions 2016 2015 2014 Interest cost $ 16 $ 15 $ 17 Recognized net actuarial loss 5 5 — Net periodic other postretirement benefit cost $ 21 $ 20 $ 17 Other changes in benefit obligations recognized in other comprehensive income for the years ended December 31 were as follows: Years ended December 31, In millions 2016 2015 2014 Recognized net actuarial loss $ (6 ) $ (5 ) $ — Incurred actuarial loss 9 6 38 Total recognized in other comprehensive income $ 3 $ 1 $ 38 Total recognized in net periodic other postretirement benefit cost and other comprehensive income $ 24 $ 21 $ 55 The amount in accumulated other comprehensive loss expected to be recognized as a component of net periodic other postretirement benefit cost during the next fiscal year is $7 million . Assumptions The table below presents assumptions used in determining the other postretirement benefit obligation for each year and reflects weighted-average percentages for our other postretirement plans as follows: 2016 2015 Discount rate 4.00 % 4.35 % The table below presents assumptions used in determining the net periodic other postretirement benefits cost and reflects weighted-average percentages for the various plans as follows: 2016 2015 2014 Discount rate 4.35 % 3.90 % 4.55 % Our consolidated other postretirement benefit obligation is determined by application of the terms of health care and life insurance plans, together with relevant actuarial assumptions and health care cost trend rates. For measurement purposes, a 7.63 percent annual rate of increase in the per capita cost of covered health care benefits was assumed in 2016 . The rate is assumed to decrease on a linear basis to 5.00 percent through 2024 and remain at that level thereafter. An increase in the health care cost trends of 1 percent would increase our APBO by $19 million at December 31, 2016 and the net periodic other postretirement benefit cost for 2017 by $1 million . A decrease in the health care cost trends of 1 percent would decrease our APBO by $16 million at December 31, 2016 and the net periodic other postretirement benefit cost for 2017 by $1 million . Estimated Benefit Payments The table below presents expected benefit payments under our other postretirement benefit plans: In millions 2017 2018 2019 2020 2021 2022 - 2026 Expected benefit payments $ 35 $ 33 $ 32 $ 30 $ 29 $ 126 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 9. DEBT Loans Payable and Commercial Paper Loans payable at December 31, 2016 and 2015 were $41 million and $24 million , respectively, and consisted primarily of notes payable to financial institutions. The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December 31 was as follows: 2016 2015 2014 Weighted average interest rate 4.20 % 3.65 % 3.70 % In February 2016, the Board of Directors authorized the issuance of up to $1.75 billion of unsecured short-term promissory notes ("commercial paper") pursuant to a commercial paper program. The program will facilitate the private placement of unsecured short-term debt through third party brokers. We intend to use the net proceeds from the commercial paper program for general corporate purposes. We had $212 million in outstanding borrowings under our commercial paper program at December 31, 2016, with a weighted-average interest rate of 0.79 percent . Interest For the years ended December 31, 2016 , 2015 and 2014 , total interest incurred was $75 million , $68 million and $71 million , respectively, and interest capitalized was $6 million , $3 million and $7 million , respectively. Revolving Credit Facility On November 13, 2015, we entered into an amended and restated five -year revolving credit agreement with a syndicate of lenders. The credit agreement provides us with a $1.75 billion senior unsecured revolving credit facility, the proceeds of which are to be used for working capital or other general corporate purposes. Amounts payable under our revolving credit facility will rank pro rata with all of our unsecured, unsubordinated indebtedness. Up to $300 million under our credit facility is available for swingline loans. Advances under the facility bear interest at (i) a base rate or (ii) a rate equal to the LIBOR rate plus an applicable margin based on the credit ratings of our outstanding senior unsecured long-term debt. Based on our current long-term debt ratings, the applicable margin on LIBOR rate loans was 0.75 percent per annum at December 31, 2016 . Advances under the facility may be prepaid without premium or penalty, subject to customary breakage costs. The credit agreement includes various covenants, including, among others, maintaining a leverage ratio of no more than 3.5 to 1.0. At December 31, 2016 , we were in compliance with the covenants. There were no outstanding borrowings under this facility at December 31, 2016 . The revolving credit facility is maintained primarily to provide backup liquidity for our commercial paper borrowings and general corporate purposes. At December 31, 2016 , we had $212 million of commercial paper outstanding, which effectively reduced the $1.75 billion available capacity under our revolving credit facility to $1.54 billion . At December 31, 2016 , we also had $128 million available for borrowings under our international and other domestic credit facilities, net of outstanding letters of credit of $27 million . Long-term Debt December 31, In millions 2016 2015 Long-term debt Senior notes, 3.65%, due 2023 $ 500 $ 500 Debentures, 6.75%, due 2027 58 58 Debentures, 7.125%, due 2028 250 250 Senior notes, 4.875%, due 2043 500 500 Debentures, 5.65%, due 2098 (effective interest rate 7.48%) 165 165 Other debt 51 55 Unamortized discount (56 ) (57 ) Fair value adjustments due to hedge on indebtedness 47 63 Capital leases 88 81 Total long-term debt 1,603 1,615 Less: Current maturities of long-term debt 35 39 Long-term debt $ 1,568 $ 1,576 Principal payments required on long-term debt during the next five years are as follows: In millions 2017 2018 2019 2020 2021 Principal payments $ 35 $ 33 $ 29 $ 8 $ 4 As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the Securities and Exchange Commission on February 16, 2016. Under this shelf registration we may offer, from time to time, debt securities, common stock, preferred and preference stock, depositary shares, warrants, stock purchase contracts and stock purchase units. In September 2013, we issued $1 billion aggregate principal amount of senior notes consisting of $500 million aggregate principal amount of 3.65% senior unsecured notes due in 2023 and $500 million aggregate principal amount of 4.875% senior unsecured notes due in 2043. The senior notes pay interest semi-annually on April 1 and October 1. Interest on the 6.75% debentures is payable on February 15 and August 15 each year. Interest on the $250 million 7.125% debentures and $165 million 5.65% debentures is payable on March 1 and September 1 of each year. The debentures are unsecured and are not subject to any sinking fund requirements. We can redeem the 7.125% debentures and the 5.65% debentures at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture holders are not penalized by the early redemption. Our debt agreements contain several restrictive covenants. The most restrictive of these covenants applies to our revolving credit facility which will upon default, among other things, limit our ability to incur additional debt or issue preferred stock, enter into sale-leaseback transactions, sell or create liens on our assets, make investments and merge or consolidate with any other entity. In addition, we are subject to a maximum debt-to-EBITDA ratio financial covenant. At December 31, 2016 , we were in compliance with all of the covenants under our borrowing agreements. Interest Rate Risk We are exposed to market risk from fluctuations in interest rates. We manage our exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk. In February 2014, we settled our November 2005 interest rate swap which previously converted our $250 million debt issue, due in 2028, from a fixed rate to a floating rate based on the LIBOR spread. We are amortizing the $52 million gain realized upon settlement over the remaining 14 -year term of related debt. Also, in February 2014, we entered into a series of interest rate swaps to effectively convert our September 2013, $500 million debt issue, due in 2023, from a fixed rate of 3.65 percent to a floating rate equal to the one-month LIBOR plus a spread. The terms of the swaps mirror those of the debt, with interest paid semi-annually. The swaps were designated, and will be accounted for, as fair value hedges under GAAP. The gain or loss on these derivative instruments, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in current income as “Interest expense.” The net swap settlements that accrue each period are also reported in interest expense. The following table summarizes these gains and losses for the years presented below: Years ended December 31, In millions 2016 2015 2014 Income Statement Classification Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Gain/(Loss) on Interest expense (1) $ (8 ) $ 12 $ 6 $ (2 ) $ 23 $ (19 ) ___________________________________________ (1) The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. 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: December 31, In millions 2016 2015 Fair value of total debt (1) $ 2,077 $ 1,821 Carrying value of total debt 1,856 1,639 ___________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 12 Months Ended |
Dec. 31, 2016 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 10. 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: December 31, In millions 2016 2015 Balance, beginning of year $ 1,404 $ 1,283 Provision for warranties issued 334 391 Deferred revenue on extended warranty contracts sold 231 290 Payments (385 ) (389 ) Amortization of deferred revenue on extended warranty contracts (201 ) (179 ) Changes in estimates for pre-existing warranties 44 20 Foreign currency translation (13 ) (12 ) Balance, end of year $ 1,414 $ 1,404 Warranty related deferred revenue and the long-term portion of the warranty liability on our Consolidated Balance Sheets were as follows: December 31, In millions 2016 2015 Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 218 $ 189 Current portion of deferred revenue Long-term portion 527 529 Other liabilities and deferred revenue Total $ 745 $ 718 Long-term portion of warranty liability $ 336 $ 327 Other liabilities and deferred revenue |
OTHER LIABILITIES AND DEFERRED
OTHER LIABILITIES AND DEFERRED REVENUE | 12 Months Ended |
Dec. 31, 2016 | |
OTHER LIABILITIES AND DEFERRED REVENUE | |
OTHER LIABILITIES AND DEFERRED REVENUE | NOTE 11. OTHER LIABILITIES AND DEFERRED REVENUE Other liabilities and deferred revenue included the following: December 31, In millions 2016 2015 Deferred revenue $ 589 $ 583 Accrued warranty 336 327 Accrued compensation 151 199 Other long-term liabilities 213 249 Other liabilities and deferred revenue $ 1,289 $ 1,358 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12. COMMITMENTS AND CONTINGENCIES We are subject to numerous lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; personal injury; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We also have been identified as a potentially responsible party at multiple waste disposal sites under U.S. federal and related state environmental statutes and regulations and may have joint and several liability for any investigation and remediation costs incurred with respect to such sites. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals pursuant to GAAP for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows. We conduct significant business operations in Brazil that are subject to the Brazilian federal, state and local labor, social security, tax and customs laws. While we believe we comply with such laws, they are complex, subject to varying interpretations and we are often engaged in litigation regarding the application of these laws to particular circumstances. Loss Contingency Charges Engine systems sold in the U.S. must be certified to comply with the Environmental Protection Agency (EPA) and California Air Resources Board (CARB) emission standards. EPA and CARB regulations require that in-use testing be performed on vehicles by the emission certificate holder and reported to the EPA and CARB in order to ensure ongoing compliance with these emission standards. We are the holder of this emission certificate for our engines, including engines installed in certain vehicles with one customer on which we did not also manufacture or sell the emission aftertreatment system. During 2015, a quality issue in certain of these third party aftertreatment systems caused some of our inter-related engines to fail in-use emission testing. In the fourth quarter of 2015, the vehicle manufacturer made a request that we assist in the design and bear the financial cost of a field campaign (Campaign) to address the technical issue purportedly causing some vehicles to fail the in-use testing. While we are not responsible for the warranty issues related to a component that we did not manufacture or sell, as the emission compliance certificate holder, we are responsible for proposing a remedy to the EPA and CARB. As a result, we have proposed actions to the agencies that we believe will address the emission failures. As the certificate holder, we expect to participate in the cost of the proposed voluntary Campaign and recorded a charge of $60 million in 2015. The Campaign design was finalized with our OEM customer, reviewed with the EPA and submitted for final approval in 2016. We concluded based upon additional in-use emission testing performed in 2016, that the Campaign should be expanded to include a larger population of vehicles manufactured by this one OEM. We recorded additional charges of $138 million in 2016 to reflect the estimated cost of our participation in the Campaign. We continue to work with our OEM customer to resolve the allocation of costs for the Campaign, including pending litigation between the parties. The Campaign is not expected to be completed for some time and our final cost could differ from the amount we have recorded. We do not currently expect any fines or penalties from the EPA or CARB related to this matter. Consolidated Balance Sheets. Guarantees and Commitments From time to time we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At December 31, 2016, the maximum potential loss related to these guarantees was $24 million . We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At December 31, 2016, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $90 million , of which $47 million relates to a contract with a components supplier that extends to 2018. Most of these arrangements enable us to secure critical components. We do not currently anticipate paying any penalties under these contracts. We enter into physical forward contracts with suppliers of platinum, palladium and copper to purchase minimum volumes of the commodities at contractually stated prices for various periods, not to exceed two years. At December 31, 2016, the total commitments under these contracts were $45 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 $85 million at December 31, 2016 . Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include: • product liability and license, patent or trademark indemnifications; • asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and • any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract. We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications. Leases We lease certain manufacturing equipment, facilities, warehouses, office space and equipment, aircraft and automobiles for varying periods under lease agreements. Most of the leases are non-cancelable operating leases with fixed rental payments, expire over the next 10 years and contain renewal provisions. Rent expense under these leases was as follows: Years ended December 31, In millions 2016 2015 2014 Rent expense $ 210 $ 205 $ 195 The following is a summary of the leased property under capital leases by major classes: December 31, In millions 2016 2015 Building $ 113 $ 113 Equipment 109 86 Land 15 15 Less: Accumulated depreciation (133 ) (112 ) Total $ 104 $ 102 Following is a summary of the future minimum lease payments due under capital and operating leases, including leases in our rental business, with terms of more than one year at December 31, 2016 , together with the net present value of the minimum payments due under capital leases: In millions Capital Leases Operating Leases 2017 $ 25 $ 141 2018 22 101 2019 19 81 2020 7 59 2021 6 44 After 2021 39 93 Total minimum lease payments $ 118 $ 519 Interest (30 ) Present value of net minimum lease payments $ 88 In addition, we have subleased certain facilities under operating leases to third parties. The future minimum lease payments due from lessees under those arrangements are less than $1 million per year for the next five years. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE 13. SHAREHOLDERS' EQUITY Preferred and Preference Stock We are authorized to issue one million shares each of zero par value preferred and preference stock with preferred shares being senior to preference shares. We can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2016 , there was no preferred or preference stock outstanding. Common Stock Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans were as follows: In millions Common Treasury Common Stock Balance at December 31, 2013 222.3 35.6 1.3 Shares acquired — 4.8 — Shares issued 0.1 (0.3 ) (0.2 ) Other shareholder transactions (0.1 ) — — Balance at December 31, 2014 222.3 40.1 1.1 Shares acquired — 7.2 — Shares issued 0.1 (0.1 ) (0.2 ) Balance at December 31, 2015 222.4 47.2 0.9 Shares acquired — 7.3 — Shares issued — (0.3 ) (0.2 ) Balance at December 31, 2016 222.4 54.2 0.7 Treasury Stock Shares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of shareholders' equity in our Consolidated Balance Sheets . Treasury shares may be reissued as part of our stock-based compensation programs. When shares are reissued, we use the weighted-average cost method for determining cost. The gains between the cost of the shares and the issuance price are added to additional paid-in-capital. The losses are deducted from additional paid-in capital to the extent of the gains. Thereafter, the losses are deducted from retained earnings. Treasury stock activity for the three-year period ended December 31, 2016 , consisting of shares issued and repurchased is presented in our Consolidated Statements of Changes in Equity . In December 2016, our Board of Directors authorized the acquisition of up to $1 billion of additional common stock upon completion of the 2015 repurchase plan. In November 2015, the Board of Directors authorized the acquisition of up to $1 billion of additional common stock upon completion of the 2014 repurchase program. In 2016 , we made the following purchases under the respective purchase programs: In millions (except per share amounts) For each quarter ended 2016 Shares Purchased Average Cost Per Share Total Cost of Repurchases Cash Paid for Shares Not Received Remaining Authorized Capacity (1) July 2014, $1 billion repurchase program April 3 2.7 $ 100.12 $ 274 $ — $ — November 2015, $1 billion repurchase program April 3 2.2 $ 105.50 $ 229 $ 100 $ 671 July 3 1.8 109.79 192 (100 ) 579 October 2 0.4 126.13 50 — 529 December 31 0.2 130.70 33 — 496 Subtotal 4.6 110.29 504 — Total 7.3 $ 106.48 $ 778 $ — ___________________________________________ (1) The remaining authorized capacity under the 2015 Plan was calculated based on the cost to purchase the shares but excludes commission expenses in accordance with the authorized Plan. In 2016, we entered into an accelerated share repurchase agreement with a third party financial institution to repurchase $500 million of our common stock under our previously announced share repurchase plans and received 4.7 million shares at an average purchase price of $105.50 per share. We repurchased $778 million and $900 million of our common stock in the years ended December 31, 2016 and 2015 , respectively. Quarterly Dividends Total dividends paid to common shareholders in 2016 , 2015 and 2014 were $676 million , $622 million and $512 million , respectively. Declaration and payment of dividends in the future depends upon our income and liquidity position, among other factors, and is subject to declaration by our Board of Directors, who meet quarterly to consider our dividend payment. We expect to fund dividend payments with cash from operations. In July 2016 , the Board of Directors authorized an increase to our quarterly dividend of 5.1 percent from $0.975 per share to $1.025 . In July 2015 , the Board of Directors authorized a 25 percent increase to our quarterly cash dividend on our common stock from $0.78 per share to $0.975 per share. In July 2014 , the Board of Directors approved a 25 percent increase to our quarterly dividend on our common stock from $0.625 per share to $0.78 per share. Cash dividends per share paid to common shareholders for the last three years were as follows: Quarterly Dividends 2016 2015 2014 First quarter $ 0.975 $ 0.78 $ 0.625 Second quarter 0.975 0.78 0.625 Third quarter 1.025 0.975 0.78 Fourth quarter 1.025 0.975 0.78 Total $ 4.00 $ 3.51 $ 2.81 Employee Benefits Trust In 1997, we established the Employee Benefits Trust (EBT) funded with common stock for use in meeting our future obligations under employee benefit and compensation plans. The primary sources of cash for the EBT are dividends received on unallocated shares of our common stock held by the EBT. The EBT may be used to fund matching contributions to employee accounts in the 401(k) Retirement Savings Plan (RSP) made in proportion to employee contributions under the terms of the RSP. In addition, we may direct the trustee to sell shares of the EBT on the open market to fund other non-qualified employee benefit plans. Matching contributions charged to income for the years ended December 31, 2016 , 2015 and 2014 were $23 million , $25 million and $24 million , respectively. |
OTHER COMPREHENSIVE INCOME (LOS
OTHER COMPREHENSIVE INCOME (LOSS) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS Following are the changes in accumulated other comprehensive income (loss) by component: In millions Change in pensions and other postretirement defined benefit plans Foreign currency translation adjustment Unrealized gain (loss) on marketable securities Unrealized gain (loss) on derivatives Total attributable to Cummins Inc. Noncontrolling interests Total Balance at December 31, 2013 $ (611 ) $ (179 ) $ 7 $ (1 ) $ (784 ) Other comprehensive income before reclassifications Before tax amount (196 ) (241 ) 2 2 (433 ) $ (7 ) $ (440 ) Tax benefit (expense) 92 14 (1 ) (1 ) 104 — 104 After tax amount (104 ) (227 ) 1 1 (329 ) (7 ) (336 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 46 — (9 ) (2 ) 35 (4 ) 31 Net current period other comprehensive income (loss) (58 ) (227 ) (8 ) (1 ) (294 ) $ (11 ) $ (305 ) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (81 ) (366 ) — 17 (430 ) $ (15 ) $ (445 ) Tax benefit (expense) 35 76 — (1 ) 110 — 110 After tax amount (46 ) (290 ) — 16 (320 ) (15 ) (335 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 61 — (1 ) (10 ) 50 — 50 Net current period other comprehensive income (loss) 15 (290 ) (1 ) 6 (270 ) $ (15 ) $ (285 ) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount (111 ) (469 ) 1 (38 ) (617 ) $ (17 ) $ (634 ) Tax benefit 44 38 — 6 88 — 88 After tax amount (67 ) (431 ) 1 (32 ) (529 ) (17 ) (546 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 36 — — 20 56 — 56 Net current period other comprehensive income (loss) (31 ) (431 ) 1 (12 ) (473 ) $ (17 ) $ (490 ) Balance at December 31, 2016 $ (685 ) $ (1,127 ) $ (1 ) $ (8 ) $ (1,821 ) _______________________________________________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. Following are the items reclassified out of accumulated other comprehensive (loss) income and the related tax effects: In millions Years ended December 31, (Gain)/Loss Components 2016 2015 2014 Statement of Income Location Change in pensions and other postretirement defined benefit plans Recognized actuarial loss $ 53 $ 87 $ 63 (1) Tax effect (17 ) (26 ) (17 ) Income tax expense Net change in pensions and other postretirement defined benefit plans 36 61 46 Realized gain on marketable securities — (1 ) (14 ) Other income (expense), net Tax effect — — 1 Income tax expense Net realized gain on marketable securities — (1 ) (13 ) Realized loss (gain) on derivatives Foreign currency forward contracts 27 (11 ) (5 ) Net sales Commodity swap contracts — — 2 Cost of sales Total before taxes 27 (11 ) (3 ) Tax effect (7 ) 1 1 Income tax expense Net realized loss (gain) on derivatives 20 (10 ) (2 ) Total reclassifications for the period $ 56 $ 50 $ 31 _______________________________________________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
STOCK INCENTIVE AND STOCK OPTIO
STOCK INCENTIVE AND STOCK OPTION PLANS | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK INCENTIVE AND STOCK OPTION PLANS | NOTE 15. STOCK INCENTIVE AND STOCK OPTION PLANS We have a shareholder approved stock incentive plan (the Plan) which allows for the granting of equity awards covering up to 3.5 million shares to executives, employees and non-employee directors. Awards available for grant under the Plan include, but are not limited to, stock options, stock appreciation rights, performance shares and other stock awards. Shares issued under the Plan may be newly issued shares or reissued treasury shares. Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant and a life of 10 years. Stock options granted have a three -year vesting period. The strike price may be higher than the fair value of the stock on the date of the grant, but cannot be lower. Compensation expense is recorded on a straight-line basis over the vesting period beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing model. Options granted to employees eligible for retirement under our retirement plan are fully expensed at the grant date. Stock options are also awarded through the Key Employee Stock Investment Plan (KESIP) which allows certain employees, other than officers, to purchase shares of common stock on an installment basis up to an established credit limit. For every even block of 100 KESIP shares purchased by the employee 50 stock options are granted. The options granted through the KESIP program are considered awards under the Plan and are vested immediately. Compensation expense for stock options granted through the KESIP program is recorded based on the fair value of each option grant using the Black-Scholes option pricing model. Performance shares are granted as target awards and are earned based on our return on equity (ROE) performance. A payout factor has been established ranging from 0 to 200 percent of the target award based on our actual ROE performance. Shares have a three -year performance period. The fair value of the award is equal to the average market price, adjusted for the present value of dividends over the vesting period, of our stock on the grant date. Compensation expense is recorded ratably over the period beginning on the grant date until the shares become unrestricted and is based on the amount of the award that is expected to be earned under the plan formula, adjusted each reporting period based on current information. Restricted common stock is awarded from time to time at no cost to certain employees. Participants are entitled to cash dividends and voting rights. Restrictions limit the sale or transfer of the shares during a defined period. Generally, one-third of the shares become vested and free from restrictions after two years and one-third of the shares issued become vested and free from restrictions each year thereafter on the anniversary of the grant date, provided the participant remains an employee. The fair value of the award is equal to the average market price of our stock on the grant date. Compensation expense is determined at the grant date and is recognized over the restriction period on a straight-line basis. Employee compensation expense (net of estimated forfeitures) related to our share-based plans for the years ended December 31, 2016, 2015 and 2014, was approximately $31 million , $22 million and $35 million , respectively. In addition, non-employee director share-based compensation expense for the years ended December 31, 2016 , 2015 and 2014 , was approximately $1 million , $2 million and $1 million , respectively. Shares granted to non-employee directors vest immediately and have no restrictions or performance conditions. The excess tax benefit associated with our employee share-based plans for the years ended December 31, 2016 , 2015 and 2014 , was $1 million , $1 million and $5 million , respectively. The total unrecognized compensation expense (net of estimated forfeitures) related to nonvested awards for our employee share-based plans was approximately $28 million at December 31, 2016 , and is expected to be recognized over a weighted-average period of less than two years . The tables below summarize the employee share-based activity in the Plan: Options Weighted-average Exercise Price Weighted-average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in millions) Balance at December 31, 2013 1,462,336 $ 95.35 Granted 350,630 148.98 Exercised (175,526 ) 82.06 Forfeited (10,716 ) 102.56 Balance at December 31, 2014 1,626,724 108.30 Granted 476,205 135.21 Exercised (53,545 ) 82.89 Forfeited (19,698 ) 135.89 Balance at December 31, 2015 2,029,686 115.02 Granted 984,430 109.24 Exercised (215,890 ) 87.27 Forfeited (63,462 ) 119.56 Balance at December 31, 2016 2,734,764 $ 115.02 7.12 $ 64 Exercisable, December 31, 2014 903,059 $ 92.18 6.05 $ 48 Exercisable, December 31, 2015 1,318,101 $ 100.55 5.73 $ 13 Exercisable, December 31, 2016 1,149,549 $ 104.19 4.81 $ 38 The weighted-average grant date fair value of options granted during the years ended December 31, 2016 , 2015 and 2014 , was $25.28 , $35.25 and $49.16 , respectively. The total intrinsic value of options exercised during the years ended December 31, 2016 , 2015 and 2014 , was approximately $9 million , $3 million and $12 million , respectively. The weighted-average grant date fair value of performance and restricted shares was as follows: Performance Shares Restricted Shares Nonvested Shares Weighted-average Shares Weighted-average Balance at December 31, 2013 475,913 $ 109.93 32,541 $ 81.49 Granted 206,031 130.38 — — Vested (207,093 ) 107.64 (21,266 ) 65.88 Forfeited (8,158 ) 121.18 — — Balance at December 31, 2014 466,693 119.78 11,275 110.94 Granted 133,975 128.48 — — Vested (112,901 ) 115.48 (7,021 ) 110.66 Forfeited (67,398 ) 118.71 — — Balance at December 31, 2015 420,369 123.88 4,254 111.40 Granted 169,150 98.26 8,089 117.69 Vested (115,680 ) 106.55 (2,502 ) 114.57 Forfeited (69,345 ) 110.52 — — Balance at December 31, 2016 404,494 $ 120.41 9,841 $ 115.76 The total vesting date fair value of performance shares vested during the years ended December 31, 2016 , 2015 and 2014 was $12 million , $11 million and $30 million , respectively. The total fair value of restricted shares vested was less than $1 million , $1 million and $3 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: 2016 2015 2014 Expected life (years) 5 5 5 Risk-free interest rate 1.34 % 1.41 % 1.80 % Expected volatility 30.96 % 33.06 % 41.17 % Dividend yield 2.10 % 1.69 % 1.61 % Expected life —The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding based upon our historical data. Risk-free interest rate —The risk-free interest rate assumption is based upon the observed U.S. treasury security rate appropriate for the expected life of our employee stock options. Expected volatility —The expected volatility assumption is based upon the weighted-average historical daily price changes of our common stock over the most recent period equal to the expected option life of the grant, adjusted for activity which is not expected to occur in the future. Dividend yield —The dividend yield assumption is based on our history and expectation of dividend payouts. |
NONCONTROLLING INTERESTS
NONCONTROLLING INTERESTS | 12 Months Ended |
Dec. 31, 2016 | |
Noncontrolling Interest [Abstract] | |
NONCONTROLLING INTERESTS | NOTE 16 . NONCONTROLLING INTERESTS Noncontrolling interests in the equity of consolidated subsidiaries were as follows: December 31, In millions 2016 2015 Cummins India Ltd. $ 285 $ 271 Wuxi Cummins Turbo Technologies Co. Ltd. (1) — 54 Other 14 19 Total $ 299 $ 344 ____________________________________________________ (1) In December 2016, we purchased the remaining interest in Wuxi Cummins Turbo Technologies Co. Ltd. See Note 18 , " ACQUISITIONS ," for additional information. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 17. EARNINGS PER SHARE We calculate basic earnings per share (EPS) of common stock by dividing net income attributable to Cummins Inc. by the weighted-average number of common shares outstanding for the period. The calculation of diluted EPS assumes the issuance of common stock for all potentially dilutive share equivalents outstanding. We exclude shares of common stock held in the EBT (see Note 13 , " SHAREHOLDERS' EQUITY ") from the calculation of the weighted-average common shares outstanding until those shares are distributed from the EBT to the RSP. Following are the computations for basic and diluted earnings per share: Years ended December 31, Dollars in millions, except per share amounts 2016 2015 2014 Net income attributable to Cummins Inc. $ 1,394 $ 1,399 $ 1,651 Weighted-average common shares outstanding Basic 169,038,410 178,037,581 182,637,568 Dilutive effect of stock compensation awards 298,206 369,247 441,727 Diluted 169,336,616 178,406,828 183,079,295 Earnings per common share attributable to Cummins Inc. Basic $ 8.25 $ 7.86 $ 9.04 Diluted 8.23 7.84 9.02 The weighted-average diluted common shares outstanding excludes the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share were as follows: Years ended December 31, 2016 2015 2014 Options excluded 1,091,799 866,262 165,840 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Acquisitions | NOTE 18. ACQUISITIONS In 2016, we completed the acquisition of the last two partially-owned North American distributors. The joint venture acquisitions for the years ended December 31, 2016, 2015 and 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) 2016 Wuxi Cummins Turbo Technologies Co. Ltd 12/05/16 45 % $ 86 $ — $ 86 EQUITY $ — $ — $ — $ — Cummins Pacific LLC (Pacific) 10/04/16 50 % 30 67 99 (4) COMB 15 4 8 391 Cummins Northeast LLC 01/01/16 35 % 12 — 12 EQUITY — — — — 2015 Cummins Crosspoint LLC 08/03/15 50% $ 29 $ 36 $ 65 COMB $ 10 $ 7 $ 2 $ 258 Cummins Atlantic LLC 08/03/15 51% 21 28 49 COMB 8 5 6 245 Cummins Central Power LLC 06/29/15 20.01% 8 — 8 EQUITY — — — — 2014 Cummins Bridgeway LLC 11/03/14 54% $ 32 $ 45 $ 77 COMB $ 13 $ 4 $ 15 $ 331 Cummins NPower LLC 09/29/14 50% 39 34 73 COMB 15 7 8 374 Cummins Power South LLC 09/29/14 50% 19 16 35 COMB 7 8 1 239 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 (Southern Plains) 03/31/14 50% 44 48 92 COMB 13 1 11 433 Cummins Mid-South LLC (Mid-South) 02/14/14 62.2% 57 61 118 COMB 7 4 8 368 ____________________________________________________ (1) All results from acquired entities were included in 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 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) 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 outstanding consideration at December 31, 2016, was $2 million . The final purchase price allocations for the large acquisitions in 2016 and 2014 were as follows: In millions Pacific Southern Plains Mid-South Accounts receivable $ 65 $ 63 $ 71 Inventory 35 59 70 Fixed assets 56 47 37 Intangible assets 8 11 8 Goodwill 4 1 4 Other current assets 10 8 10 Current liabilities (46 ) (53 ) (43 ) Other long-term liability — — (4 ) Total business valuation 132 136 153 Fair value of pre-existing interest (33 ) (44 ) (35 ) Total purchase consideration $ 99 $ 92 $ 118 North American distributor acquisitions excluded from the table were deemed immaterial individually and in the aggregate for additional disclosure. |
IMPAIRMENTS
IMPAIRMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Asset Impairment Charges [Abstract] | |
Asset Impairment Charges | NOTE 19. IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS We began development of a new North American light-duty diesel engine (LDD) platform in July of 2006 for use in a variety of on- and off-highway applications. Since that time, and as of December 31, 2015, we capitalized investments of approximately $279 million , with a net book value prior to the impairment of $246 million ( $235 million of which was in our Engine segment and $11 million of which was in our Components segment). Market uncertainty due to the global recession in 2008/2009 resulted in some customers delaying or canceling their vehicle programs, while others remained active. We announced an agreement with Nissan Motor Co. Ltd. in 2013 to supply our light-duty diesel engine and began commercial shipment in 2015. In the fourth quarter of 2015, we learned that we were not successful in our bid to supply this product for an additional customer. In addition, the recent deterioration in global economic conditions and excess manufacturing capacity in other markets made it unlikely that we would manufacture additional products on the LDD line to utilize its excess capacity during the asset recovery period. As a result, we concluded that the combination of these events presented a triggering event requiring an assessment of the recoverability of these assets in the fourth quarter of 2015. The assessment indicated that the projected undiscounted cash flows related to this asset group were not sufficient to recover its carrying value. Consequently, we were required to write down the LDD asset group to fair value. Our 2015 fourth quarter results included an impairment charge of $211 million ( $133 million after-tax), of which $202 million was in the Engine segment and $9 million was in the Components segment, to reflect the assets at fair value. We remain committed to servicing existing contracts and are not exiting this product line. The fair value of the asset group was estimated to be $35 million ( $33 million for the Engine segment and $2 million for the Components segment) at December 31, 2015 and was calculated primarily using a cost approach with consideration of a market approach where secondary market information was available for the type and age of these assets. In the application of the market approach, we determined that the liquidation value in-place reflected the best estimate of fair value. In the application of the cost approach we considered the current cost of replacing the assets with a reduction for physical deterioration given the age of the assets and a reduction for functional and economic obsolescence in the form of a discount reflecting the current and projected under-utilization of the assets. The fair value of these assets are considered Level 3 under the fair value hierarchy as they are either derived from unobservable inputs or have significant adjustments to the observable inputs. |
RESTRUCTURING AND OTHER CHARGES
RESTRUCTURING AND OTHER CHARGES | 12 Months Ended |
Dec. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring, Impairment, and Other Activities Disclosure | NOTE 20. RESTRUCTURING ACTIONS AND OTHER CHARGES We executed restructuring actions primarily in the form of professional voluntary and involuntary employee separation programs in the fourth quarter of 2015. These actions were in response to the continued deterioration in our global markets in the second half of 2015, as well as expected reductions in orders in most U.S. and global markets in 2016. We reduced our worldwide workforce by approximately 1,900 employees , including approximately 370 employees accepting voluntary retirement packages with the remainder of the reductions being involuntary. We incurred a charge of $90 million ( $61 million after-tax) in the fourth quarter of 2015, of which $86 million related to severance costs for both voluntary and involuntary terminations and $4 million for asset impairments and other charges. Employee termination and severance costs were recorded based on approved plans developed by the businesses and corporate management which specified positions to be eliminated, benefits to be paid under existing severance plans or statutory requirements and the expected timetable for completion of the plan. Estimates of restructuring costs and benefits were made based on information available at the time charges were recorded. Due to the inherent uncertainty involved, actual amounts paid for such activities may differ from amounts initially recorded and we may need to revise previous estimates. Restructuring actions and other charges were included in each segment in our operating results as follows: In millions (1) Year ended December 31, 2015 Power Systems $ 26 Distribution 23 Engine 17 Components 13 Corporate 11 Restructuring actions and other charges $ 90 ______________________________ (1) The charges by segment were revised in conjunction with our segment realignment in the second quarter of 2016. See Note 21 , " OPERATING SEGMENTS ," for additional information. At December 31, 2016 , substantially all terminations have been completed . The table below summarizes the activity and balance of accrued restructuring charges, which is included in "Other accrued expenses" in our Consolidated Balance Sheets : In millions Restructuring Accrual Workforce reductions $ 86 Cash payments (26 ) Balance at December 31, 2015 60 Cash payments (58 ) Change in estimate (1 ) Balance at December 31, 2016 $ 1 |
OPERATING SEGMENTS
OPERATING SEGMENTS | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 21. OPERATING SEGMENTS Operating segments under GAAP are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is the Chief Operating Officer. We use segment EBIT (defined as earnings before interest expense, income taxes and noncontrolling interests) as a primary basis for the CODM to evaluate the performance of each of our operating segments. Segment amounts exclude certain expenses not specifically identifiable to segments. As previously announced, beginning with the second quarter of 2016, we realigned certain of our reportable segments to be consistent with changes to our organizational structure and how the CODM monitors the performance of our segments. We reorganized our business to combine our Power Generation segment and our high-horsepower engine business to create the new Power Systems segment. Our reportable operating segments consist of Engine, Distribution, Components and Power Systems. We began to report results for our new reporting structure in the second quarter of 2016 and also reflected this change for historical periods. We allocate certain common costs and expenses, primarily corporate functions, among segments. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. In addition to the reorganization noted above, we reevaluated the allocation of these costs, considering the new segment structure created in April 2016 and adjusted our allocation methodology accordingly. The revised methodology, which is based on a combination of relative segment sales and relative service usage levels, is effective for the periods beginning after January 1, 2016 and resulted in the revision of our segment operating results, including segment EBIT, for all four segments for the first quarter of 2016 with a greater share of costs allocated to the Distribution and Components segments than in previous years. Prior periods were not revised for the new allocation methodology. These changes had no impact on our consolidated results. Our new reporting structure is organized according to the products and markets each segment serves . The Engine segment produces engines (15 liters and less in size) and associated parts for sale to customers in on-highway and various off-highway markets. Our engines are used in trucks of all sizes, buses and recreational vehicles, as well as in various industrial applications, including construction, agriculture, power generation systems and other off-highway applications. The Distribution segment includes wholly-owned and partially-owned distributorships engaged in wholesaling engines, generator sets and service parts, as well as performing service and repair activities on our products and maintaining relationships with various OEMs throughout the world. The Components segment sells filtration products, aftertreatment systems, turbochargers and fuel systems. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas and marine), standby and prime power generator sets, alternators and other power components. The accounting policies of our operating segments are the same as those applied in our Consolidated Financial Statements . We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. As noted above, we allocate certain common costs and expenses, primarily corporate functions, among segments. We do not allocate debt-related items, actuarial gains or losses, prior service costs or credits, changes in cash surrender value of corporate owned life insurance or income taxes to individual segments. Segment EBIT may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments at December 31, is shown in the table below: In millions Engine Distribution Components Power Systems Intersegment Eliminations Total 2016 External sales $ 5,774 $ 6,157 $ 3,514 $ 2,064 $ — $ 17,509 Intersegment sales 2,030 24 1,322 1,453 (4,829 ) — Total sales 7,804 6,181 4,836 3,517 (4,829 ) 17,509 Depreciation and amortization (1) 163 116 133 115 — 527 Research, development and engineering expenses 226 13 208 189 — 636 Equity, royalty and interest income from investees 148 70 41 42 — 301 Interest income 10 4 4 5 — 23 Loss contingency charges (2) 138 — — — — 138 Segment EBIT 686 392 (3) 641 263 (4) 17 1,999 Net assets 1,620 2,604 1,868 2,629 — 8,721 Investments and advances to equity investees 427 204 176 139 — 946 Capital expenditures 200 96 143 92 — 531 2015 External sales $ 6,733 $ 6,198 $ 3,745 $ 2,434 $ — $ 19,110 Intersegment sales 1,937 31 1,427 1,633 (5,028 ) — Total sales 8,670 6,229 5,172 4,067 (5,028 ) 19,110 Depreciation and amortization (1) 187 105 109 110 — 511 Research, development and engineering expenses 263 10 236 226 — 735 Equity, royalty and interest income from investees 146 78 35 56 — 315 Interest income 11 4 4 5 — 24 Loss contingency charge (2) 60 — — — — 60 Impairment of light-duty diesel assets (5) 202 — 9 — — 211 Restructuring actions and other charges (6) 17 23 13 26 11 90 Segment EBIT 636 412 (3) 727 335 (20 ) 2,090 Net assets 2,107 2,330 1,891 2,736 — 9,064 Investments and advances to equity investees 445 192 150 188 — 975 Capital expenditures 345 125 137 137 — 744 2014 External sales $ 7,462 $ 5,135 $ 3,791 $ 2,833 $ — $ 19,221 Intersegment sales 1,505 39 1,327 1,581 (4,452 ) — Total sales 8,967 5,174 5,118 4,414 (4,452 ) 19,221 Depreciation and amortization (1) 163 86 106 97 — 452 Research, development and engineering expenses 265 9 230 250 — 754 Equity, royalty and interest income from investees 118 148 36 68 — 370 Interest income 9 4 4 6 — 23 Segment EBIT 1,031 491 (3) 684 361 (7) (69 ) 2,498 Net assets 2,401 2,441 2,152 2,743 — 9,737 Investments and advances to equity investees 415 209 164 193 — 981 Capital expenditures 268 89 162 224 — 743 ____________________________________________________ (1) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs that are included in the Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million , $3 million and $3 million for the years ended December 31, 2016, 2015 and 2014, respectively. (2) See Note 12 , " COMMITMENTS AND CONTINGENCIES ," for additional information. (3) Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million , $18 million and $73 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. See Note 18 , " ACQUISITIONS ," for additional information. (4) Power Systems segment EBIT included a $17 million gain on the sale of an equity investee. (5) See Note 19 , " IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS ," for additional information. (6) See Note 20 , " RESTRUCTURING ACTIONS AND OTHER CHARGES ," for additional information. (7) Power Systems segment EBIT included $32 million of restructuring charges primarily related to the closure of a plant in Germany. A reconciliation of our segment information to the corresponding amounts in the Consolidated Statements of Income is shown in the table below: Years ended December 31, In millions 2016 2015 2014 Total segment EBIT $ 1,999 $ 2,090 $ 2,498 Less: Interest expense 69 65 64 Income before income taxes $ 1,930 $ 2,025 $ 2,434 December 31, In millions 2016 2015 2014 Net assets for operating segments $ 8,721 $ 9,064 $ 9,737 Liabilities deducted in arriving at net assets 6,152 5,920 6,009 Pension and other postretirement benefit adjustments excluded from net assets (284 ) (242 ) (319 ) Deferred tax assets not allocated to segments 420 390 314 Deferred debt costs not allocated to segments 2 2 23 Total assets $ 15,011 $ 15,134 $ 15,764 The tables below present certain segment information by geographic area. Net sales attributed to geographic areas were based on the location of the customer. In millions Years ended December 31, Net Sales 2016 2015 2014 United States $ 9,476 $ 10,757 $ 10,058 International 8,033 8,353 9,163 Total net sales $ 17,509 $ 19,110 $ 19,221 Long-lived assets include property, plant and equipment, net of depreciation, investments and advances to equity investees and other assets, excluding deferred tax assets, refundable taxes and deferred debt expenses. In millions December 31, Long-lived assets 2016 2015 2014 United States $ 3,092 $ 2,968 $ 2,949 China 652 668 692 India 475 450 391 United Kingdom 254 349 339 Netherlands 197 172 156 Brazil 149 124 161 Canada 132 133 126 Mexico 131 108 96 Other international countries 236 261 274 Total long-lived assets $ 5,318 $ 5,233 $ 5,184 Our largest customer is PACCAR Inc. Worldwide sales to this customer were $2,359 million in 2016 , $2,949 million in 2015 and $2,706 million in 2014 , representing 13 percent , 15 percent and 14 percent , respectively, of our consolidated net sales. No other customer accounted for more than 10 percent of consolidated net sales. |
QUARTERLY FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION DISCLOSURE (unaudited) | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
QUARTERLY FINANCIAL INFORMATION | SELECTED QUARTERLY FINANCIAL DATA UNAUDITED First Quarter Second Quarter Third Quarter Fourth Quarter In millions, except per share amounts 2016 Net sales $ 4,291 $ 4,528 $ 4,187 $ 4,503 Gross margin 1,056 1,197 1,079 1,120 Net income attributable to Cummins Inc. 321 406 (1) 289 (1) 378 Earnings per common share attributable to Cummins Inc.—basic (2) $ 1.87 $ 2.41 (1) $ 1.72 (1) $ 2.26 Earnings per common share attributable to Cummins Inc.—diluted (2) 1.87 2.40 (1) 1.72 (1) 2.25 Cash dividends per share 0.975 0.975 1.025 1.025 Stock price per share High $ 111.29 $ 120.00 $ 128.60 $ 147.10 Low 79.88 104.30 107.51 121.22 2015 Net sales $ 4,709 $ 5,015 $ 4,620 $ 4,766 Gross margin 1,195 1,332 1,208 1,212 Net income attributable to Cummins Inc. 387 471 380 161 (3) Earnings per common share attributable to Cummins Inc.—basic (2) $ 2.14 $ 2.63 $ 2.15 $ 0.92 (3) Earnings per common share attributable to Cummins Inc.—diluted (2) 2.14 2.62 2.14 0.92 (3) Cash dividends per share 0.78 0.78 0.975 0.975 Stock price per share High $ 148.04 $ 143.40 $ 132.96 $ 115.37 Low 133.50 133.36 108.27 84.99 ___________________________________________________ (1) The second quarter of 2016, included an additional $39 million loss contingency charge ( $24 million after-tax). The third quarter of 2016 included an additional $99 million loss contingency charge ( $50 million net of favorable compensation impact and after-tax). (2) Earnings per share in each quarter is computed using the weighted-average number of shares outstanding during that quarter while earnings per share for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters earnings per share may not equal the full year earnings per share. (3) The fourth quarter of 2015, included a $211 million impairment of light-duty diesel assets ( $133 million after-tax), a $90 million restructuring charge ( $61 million after-tax) and a $60 million charge for a loss contingency ( $38 million after-tax). At December 31, 2016 , there were approximately 3,536 holders of record of Cummins Inc.'s $2.50 par value common stock. |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation Our Consolidated Financial Statements include the accounts of all wholly-owned and majority-owned domestic and foreign subsidiaries where our ownership is more than 50 percent of outstanding equity interests except for majority-owned subsidiaries that are considered variable interest entities (VIEs) where we are not deemed to have a controlling financial interest. In addition, we also consolidate, regardless of our ownership percentage, VIEs for which we are deemed to have a controlling financial interest. Intercompany balances and transactions are eliminated in consolidation. Where our ownership interest is less than 100 percent, the noncontrolling ownership interests are reported in our Consolidated Balance Sheets . The noncontrolling ownership interest in our income, net of tax, is classified as "Net income attributable to noncontrolling interests" in our Consolidated Statements of Income . We have variable interests in several businesses accounted for under the equity method of accounting that are deemed to be VIEs and are subject to generally accepted accounting principles in the United States of America (GAAP) for variable interest entities. Most of these VIEs are unconsolidated. Reclassifications Certain amounts for 2015 and 2014 have been reclassified to conform to the current year presentation. |
Reclassification | Reclassifications Certain amounts for 2015 and 2014 have been reclassified to conform to the current year presentation. |
Investments in Equity Investees | Investments in Equity Investees We use the equity method to account for our investments in joint ventures, affiliated companies and alliances in which we have the ability to exercise significant influence, generally represented by equity ownership or partnership equity of at least 20 percent but not more than 50 percent . Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition. Investment amounts in excess of our share of an investee's net assets are amortized over the life of the related asset creating the excess. If the excess is goodwill, then it is not amortized. Equity in income or losses of each investee is recorded according to our level of ownership; if losses accumulate, we record our share of losses until our investment has been fully depleted. If our investment has been fully depleted, we recognize additional losses only when we are the primary funding source. We eliminate (to the extent of our ownership percentage) in our Consolidated Financial Statements the profit in inventory held by our equity method investees that has not yet been sold to a third-party. Our investments are classified as "Investments and advances related to equity method investees" in our Consolidated Balance Sheets. Our share of the results from joint ventures, affiliated companies and alliances is reported in our Consolidated Statements of Income as "Equity, royalty and interest income from investees," and is reported net of all applicable income taxes. Our foreign equity investees are presented net of applicable foreign income taxes in our Consolidated Statements of Income . Our remaining United States (U.S.) equity investees are partnerships (non-taxable), thus there is no difference between gross or net of tax presentation as the investees are not taxed. See NOTE 2 , " INVESTMENTS IN EQUITY INVESTEES ," for additional information. |
Use of Estimates in the Preparation of the Financial Statements | Use of Estimates in the Preparation of the Financial Statements Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Consolidated Financial Statements . Significant estimates and assumptions in these Consolidated Financial Statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, determination of discount rate and other assumptions for pension and other postretirement benefit costs, impairment charges, restructuring costs, income taxes and deferred tax valuation allowances, lease classification and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. |
Revenue Recognition | Revenue Recognition We recognize revenue, net of estimated costs of returns, allowances and sales incentives, when it is realized or realizable, which generally occurs when: • Persuasive evidence of an arrangement exists; • The product has been shipped and legal title and all risks of ownership have been transferred; • The sales price is fixed or determinable; and • Payment is reasonably assured. Products are generally sold on open account under credit terms customary to the geographic region of distribution. We perform ongoing credit evaluations of our customers and generally do not require collateral to secure our accounts receivable. For engines, service parts, service tools and other items sold to independent distributors and to partially-owned distributors accounted for under the equity method, revenues are recorded when title and risk of ownership transfers. This transfer is based on the agreement in effect with the respective distributor, which generally occurs when the products are shipped. To the extent of our ownership percentage, margins on sales to distributors accounted for under the equity method are deferred until the distributor sells the product to unrelated parties. We provide various sales incentives to both our distribution network and our OEM customers. These programs are designed to promote the sale of our product in the channel or encourage the usage of our products by OEM customers. Sales incentives primarily fall into three categories: • Volume rebates; • Market share rebates; and • Aftermarket rebates. For volume rebates, we provide certain customers with rebate opportunities for attaining specified volumes during a particular quarter or year. We accrue for the expected amount of these rebates at the time of the original sale and update our accruals quarterly based on our best estimate of the volume levels the customer will reach during the measurement period. For market share rebates, we provide certain customers with rebate opportunities based on the percentage of their production that utilizes our product. These rebates are typically measured either quarterly or annually and are accrued at the time of the original sale based on the current market shares, with adjustments made as the level changes. For aftermarket rebates, we provide incentives to promote sales to certain dealers and end-markets. These rebates are typically paid on a quarterly, or more frequent, basis and estimates are made at the end of each quarter as to the amount yet to be paid. These estimates are based on historical experience with the particular program. The incentives are classified as a reduction in sales in our Consolidated Statements of Income . We classify shipping and handling billed to customers as sales in our Consolidated Statements of Income . Substantially all shipping and handling costs are included in "Cost of sales." Rights of return do not exist for the majority of our sales, other than for quality issues. We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return small amounts of parts and filters each year and in our power systems business, which sells portable generators to retail customers. An estimate of future returns is accrued at the time of sale based on historical return rates. |
Foreign Currency Transactions and Translation | Foreign Currency Transactions and Translation We translate assets and liabilities of foreign entities to U.S. dollars, where the local currency is the functional currency, at year-end exchange rates. We translate income and expenses to U.S. dollars using weighted-average exchange rates for the year. We record adjustments resulting from translation in a separate component of accumulated other comprehensive loss (AOCL) and include the adjustments in net income only upon sale, loss of controlling financial interest or liquidation of the underlying foreign investment. Foreign currency transaction gains and losses are included in current net income. For foreign entities where the U.S. dollar is the functional currency, including those operating in highly inflationary economies when applicable, we remeasure non-monetary balances and the related income statement using historical exchange rates. We include in income the resulting gains and losses, including the effect of derivatives in our Consolidated Statements of Income , which combined with transaction gains and losses amounted to a net loss of $12 million , $18 million and $6 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. |
Fair Value Measurement, Policy | Fair Value Measurements A three-level valuation hierarchy, based upon the observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy: • Level 1 - Quoted prices for identical instruments in active markets; • Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose significant inputs are observable; and • Level 3 - Instruments whose significant inputs are unobservable . |
Derivative Instruments | Derivative Instruments We make use of derivative instruments in foreign exchange, commodity price and interest rate hedging programs. Derivatives currently in use are foreign currency forward contracts, commodity physical forward contracts and zero-cost collars and interest rate swaps. These contracts are used strictly for hedging and not for speculative purposes. We are exposed to market risk from fluctuations in interest rates. We manage our exposure to interest rate fluctuations through the use of interest rate swaps. The objective of the swaps is to more effectively balance our borrowing costs and interest rate risk. The gain or loss on these derivative instruments as well as the offsetting gain or loss on the hedged item are recognized in current income as "Interest expense." For more detail on our interest rate swaps see NOTE 9 , " DEBT ." Due to our international business presence, we are exposed to foreign currency exchange risk. We transact in foreign currencies and have assets and liabilities denominated in foreign currencies. Consequently, our income experiences some volatility related to movements in foreign currency exchange rates. In order to benefit from global diversification and after considering naturally offsetting currency positions, we enter into foreign currency forward contracts to minimize our existing exposures (recognized assets and liabilities) and hedge forecasted transactions. Foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges under GAAP. The effective portion of the unrealized gain or loss on the forward contract is deferred and reported as a component of AOCL. When the hedged forecasted transaction (sale or purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income. To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, we enter into foreign currency forward contracts, which are considered economic hedges. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract. These derivative instruments are not designated as hedges under GAAP. We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers. In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity physical forward contracts and zero-cost collar contracts with designated banks and other counterparties to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations. The physical forward contracts qualify for the normal purchases scope exceptions and are treated as purchase commitments. The commodity zero-cost collar contracts that represent an economic hedge, but are not designated for hedge accounting, are marked to market through earnings. |
Income Tax Accounting | Income Tax Accounting We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. A valuation allowance is recorded to reduce the tax assets to the net value management believes is more likely than not to be realized. In the event our operating performance deteriorates, future assessments could conclude that a larger valuation allowance will be needed to further reduce the deferred tax assets. In addition, we operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We have taken and we believe we have made adequate provision for income taxes for all years that are subject to audit based upon the latest information available. A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in NOTE 3 , " INCOME TAXES ." |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash equivalents are defined as short-term, highly liquid investments with an original maturity of 90 days or less at the time of purchase. The carrying amounts reflected in our Consolidated Balance Sheets for cash and cash equivalents approximate fair value due to the short-term maturity of these investments. Years ended December 31, In millions 2016 2015 2014 Cash payments for income taxes, net of refunds $ 430 $ 732 $ 659 Cash payments for interest, net of capitalized interest 68 65 65 |
Marketable Securities | Marketable Securities We account for marketable securities in accordance with GAAP for investments in debt and equity securities. We determine the appropriate classification of all marketable securities as "held-to-maturity," "available-for-sale" or "trading" at the time of purchase, and re-evaluate such classifications at each balance sheet date. At December 31, 2016 and 2015 , all of our investments were classified as available-for-sale. Available-for-sale (AFS) securities are carried at fair value with the unrealized gain or loss, net of tax, reported in other comprehensive income. Unrealized losses considered to be "other-than-temporary" are recognized currently in income. The cost of securities sold is based on the specific identification method. The fair value of most investment securities is determined by currently available market prices. Where quoted market prices are not available, we use the market price of similar types of securities that are traded in the market to estimate fair value. See NOTE 4 , " MARKETABLE SECURITIES ," for a detailed description of our investments in marketable securities. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount, which approximates net realizable value, and generally do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on our historical collection experience and by performing an analysis of our accounts receivable in light of the current economic environment. We review our allowance for doubtful accounts on a regular basis. In addition, when necessary, we provide an allowance for the full amount of specific accounts deemed to be uncollectible. Account balances are charged off against the allowance in the period in which we determine that it is probable the receivable will not be recovered. The allowance for doubtful accounts balances for the years ended December 31, 2016 and 2015 were $16 million and $15 million , respectively. |
Inventories | Inventories Our inventories are stated at the lower of cost or market. For the years ended December 31, 2016 and 2015 , approximately 13 percent and 13 percent , respectively, of our consolidated inventories (primarily heavy-duty and high-horsepower engines and parts) were valued using the last-in, first-out (LIFO) cost method. The cost of other inventories is generally valued using the first-in, first-out (FIFO) cost method. Our inventories at interim and year-end reporting dates include estimates for adjustments related to annual physical inventory results and for inventory cost changes under the LIFO cost method. Due to significant movements of partially-manufactured components and parts between manufacturing plants, we do not internally measure, nor do our accounting systems provide, a meaningful segregation between raw materials and work-in-process. See NOTE 5 , " INVENTORIES ," for additional information. |
Property, Plant and Equipment | Property, Plant and Equipment We record property, plant and equipment, inclusive of assets under capital leases, at cost. We depreciate the cost of the majority of our equipment using the straight-line method with depreciable lives ranging from 20 to 40 years for buildings and 3 to 20 years for machinery, equipment and fixtures. Capital lease amortization is recorded in depreciation expense. We expense normal maintenance and repair costs as incurred. Depreciation expense totaled $434 million , $419 million and $351 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. See NOTE 6 , " PROPERTY, PLANT AND EQUIPMENT ," for additional information. |
Long-Lived Assets | Impairment of Long-Lived Assets We review our long-lived assets for possible impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We assess the recoverability of the carrying value of the long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment of a long-lived asset or asset group exists when the expected future pre-tax cash flows (undiscounted and without interest charges) estimated to be generated by the asset or asset group is less than its carrying value. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is measured based on the difference between the estimated fair value and carrying value of the asset or asset group. Assumptions and estimates used to estimate cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge. See NOTE 19 , " IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS ," for additional information. |
Goodwill | Goodwill Under GAAP for goodwill, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual two-step goodwill impairment test. We have elected this option on certain reporting units. The two-step impairment test is now only required if an entity determines through this qualitative analysis that it is more likely than not that the fair value of the reporting unit is less than its carrying value. In addition, the carrying value of goodwill must be tested for impairment on an interim basis in certain circumstances where impairment may be indicated. When we are required or opt to perform the two-step impairment test, the fair value of each reporting unit is estimated by discounting the after tax future cash flows less requirements for working capital and fixed asset additions. Our reporting units are generally defined as one level below an operating segment. However, there are two situations where we have aggregated two or more reporting units which share similar economic characteristics and thus are aggregated into a single reporting unit for testing purposes. These two situations are described further below: • Within our Components segment, our emission solutions and filtration businesses have been aggregated into a single reporting unit. • Our Distribution segment is considered a single reporting unit as it is managed geographically and all regions share similar economic characteristics and provide similar products and services. Goodwill in other reporting units is immaterial for separate disclosure. Our valuation method requires us to make projections of revenue, operating expenses, working capital investment and fixed asset additions for the reporting units over a multi-year period. Additionally, management must estimate a weighted-average cost of capital, which reflects a market rate, for each reporting unit for use as a discount rate. The discounted cash flows are compared to the carrying value of the reporting unit and, if less than the carrying value, a separate valuation of the goodwill is required to determine if an impairment loss has occurred. In addition, we also perform a sensitivity analysis to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount. We performed the required procedures as of the end of our fiscal third quarter and determined that our goodwill was not impaired. At December 31, 2016 , our recorded goodwill was $480 million , approximately 79 percent of which resided in the aggregated emission solutions and filtration reporting unit. For this reporting unit, the fair value exceeded its carrying value by a substantial margin when we last performed step one of the two-step impairment test. Changes in our projections or estimates, a deterioration of our operating results and the related cash flow effect or a significant increase in the discount rate could decrease the estimated fair value of our reporting units and result in a future impairment of goodwill. See NOTE 7 , " GOODWILL AND OTHER INTANGIBLE ASSETS ," for additional information. |
Software | Software We capitalize software that is developed or obtained for internal use. Software costs are amortized on a straight-line basis over their estimated useful lives generally ranging from 3 to 12 years. Software assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable over the remaining lives of the assets. Upgrades and enhancements are capitalized if they result in significant modifications that enable the software to perform tasks it was previously incapable of performing. Software maintenance, training, data conversion and business process reengineering costs are expensed in the period in which they are incurred. See NOTE 7 , " GOODWILL AND OTHER INTANGIBLE ASSETS ," for additional information. |
Warranty | Warranty We charge the estimated costs of warranty programs, other than product recalls, to cost of sales at the time products are sold and revenue is recognized. We use historical experience to develop the estimated liability for our various warranty programs. As a result of the uncertainty surrounding the nature and frequency of product recall programs, the liability for such programs is recorded when we commit to a recall action or when a recall becomes probable and estimable, which generally occurs when it is announced. The liability for these programs is reflected in the provision for warranties issued. We review and assess the liability for these programs on a quarterly basis. We also assess our ability to recover certain costs from our suppliers and record a receivable when we believe a recovery is probable. In addition to costs incurred on warranty and recall programs, from time to time we also incur costs related to customer satisfaction programs for items not covered by warranty. We accrue for these costs when agreement is reached with a specific customer. These costs are not included in the provision for warranties, but are included in cost of sales. In addition, we sell extended warranty coverage on most of our engines. The revenue collected is initially deferred and is recognized as revenue in proportion to the costs expected to be incurred in performing services over the contract period. We compare the remaining deferred revenue balance quarterly to the estimated amount of future claims under extended warranty programs and provide an additional accrual when the deferred revenue balance is less than expected future costs. See NOTE 10 , " PRODUCT WARRANTY LIABILITY ," for additional information. |
Research and Development | Research and Development Our research and development program is focused on product improvements, product extensions, innovations and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred. From time to time, we enter into agreements with customers and government agencies to fund a portion of the research and development costs of a particular project. We generally account for these reimbursements as an offset to the related research and development expenditure. Research and development expenses, net of contract reimbursements, were $616 million in 2016 , $718 million in 2015 and $737 million in 2014 . Contract reimbursements were $131 million in 2016 , $98 million in 2015 and $121 million in 2014 . |
Related Party Transactions | Related Party Transactions In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value. Our related party sales are presented on the face of our Consolidated Statements of Income . Our related party purchases were not material to our financial position or results of operations. |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Statements of Cash Flows-Supplemental Disclosures | Years ended December 31, In millions 2016 2015 2014 Cash payments for income taxes, net of refunds $ 430 $ 732 $ 659 Cash payments for interest, net of capitalized interest 68 65 65 |
INVESTMENTS IN EQUITY INVESTE33
INVESTMENTS IN EQUITY INVESTEES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Summary of investments in and advances to equity investees and our ownership percentage | Investments and advances related to equity method investees and our ownership percentage was as follows: December 31, In millions Ownership % 2016 2015 Komatsu alliances 20-50% $ 197 $ 173 Beijing Foton Cummins Engine Co., Ltd. 50% 163 172 Dongfeng Cummins Engine Company, Ltd. 50% 111 118 Chongqing Cummins Engine Company, Ltd. 50% 73 80 Cummins-Scania XPI Manufacturing, LLC 50% 82 66 Tata Cummins, Ltd. 50% 63 60 North American distributors (1) 50% — 15 Other Various 257 291 Investments and advances related to equity method investees $ 946 $ 975 ____________________________________ (1) Ownership percentage of North American distributor investments at December 31, 2015. |
Equity, royalty and interest income from investees | Equity, royalty and interest income from investees, net of applicable taxes, was as follows: Years ended December 31, In millions 2016 2015 2014 Distribution entities Komatsu Cummins Chile, Ltda. $ 34 $ 31 $ 29 North American distributors 21 33 107 All other distributors — 3 4 Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. 52 62 (2 ) Dongfeng Cummins Engine Company, Ltd. 46 51 67 Chongqing Cummins Engine Company, Ltd. 38 41 51 All other manufacturers 69 52 74 Cummins share of net income 260 273 330 Royalty and interest income 41 42 40 Equity, royalty and interest income from investees $ 301 $ 315 $ 370 |
Summary of financial information for equity investees | Summary financial information for our equity investees was as follows: At and for the years ended December 31, In millions 2016 2015 2014 Net sales $ 5,654 $ 5,946 $ 7,426 Gross margin 1,182 1,265 1,539 Net income 499 521 630 Cummins share of net income $ 260 $ 273 $ 330 Royalty and interest income 41 42 40 Total equity, royalty and interest from investees $ 301 $ 315 $ 370 Current assets $ 2,602 $ 2,458 Non-current assets 1,377 1,539 Current liabilities (1,938 ) (1,796 ) Non-current liabilities (232 ) (284 ) Net assets $ 1,809 $ 1,917 Cummins share of net assets $ 927 $ 958 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] | The following table summarizes income before income taxes: Years ended December 31, In millions 2016 2015 2014 U.S. income $ 995 $ 1,275 $ 1,407 Foreign income 935 750 1,027 Income before income taxes $ 1,930 $ 2,025 $ 2,434 |
Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | Income tax expense consists of the following: Years ended December 31, In millions 2016 2015 2014 Current U.S. federal and state $ 211 $ 516 $ 470 Foreign 213 147 197 Total current 424 663 667 Deferred U.S. federal and state 57 (151 ) 39 Foreign (7 ) 43 (8 ) Total deferred 50 (108 ) 31 Income tax expense $ 474 $ 555 $ 698 |
Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows: Years ended December 31, 2016 2015 2014 Statutory U.S. federal income tax rate 35.0 % 35.0 % 35.0 % State income tax, net of federal effect 0.8 1.2 1.1 Differences in rates and taxability of foreign subsidiaries and joint ventures (7.2 ) (6.6 ) (5.7 ) Research tax credits (1.7 ) (1.4 ) (1.5 ) Other, net (2.3 ) (0.8 ) (0.2 ) Effective tax rate 24.6 % 27.4 % 28.7 % |
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets were as follows: December 31, In millions 2016 2015 Deferred tax assets U.S. state carryforward benefits $ 159 $ 133 Foreign carryforward benefits 154 103 Employee benefit plans 401 377 Warranty expenses 405 369 Accrued expenses 107 76 Other 64 78 Gross deferred tax assets 1,290 1,136 Valuation allowance (307 ) (209 ) Total deferred tax assets 983 927 Deferred tax liabilities Property, plant and equipment (319 ) (269 ) Unremitted income of foreign subsidiaries and joint ventures (59 ) (69 ) Employee benefit plans (213 ) (212 ) Other (48 ) (21 ) Total deferred tax liabilities (639 ) (571 ) Net deferred tax assets $ 344 $ 356 |
Tax Related Line Items on the Consolidated Balance Sheets [Table Text Block] | Our Consolidated Balance Sheets contain the following tax related items: December 31, In millions 2016 2015 Prepaid and other current assets Refundable income taxes $ 192 $ 176 Other assets Deferred tax assets 420 390 Long-term refundable income taxes 22 18 Other liabilities and deferred revenue Deferred tax liabilities 76 34 |
Summary of Income Tax Contingencies [Table Text Block] | A reconciliation of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 was as follows: December 31, In millions 2016 2015 2014 Balance at beginning of year $ 135 $ 174 $ 169 Additions to current year tax positions 10 8 8 Additions to prior years tax positions 18 24 5 Reductions to prior years tax positions — — (2 ) Reductions for tax positions due to settlements with taxing authorities (104 ) (71 ) (5 ) Reductions for tax positions due to lapse of statute of limitations — — (1 ) Balance at end of year $ 59 $ 135 $ 174 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Marketable Securities [Abstract] | |
Summary of marketable securities | A summary of marketable securities, all of which are classified as current, was as follows: December 31, 2016 2015 In millions Cost Gross unrealized Estimated Cost Gross unrealized Estimated Available-for-sale (1) Debt mutual funds $ 132 $ — $ 132 $ 88 $ — $ 88 Bank debentures 114 — 114 — — — Equity mutual funds 12 — 12 11 (1 ) 10 Government debt securities 2 — 2 2 — 2 Total marketable securities $ 260 $ — $ 260 $ 101 $ (1 ) $ 100 ______________________________________________________ (1) All marketable securities are classified as Level 2 securities. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during 2016 and 2015. |
Schedule of proceeds from sales and maturities and gross realized gains and losses | The proceeds from sales and maturities of marketable securities and gross realized gains from the sale of AFS securities were as follows: Years ended December 31, In millions 2016 2015 2014 Proceeds from sales and maturities of marketable securities $ 306 $ 270 $ 336 Gross realized gains from the sale of available-for-sale securities (1) — 1 14 ____________________________________________________ (1) Gross realized losses from the sale of available-for-sale securities were immaterial. |
Summary of fair value of AFS investments in debt securities by contractual maturity | At December 31, 2016 , the fair value of AFS investments in debt securities that utilize a Level 2 fair value measure is shown by contractual maturity below: Maturity date (in millions) 1 year or less $ 247 5 - 10 years 1 Total $ 248 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories included the following: December 31, In millions 2016 2015 Finished products $ 1,779 $ 1,796 Work-in-process and raw materials 1,005 1,022 Inventories at FIFO cost 2,784 2,818 Excess of FIFO over LIFO (109 ) (111 ) Total inventories $ 2,675 $ 2,707 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Details of property, plant and equipment | Details of our property, plant and equipment balance were as follows: December 31, In millions 2016 2015 Land and buildings $ 2,075 $ 1,978 Machinery, equipment and fixtures 4,898 4,739 Construction in process 662 605 Property, plant and equipment, gross 7,635 7,322 Less: Accumulated depreciation (3,835 ) (3,577 ) Property, plant and equipment, net $ 3,800 $ 3,745 |
GOODWILL AND OTHER INTANGIBLE38
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in the carrying amount of goodwill | The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 : In millions Components Distribution Power Systems Engine Total Balance at December 31, 2014 $ 400 $ 62 $ 11 $ 6 $ 479 Acquisitions — 12 — — 12 Translation and other (9 ) 1 (1 ) — (9 ) Balance at December 31, 2015 391 75 10 6 482 Acquisitions — 4 — — 4 Translation and other (5 ) — (1 ) — (6 ) Balance at December 31, 2016 $ 386 $ 79 $ 9 $ 6 $ 480 |
Summary of other intangible assets with finite useful lives that are subject to amortization | The following table summarizes our other intangible assets with finite useful lives that are subject to amortization: December 31, In millions 2016 2015 Software $ 617 $ 536 Less: Accumulated amortization (330 ) (269 ) Software, net 287 267 Trademarks, patents and other 164 165 Less: Accumulated amortization (119 ) (104 ) Trademarks, patents and other, net 45 61 Total other intangible assets, net $ 332 $ 328 |
Projected amortization expense of intangible assets | The projected amortization expense of our intangible assets, assuming no further acquisitions or dispositions, is as follows: In millions 2017 2018 2019 2020 2021 Projected amortization expense $ 83 $ 66 $ 56 $ 43 $ 28 |
PENSION AND OTHER POSTRETIREM39
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Pension Plan | |
Pension and other postretirement benefits | |
Schedule of Net Funded Status | The changes in the benefit obligations, the various plan assets, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant pension plans at December 31 were as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2016 2015 Change in benefit obligation Benefit obligation at the beginning of the year $ 2,533 $ 2,579 $ 1,390 $ 1,522 Service cost 90 80 21 27 Interest cost 109 102 50 56 Actuarial loss (gain) 111 (76 ) 316 (88 ) Benefits paid from fund (175 ) (139 ) (55 ) (53 ) Benefits paid directly by employer (16 ) (13 ) — — Plan amendments 9 — — — Exchange rate changes — — (271 ) (74 ) Benefit obligation at end of year $ 2,661 $ 2,533 $ 1,451 $ 1,390 Change in plan assets Fair value of plan assets at beginning of year $ 2,636 $ 2,713 $ 1,712 $ 1,724 Actual return on plan assets 200 (8 ) 402 20 Employer contributions 90 70 28 107 Benefits paid (175 ) (139 ) (55 ) (53 ) Exchange rate changes — — (334 ) (86 ) Fair value of plan assets at end of year $ 2,751 $ 2,636 $ 1,753 $ 1,712 Funded status (including underfunded and nonfunded plans) at end of year $ 90 $ 103 $ 302 $ 322 Amounts recognized in consolidated balance sheets Pension assets - long-term $ 429 $ 413 $ 302 $ 322 Accrued compensation, benefits and retirement costs - current liabilities (13 ) (12 ) — — Pensions - long-term liabilities (326 ) (298 ) — — Net amount recognized $ 90 $ 103 $ 302 $ 322 Amounts recognized in accumulated other comprehensive loss Net actuarial loss $ 770 $ 689 $ 172 $ 228 Prior service cost (credit) 9 (1 ) — — Net amount recognized $ 779 $ 688 $ 172 $ 228 |
Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets | The following table presents information regarding total accumulated benefit obligation, PBO's and underfunded pension plans that are included in the preceding table: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2016 2015 Total accumulated benefit obligation $ 2,625 $ 2,499 $ 1,366 $ 1,311 Plans with accumulated benefit obligation in excess of plan assets Accumulated benefit obligation 304 276 — — Plans with projected benefit obligation in excess of plan assets Projected benefit obligation 339 311 — — |
Schedule of Net Benefit Costs | The following table presents the net periodic pension cost under our plans for the years ended December 31: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans In millions 2016 2015 2014 2016 2015 2014 Service cost $ 90 $ 80 $ 66 $ 21 $ 27 $ 24 Interest cost 109 102 105 50 56 63 Expected return on plan assets (201 ) (189 ) (173 ) (71 ) (91 ) (84 ) Amortization of prior service credit — (1 ) (1 ) — — — Recognized net actuarial loss 29 45 31 15 34 26 Net periodic pension cost $ 27 $ 37 $ 28 $ 15 $ 26 $ 29 |
Schedule of Amounts Recognized in Other Comprehensive Income (Loss) | Other changes in benefit obligations and plan assets recognized in other comprehensive income for the years ended December 31 were as follows: In millions 2016 2015 2014 Amortization of prior service credit $ — $ 1 $ 1 Recognized net actuarial loss (44 ) (79 ) (57 ) Incurred actuarial loss 107 105 133 Foreign exchange translation adjustments (28 ) (7 ) (18 ) Total recognized in other comprehensive income $ 35 $ 20 $ 59 Total recognized in net periodic pension cost and other comprehensive income $ 77 $ 83 $ 116 |
Schedule of Assumptions Used | The table below presents various assumptions used in determining the net periodic pension cost and reflects weighted-average percentages for the various plans as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans 2016 2015 2014 2016 2015 2014 Discount rate 4.47 % 4.07 % 4.83 % 3.95 % 3.80 % 4.60 % Expected return on plan assets 7.50 % 7.50 % 7.50 % 4.70 % 5.80 % 5.80 % Compensation increase rate 4.87 % 4.88 % 4.91 % 3.75 % 4.25 % 4.50 % The table below presents various assumptions used in determining the PBO for each year and reflects weighted-average percentages for the various plans as follows: Qualified and Non-Qualified Pension Plans U.S. Plans U.K. Plans 2016 2015 2016 2015 Discount rate 4.12 % 4.47 % 2.70 % 3.95 % Compensation increase rate 4.87 % 4.88 % 3.75 % 3.75 % |
Schedule of Expected Benefit Payments | The table below presents expected future benefit payments under our pension plans: Qualified and Non-Qualified Pension Plans In millions 2017 2018 2019 2020 2021 2022 - 2026 Expected benefit payments $ 241 $ 237 $ 243 $ 249 $ 254 $ 1,322 |
U.S. Plans | |
Pension and other postretirement benefits | |
Schedule of Allocation of Plan Assets | The primary investment objective is to exceed, on a net-of-fee basis, the rate of return of a policy portfolio comprised of the following: Asset Class Target Range U.S. equities 13.0 % +/-5.0% Non-U.S. equities 5.0 % +/-3.0% Global equities 6.0 % +/-3.0% Total equities 24.0 % Real estate 7.5 % +2.5/-7.5% Private equity/venture capital 7.5 % +2.5/-7.5% Opportunistic credit 4.0 % +6.0/-4.0% Fixed income 57.0 % +/-5.0% Total 100.0 % |
Fair Value, Assets Measured on Recurring Basis | The fair values of U.S. pension plan assets by asset category were as follows: Fair Value Measurements at December 31, 2016 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ 145 $ — $ — $ 145 Non-U.S. 125 — — 125 Fixed income Government debt — 570 — 570 Corporate debt U.S. — 497 — 497 Non-U.S. — 84 — 84 Asset/mortgaged backed securities — 58 — 58 Net cash equivalents (1) 18 20 — 38 Derivative instruments (2) — 9 — 9 Private equity and real estate (3) — — 212 212 Net plan assets subject to leveling $ 288 $ 1,238 $ 212 $ 1,738 Pending trade/purchases/sales (83 ) Accruals (4) 12 Investments measured at net asset value 1,084 Net plan assets $ 2,751 Fair Value Measurements at December 31, 2015 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ 96 $ — $ — $ 96 Non-U.S. 130 — — 130 Fixed income Government debt — 533 — 533 Corporate debt U.S. — 406 — 406 Non-U.S. — 80 — 80 Asset/mortgaged backed securities — 56 — 56 Net cash equivalents (1) 42 10 — 52 Derivative instruments (2) — 3 — 3 Private equity and real estate (3) — — 203 203 Net plan assets subject to leveling $ 268 $ 1,088 $ 203 $ 1,559 Pending trade/purchases/sales (27 ) Accruals (4) 10 Investments measured at net asset value 1,094 Net plan assets $ 2,636 ____________________________________________________ (1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. (2) Derivative instruments include interest rate swaps and credit default swaps. (3) The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. (4) Accruals include interest or dividends that were not settled at December 31. |
Schedule of Effect of Significant Unobservable Inputs, Changes in Plan Assets | The reconciliation of Level 3 assets was as follows: Fair Value Measurements In millions Private Equity Real Estate Total Balance at December 31, 2014 $ 148 $ 54 $ 202 Actual return on plan assets Unrealized gains on assets still held at the reporting date 17 8 25 Purchases, sales and settlements, net (22 ) (2 ) (24 ) Balance at December 31, 2015 143 60 203 Actual return on plan assets Unrealized gains on assets still held at the reporting date 6 6 12 Purchases, sales and settlements, net (1 ) (2 ) (3 ) Balance at December 31, 2016 $ 148 $ 64 $ 212 |
Non-U.S. Plans | |
Pension and other postretirement benefits | |
Schedule of Allocation of Plan Assets | To achieve these objectives we have established the following targets: Asset Class Target Global equities 23.0 % Real estate 5.0 % Re-insurance 8.0 % Corporate credit instruments 7.5 % Fixed income 56.5 % Total 100.0 % |
Fair Value, Assets Measured on Recurring Basis | The fair values of U.K. pension plan assets by asset category were as follows: Fair Value Measurements at December 31, 2016 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ — $ 174 $ — $ 174 Non-U.S. — 193 — 193 Fixed income Net cash equivalents (1) 24 — — 24 Private equity, real estate and insurance (2) — — 613 613 Net plan assets subject to leveling $ 24 $ 367 $ 613 $ 1,004 Investments measured at net asset value 749 Net plan assets $ 1,753 Fair Value Measurements at December 31, 2015 In millions Quoted prices in active Significant other Significant Total Equities U.S. $ — $ 250 $ — $ 250 Non-U.S. — 269 — 269 Fixed income Corporate debt non-U.S. — 45 — 45 Net cash equivalents (1) 33 — — 33 Private equity, real estate and insurance (2) — — 601 601 Net plan assets subject to leveling $ 33 $ 564 $ 601 $ 1,198 Investments measured at net asset value 514 Net plan assets $ 1,712 _____________________________________________________ (1) Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. (2) The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. |
Schedule of Effect of Significant Unobservable Inputs, Changes in Plan Assets | The reconciliation of Level 3 assets was as follows: Fair Value Measurements In millions Insurance Real Estate Private Equity Total Balance at December 31, 2014 $ 462 $ 61 $ 81 $ 604 Actual return on plan assets Unrealized gains on assets still held at the reporting date 6 7 10 23 Purchases, sales and settlements, net (23 ) (11 ) 8 (26 ) Balance at December 31, 2015 445 57 99 601 Actual return on plan assets Unrealized (losses) gains on assets still held at the reporting date (6 ) (7 ) 15 2 Purchases, sales and settlements, net — 7 3 10 Balance at December 31, 2016 $ 439 $ 57 $ 117 $ 613 |
Other Postretirement Benefit Plan | |
Pension and other postretirement benefits | |
Schedule of Net Funded Status | The changes in the benefit obligations, the funded status of the plans and the amounts recognized in our Consolidated Balance Sheets for our significant other postretirement benefit plans were as follows: Years ended December 31, In millions 2016 2015 Change in benefit obligation Benefit obligation at the beginning of the year $ 385 $ 408 Interest cost 16 15 Plan participants' contributions 14 10 Actuarial loss 9 5 Benefits paid directly by employer (60 ) (53 ) Benefit obligation at end of year $ 364 $ 385 Funded status at end of year $ (364 ) $ (385 ) Amounts recognized in consolidated balance sheets Accrued compensation, benefits and retirement costs - current liabilities $ (35 ) $ (36 ) Postretirement benefits other than pensions-long-term liabilities (329 ) (349 ) Net amount recognized $ (364 ) $ (385 ) Amounts recognized in accumulated other comprehensive loss: Net actuarial loss $ 69 $ 66 Prior service credit (5 ) (5 ) Net amount recognized $ 64 $ 61 |
Schedule of Net Benefit Costs | The following table presents the net periodic other postretirement benefits cost under our plans: Years ended December 31, In millions 2016 2015 2014 Interest cost $ 16 $ 15 $ 17 Recognized net actuarial loss 5 5 — Net periodic other postretirement benefit cost $ 21 $ 20 $ 17 |
Schedule of Amounts Recognized in Other Comprehensive Income (Loss) | Other changes in benefit obligations recognized in other comprehensive income for the years ended December 31 were as follows: Years ended December 31, In millions 2016 2015 2014 Recognized net actuarial loss $ (6 ) $ (5 ) $ — Incurred actuarial loss 9 6 38 Total recognized in other comprehensive income $ 3 $ 1 $ 38 Total recognized in net periodic other postretirement benefit cost and other comprehensive income $ 24 $ 21 $ 55 |
Schedule of Assumptions Used | The table below presents assumptions used in determining the other postretirement benefit obligation for each year and reflects weighted-average percentages for our other postretirement plans as follows: 2016 2015 Discount rate 4.00 % 4.35 % The table below presents assumptions used in determining the net periodic other postretirement benefits cost and reflects weighted-average percentages for the various plans as follows: 2016 2015 2014 Discount rate 4.35 % 3.90 % 4.55 % |
Schedule of Expected Benefit Payments | The table below presents expected benefit payments under our other postretirement benefit plans: In millions 2017 2018 2019 2020 2021 2022 - 2026 Expected benefit payments $ 35 $ 33 $ 32 $ 30 $ 29 $ 126 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Weighted-average interest rate | The weighted-average interest rate for notes payable, bank overdrafts and current maturities of long-term debt at December 31 was as follows: 2016 2015 2014 Weighted average interest rate 4.20 % 3.65 % 3.70 % |
Summary of long-term debt | December 31, In millions 2016 2015 Long-term debt Senior notes, 3.65%, due 2023 $ 500 $ 500 Debentures, 6.75%, due 2027 58 58 Debentures, 7.125%, due 2028 250 250 Senior notes, 4.875%, due 2043 500 500 Debentures, 5.65%, due 2098 (effective interest rate 7.48%) 165 165 Other debt 51 55 Unamortized discount (56 ) (57 ) Fair value adjustments due to hedge on indebtedness 47 63 Capital leases 88 81 Total long-term debt 1,603 1,615 Less: Current maturities of long-term debt 35 39 Long-term debt $ 1,568 $ 1,576 |
Principal repayments on long-term debt | Principal payments required on long-term debt during the next five years are as follows: In millions 2017 2018 2019 2020 2021 Principal payments $ 35 $ 33 $ 29 $ 8 $ 4 |
Schedule of Interest Rate Derivatives | The following table summarizes these gains and losses for the years presented below: Years ended December 31, In millions 2016 2015 2014 Income Statement Classification Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Swaps Gain/(Loss) on Borrowings Gain/(Loss) on Gain/(Loss) on Interest expense (1) $ (8 ) $ 12 $ 6 $ (2 ) $ 23 $ (19 ) ___________________________________________ (1) The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. |
Fair value and carrying value of total debt | 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: December 31, In millions 2016 2015 Fair value of total debt (1) $ 2,077 $ 1,821 Carrying value of total debt 1,856 1,639 ___________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Product Warranties Disclosures [Abstract] | |
Summary of activity in the product warranty account | A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued recall programs was as follows: December 31, In millions 2016 2015 Balance, beginning of year $ 1,404 $ 1,283 Provision for warranties issued 334 391 Deferred revenue on extended warranty contracts sold 231 290 Payments (385 ) (389 ) Amortization of deferred revenue on extended warranty contracts (201 ) (179 ) Changes in estimates for pre-existing warranties 44 20 Foreign currency translation (13 ) (12 ) Balance, end of year $ 1,414 $ 1,404 |
Warranty related deferred revenue, supplier recovery receivables and the long-term portion of the warranty liability | Warranty related deferred revenue and the long-term portion of the warranty liability on our Consolidated Balance Sheets were as follows: December 31, In millions 2016 2015 Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 218 $ 189 Current portion of deferred revenue Long-term portion 527 529 Other liabilities and deferred revenue Total $ 745 $ 718 Long-term portion of warranty liability $ 336 $ 327 Other liabilities and deferred revenue |
OTHER LIABILITIES AND DEFERRE42
OTHER LIABILITIES AND DEFERRED REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
OTHER LIABILITIES AND DEFERRED REVENUE | |
Other liabilities and deferred revenue | Other liabilities and deferred revenue included the following: December 31, In millions 2016 2015 Deferred revenue $ 589 $ 583 Accrued warranty 336 327 Accrued compensation 151 199 Other long-term liabilities 213 249 Other liabilities and deferred revenue $ 1,289 $ 1,358 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Rent expense under these leases | Rent expense under these leases was as follows: Years ended December 31, In millions 2016 2015 2014 Rent expense $ 210 $ 205 $ 195 |
Schedule of capital leases by major property class | The following is a summary of the leased property under capital leases by major classes: December 31, In millions 2016 2015 Building $ 113 $ 113 Equipment 109 86 Land 15 15 Less: Accumulated depreciation (133 ) (112 ) Total $ 104 $ 102 |
Future minimum lease payments due under capital and operating leases | Following is a summary of the future minimum lease payments due under capital and operating leases, including leases in our rental business, with terms of more than one year at December 31, 2016 , together with the net present value of the minimum payments due under capital leases: In millions Capital Leases Operating Leases 2017 $ 25 $ 141 2018 22 101 2019 19 81 2020 7 59 2021 6 44 After 2021 39 93 Total minimum lease payments $ 118 $ 519 Interest (30 ) Present value of net minimum lease payments $ 88 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans | Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans were as follows: In millions Common Treasury Common Stock Balance at December 31, 2013 222.3 35.6 1.3 Shares acquired — 4.8 — Shares issued 0.1 (0.3 ) (0.2 ) Other shareholder transactions (0.1 ) — — Balance at December 31, 2014 222.3 40.1 1.1 Shares acquired — 7.2 — Shares issued 0.1 (0.1 ) (0.2 ) Balance at December 31, 2015 222.4 47.2 0.9 Shares acquired — 7.3 — Shares issued — (0.3 ) (0.2 ) Balance at December 31, 2016 222.4 54.2 0.7 |
Repurchases of common stock | In 2016 , we made the following purchases under the respective purchase programs: In millions (except per share amounts) For each quarter ended 2016 Shares Purchased Average Cost Per Share Total Cost of Repurchases Cash Paid for Shares Not Received Remaining Authorized Capacity (1) July 2014, $1 billion repurchase program April 3 2.7 $ 100.12 $ 274 $ — $ — November 2015, $1 billion repurchase program April 3 2.2 $ 105.50 $ 229 $ 100 $ 671 July 3 1.8 109.79 192 (100 ) 579 October 2 0.4 126.13 50 — 529 December 31 0.2 130.70 33 — 496 Subtotal 4.6 110.29 504 — Total 7.3 $ 106.48 $ 778 $ — ___________________________________________ (1) The remaining authorized capacity under the 2015 Plan was calculated based on the cost to purchase the shares but excludes commission expenses in accordance with the authorized Plan. |
Dividends per share paid to common shareholders | Cash dividends per share paid to common shareholders for the last three years were as follows: Quarterly Dividends 2016 2015 2014 First quarter $ 0.975 $ 0.78 $ 0.625 Second quarter 0.975 0.78 0.625 Third quarter 1.025 0.975 0.78 Fourth quarter 1.025 0.975 0.78 Total $ 4.00 $ 3.51 $ 2.81 |
OTHER COMPREHENSIVE INCOME (L45
OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Changes in accumulated other comprehensive income (loss) by component | Following are the changes in accumulated other comprehensive income (loss) by component: In millions Change in pensions and other postretirement defined benefit plans Foreign currency translation adjustment Unrealized gain (loss) on marketable securities Unrealized gain (loss) on derivatives Total attributable to Cummins Inc. Noncontrolling interests Total Balance at December 31, 2013 $ (611 ) $ (179 ) $ 7 $ (1 ) $ (784 ) Other comprehensive income before reclassifications Before tax amount (196 ) (241 ) 2 2 (433 ) $ (7 ) $ (440 ) Tax benefit (expense) 92 14 (1 ) (1 ) 104 — 104 After tax amount (104 ) (227 ) 1 1 (329 ) (7 ) (336 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 46 — (9 ) (2 ) 35 (4 ) 31 Net current period other comprehensive income (loss) (58 ) (227 ) (8 ) (1 ) (294 ) $ (11 ) $ (305 ) Balance at December 31, 2014 $ (669 ) $ (406 ) $ (1 ) $ (2 ) $ (1,078 ) Other comprehensive income before reclassifications Before tax amount (81 ) (366 ) — 17 (430 ) $ (15 ) $ (445 ) Tax benefit (expense) 35 76 — (1 ) 110 — 110 After tax amount (46 ) (290 ) — 16 (320 ) (15 ) (335 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 61 — (1 ) (10 ) 50 — 50 Net current period other comprehensive income (loss) 15 (290 ) (1 ) 6 (270 ) $ (15 ) $ (285 ) Balance at December 31, 2015 $ (654 ) $ (696 ) $ (2 ) $ 4 $ (1,348 ) Other comprehensive income before reclassifications Before tax amount (111 ) (469 ) 1 (38 ) (617 ) $ (17 ) $ (634 ) Tax benefit 44 38 — 6 88 — 88 After tax amount (67 ) (431 ) 1 (32 ) (529 ) (17 ) (546 ) Amounts reclassified from accumulated other comprehensive income (1)(2) 36 — — 20 56 — 56 Net current period other comprehensive income (loss) (31 ) (431 ) 1 (12 ) (473 ) $ (17 ) $ (490 ) Balance at December 31, 2016 $ (685 ) $ (1,127 ) $ (1 ) $ (8 ) $ (1,821 ) _______________________________________________________________________ (1) Amounts are net of tax. (2) See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. |
Schedule of reclassification out of accumulated other comprehensive income (loss) and related tax effects | Following are the items reclassified out of accumulated other comprehensive (loss) income and the related tax effects: In millions Years ended December 31, (Gain)/Loss Components 2016 2015 2014 Statement of Income Location Change in pensions and other postretirement defined benefit plans Recognized actuarial loss $ 53 $ 87 $ 63 (1) Tax effect (17 ) (26 ) (17 ) Income tax expense Net change in pensions and other postretirement defined benefit plans 36 61 46 Realized gain on marketable securities — (1 ) (14 ) Other income (expense), net Tax effect — — 1 Income tax expense Net realized gain on marketable securities — (1 ) (13 ) Realized loss (gain) on derivatives Foreign currency forward contracts 27 (11 ) (5 ) Net sales Commodity swap contracts — — 2 Cost of sales Total before taxes 27 (11 ) (3 ) Tax effect (7 ) 1 1 Income tax expense Net realized loss (gain) on derivatives 20 (10 ) (2 ) Total reclassifications for the period $ 56 $ 50 $ 31 _______________________________________________________________________ (1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
STOCK INCENTIVE AND STOCK OPT46
STOCK INCENTIVE AND STOCK OPTION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Activity in stock option plans | The tables below summarize the employee share-based activity in the Plan: Options Weighted-average Exercise Price Weighted-average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in millions) Balance at December 31, 2013 1,462,336 $ 95.35 Granted 350,630 148.98 Exercised (175,526 ) 82.06 Forfeited (10,716 ) 102.56 Balance at December 31, 2014 1,626,724 108.30 Granted 476,205 135.21 Exercised (53,545 ) 82.89 Forfeited (19,698 ) 135.89 Balance at December 31, 2015 2,029,686 115.02 Granted 984,430 109.24 Exercised (215,890 ) 87.27 Forfeited (63,462 ) 119.56 Balance at December 31, 2016 2,734,764 $ 115.02 7.12 $ 64 Exercisable, December 31, 2014 903,059 $ 92.18 6.05 $ 48 Exercisable, December 31, 2015 1,318,101 $ 100.55 5.73 $ 13 Exercisable, December 31, 2016 1,149,549 $ 104.19 4.81 $ 38 |
Weighted-average grant date fair value of performance and restricted shares | The weighted-average grant date fair value of performance and restricted shares was as follows: Performance Shares Restricted Shares Nonvested Shares Weighted-average Shares Weighted-average Balance at December 31, 2013 475,913 $ 109.93 32,541 $ 81.49 Granted 206,031 130.38 — — Vested (207,093 ) 107.64 (21,266 ) 65.88 Forfeited (8,158 ) 121.18 — — Balance at December 31, 2014 466,693 119.78 11,275 110.94 Granted 133,975 128.48 — — Vested (112,901 ) 115.48 (7,021 ) 110.66 Forfeited (67,398 ) 118.71 — — Balance at December 31, 2015 420,369 123.88 4,254 111.40 Granted 169,150 98.26 8,089 117.69 Vested (115,680 ) 106.55 (2,502 ) 114.57 Forfeited (69,345 ) 110.52 — — Balance at December 31, 2016 404,494 $ 120.41 9,841 $ 115.76 |
NONCONTROLLING INTERESTS (Table
NONCONTROLLING INTERESTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling interests in the equity of consolidated subsidiaries | Noncontrolling interests in the equity of consolidated subsidiaries were as follows: December 31, In millions 2016 2015 Cummins India Ltd. $ 285 $ 271 Wuxi Cummins Turbo Technologies Co. Ltd. (1) — 54 Other 14 19 Total $ 299 $ 344 ____________________________________________________ (1) In December 2016, we purchased the remaining interest in Wuxi Cummins Turbo Technologies Co. Ltd. See Note 18 , " ACQUISITIONS ," for additional information. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Earnings Per Share [Abstract] | |
Computations for basic and diluted earnings per share | Following are the computations for basic and diluted earnings per share: Years ended December 31, Dollars in millions, except per share amounts 2016 2015 2014 Net income attributable to Cummins Inc. $ 1,394 $ 1,399 $ 1,651 Weighted-average common shares outstanding Basic 169,038,410 178,037,581 182,637,568 Dilutive effect of stock compensation awards 298,206 369,247 441,727 Diluted 169,336,616 178,406,828 183,079,295 Earnings per common share attributable to Cummins Inc. Basic $ 8.25 $ 7.86 $ 9.04 Diluted 8.23 7.84 9.02 |
Options excluded from diluted earnings per share | The options excluded from diluted earnings per share were as follows: Years ended December 31, 2016 2015 2014 Options excluded 1,091,799 866,262 165,840 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | The joint venture acquisitions for the years ended December 31, 2016, 2015 and 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) 2016 Wuxi Cummins Turbo Technologies Co. Ltd 12/05/16 45 % $ 86 $ — $ 86 EQUITY $ — $ — $ — $ — Cummins Pacific LLC (Pacific) 10/04/16 50 % 30 67 99 (4) COMB 15 4 8 391 Cummins Northeast LLC 01/01/16 35 % 12 — 12 EQUITY — — — — 2015 Cummins Crosspoint LLC 08/03/15 50% $ 29 $ 36 $ 65 COMB $ 10 $ 7 $ 2 $ 258 Cummins Atlantic LLC 08/03/15 51% 21 28 49 COMB 8 5 6 245 Cummins Central Power LLC 06/29/15 20.01% 8 — 8 EQUITY — — — — 2014 Cummins Bridgeway LLC 11/03/14 54% $ 32 $ 45 $ 77 COMB $ 13 $ 4 $ 15 $ 331 Cummins NPower LLC 09/29/14 50% 39 34 73 COMB 15 7 8 374 Cummins Power South LLC 09/29/14 50% 19 16 35 COMB 7 8 1 239 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 (Southern Plains) 03/31/14 50% 44 48 92 COMB 13 1 11 433 Cummins Mid-South LLC (Mid-South) 02/14/14 62.2% 57 61 118 COMB 7 4 8 368 ____________________________________________________ (1) All results from acquired entities were included in 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 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) 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 outstanding consideration at December 31, 2016, was $2 million . |
Purchase price allocation | The final purchase price allocations for the large acquisitions in 2016 and 2014 were as follows: In millions Pacific Southern Plains Mid-South Accounts receivable $ 65 $ 63 $ 71 Inventory 35 59 70 Fixed assets 56 47 37 Intangible assets 8 11 8 Goodwill 4 1 4 Other current assets 10 8 10 Current liabilities (46 ) (53 ) (43 ) Other long-term liability — — (4 ) Total business valuation 132 136 153 Fair value of pre-existing interest (33 ) (44 ) (35 ) Total purchase consideration $ 99 $ 92 $ 118 |
RESTRUCTURING AND OTHER CHARG50
RESTRUCTURING AND OTHER CHARGES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and other charges by segment | Restructuring actions and other charges were included in each segment in our operating results as follows: In millions (1) Year ended December 31, 2015 Power Systems $ 26 Distribution 23 Engine 17 Components 13 Corporate 11 Restructuring actions and other charges $ 90 |
Schedule of Restructuring and Related Costs Accrual Rollforward | The table below summarizes the activity and balance of accrued restructuring charges, which is included in "Other accrued expenses" in our Consolidated Balance Sheets : In millions Restructuring Accrual Workforce reductions $ 86 Cash payments (26 ) Balance at December 31, 2015 60 Cash payments (58 ) Change in estimate (1 ) Balance at December 31, 2016 $ 1 |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments at December 31, is shown in the table below: In millions Engine Distribution Components Power Systems Intersegment Eliminations Total 2016 External sales $ 5,774 $ 6,157 $ 3,514 $ 2,064 $ — $ 17,509 Intersegment sales 2,030 24 1,322 1,453 (4,829 ) — Total sales 7,804 6,181 4,836 3,517 (4,829 ) 17,509 Depreciation and amortization (1) 163 116 133 115 — 527 Research, development and engineering expenses 226 13 208 189 — 636 Equity, royalty and interest income from investees 148 70 41 42 — 301 Interest income 10 4 4 5 — 23 Loss contingency charges (2) 138 — — — — 138 Segment EBIT 686 392 (3) 641 263 (4) 17 1,999 Net assets 1,620 2,604 1,868 2,629 — 8,721 Investments and advances to equity investees 427 204 176 139 — 946 Capital expenditures 200 96 143 92 — 531 2015 External sales $ 6,733 $ 6,198 $ 3,745 $ 2,434 $ — $ 19,110 Intersegment sales 1,937 31 1,427 1,633 (5,028 ) — Total sales 8,670 6,229 5,172 4,067 (5,028 ) 19,110 Depreciation and amortization (1) 187 105 109 110 — 511 Research, development and engineering expenses 263 10 236 226 — 735 Equity, royalty and interest income from investees 146 78 35 56 — 315 Interest income 11 4 4 5 — 24 Loss contingency charge (2) 60 — — — — 60 Impairment of light-duty diesel assets (5) 202 — 9 — — 211 Restructuring actions and other charges (6) 17 23 13 26 11 90 Segment EBIT 636 412 (3) 727 335 (20 ) 2,090 Net assets 2,107 2,330 1,891 2,736 — 9,064 Investments and advances to equity investees 445 192 150 188 — 975 Capital expenditures 345 125 137 137 — 744 2014 External sales $ 7,462 $ 5,135 $ 3,791 $ 2,833 $ — $ 19,221 Intersegment sales 1,505 39 1,327 1,581 (4,452 ) — Total sales 8,967 5,174 5,118 4,414 (4,452 ) 19,221 Depreciation and amortization (1) 163 86 106 97 — 452 Research, development and engineering expenses 265 9 230 250 — 754 Equity, royalty and interest income from investees 118 148 36 68 — 370 Interest income 9 4 4 6 — 23 Segment EBIT 1,031 491 (3) 684 361 (7) (69 ) 2,498 Net assets 2,401 2,441 2,152 2,743 — 9,737 Investments and advances to equity investees 415 209 164 193 — 981 Capital expenditures 268 89 162 224 — 743 ____________________________________________________ (1) Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs that are included in the Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million , $3 million and $3 million for the years ended December 31, 2016, 2015 and 2014, respectively. (2) See Note 12 , " COMMITMENTS AND CONTINGENCIES ," for additional information. (3) Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million , $18 million and $73 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. See Note 18 , " ACQUISITIONS ," for additional information. (4) Power Systems segment EBIT included a $17 million gain on the sale of an equity investee. (5) See Note 19 , " IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS ," for additional information. (6) See Note 20 , " RESTRUCTURING ACTIONS AND OTHER CHARGES ," for additional information. (7) Power Systems segment EBIT included $32 million of restructuring charges primarily related to the closure of a plant in Germany. |
Reconciliation of segment information | A reconciliation of our segment information to the corresponding amounts in the Consolidated Statements of Income is shown in the table below: Years ended December 31, In millions 2016 2015 2014 Total segment EBIT $ 1,999 $ 2,090 $ 2,498 Less: Interest expense 69 65 64 Income before income taxes $ 1,930 $ 2,025 $ 2,434 |
Reconciliation of segment information from net assets to total assets | December 31, In millions 2016 2015 2014 Net assets for operating segments $ 8,721 $ 9,064 $ 9,737 Liabilities deducted in arriving at net assets 6,152 5,920 6,009 Pension and other postretirement benefit adjustments excluded from net assets (284 ) (242 ) (319 ) Deferred tax assets not allocated to segments 420 390 314 Deferred debt costs not allocated to segments 2 2 23 Total assets $ 15,011 $ 15,134 $ 15,764 |
Net sales attributed to geographic areas based on the location of the customer | The tables below present certain segment information by geographic area. Net sales attributed to geographic areas were based on the location of the customer. In millions Years ended December 31, Net Sales 2016 2015 2014 United States $ 9,476 $ 10,757 $ 10,058 International 8,033 8,353 9,163 Total net sales $ 17,509 $ 19,110 $ 19,221 |
Long-lived assets attributed to geographic areas | Long-lived assets include property, plant and equipment, net of depreciation, investments and advances to equity investees and other assets, excluding deferred tax assets, refundable taxes and deferred debt expenses. In millions December 31, Long-lived assets 2016 2015 2014 United States $ 3,092 $ 2,968 $ 2,949 China 652 668 692 India 475 450 391 United Kingdom 254 349 339 Netherlands 197 172 156 Brazil 149 124 161 Canada 132 133 126 Mexico 131 108 96 Other international countries 236 261 274 Total long-lived assets $ 5,318 $ 5,233 $ 5,184 |
QUARTERLY FINANCIAL INFORMATI52
QUARTERLY FINANCIAL INFORMATION DISCLOSURE (unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Information | First Quarter Second Quarter Third Quarter Fourth Quarter In millions, except per share amounts 2016 Net sales $ 4,291 $ 4,528 $ 4,187 $ 4,503 Gross margin 1,056 1,197 1,079 1,120 Net income attributable to Cummins Inc. 321 406 (1) 289 (1) 378 Earnings per common share attributable to Cummins Inc.—basic (2) $ 1.87 $ 2.41 (1) $ 1.72 (1) $ 2.26 Earnings per common share attributable to Cummins Inc.—diluted (2) 1.87 2.40 (1) 1.72 (1) 2.25 Cash dividends per share 0.975 0.975 1.025 1.025 Stock price per share High $ 111.29 $ 120.00 $ 128.60 $ 147.10 Low 79.88 104.30 107.51 121.22 2015 Net sales $ 4,709 $ 5,015 $ 4,620 $ 4,766 Gross margin 1,195 1,332 1,208 1,212 Net income attributable to Cummins Inc. 387 471 380 161 (3) Earnings per common share attributable to Cummins Inc.—basic (2) $ 2.14 $ 2.63 $ 2.15 $ 0.92 (3) Earnings per common share attributable to Cummins Inc.—diluted (2) 2.14 2.62 2.14 0.92 (3) Cash dividends per share 0.78 0.78 0.975 0.975 Stock price per share High $ 148.04 $ 143.40 $ 132.96 $ 115.37 Low 133.50 133.36 108.27 84.99 ___________________________________________________ (1) The second quarter of 2016, included an additional $39 million loss contingency charge ( $24 million after-tax). The third quarter of 2016 included an additional $99 million loss contingency charge ( $50 million net of favorable compensation impact and after-tax). (2) Earnings per share in each quarter is computed using the weighted-average number of shares outstanding during that quarter while earnings per share for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters earnings per share may not equal the full year earnings per share. (3) The fourth quarter of 2015, included a $211 million impairment of light-duty diesel assets ( $133 million after-tax), a $90 million restructuring charge ( $61 million after-tax) and a $60 million charge for a loss contingency ( $38 million after-tax). |
SUMMARY OF SIGNIFICANT ACCOUN53
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016USD ($)countrylocation | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Nature of Operations | |||
Company owned and independent distributor locations | location | 600 | ||
Dealer locations | location | 7,400 | ||
Countries and territories located in | country | 190 | ||
Foreign Currency Translation | |||
Foreign Currency Transaction Gain (Loss), before Tax | $ (12) | $ (18) | $ (6) |
Supplemental Cash Flow Information | |||
Cash payments for income taxes, net of refunds | 430 | 732 | 659 |
Cash payments for interest, net of capitalized interest | 68 | 65 | $ 65 |
Activity in allowance for doubtful accounts | |||
Allowance for doubtful accounts receivable | $ 16 | $ 15 | |
Inventory Disclosure | |||
Percentage of total inventory values using LIFO | 13.00% | 13.00% | |
Minimum | |||
Investments in Equity Investees | |||
Percentage of equity method investment ownership | 20.00% | ||
Maximum | |||
Investments in Equity Investees | |||
Percentage of equity method investment ownership | 50.00% |
SUMMARY OF SIGNIFICANT ACCOUN54
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Property, Plant and Equipment | |||
Depreciation expense on property, plant and equipment | $ 434 | $ 419 | $ 351 |
Goodwill. | |||
Goodwill | $ 480 | 482 | 479 |
Percentage of total goodwill, emissions solutions and filtration | 79.00% | ||
Research and Development | |||
Research and development expenses, net of contract reimbursements | $ 616 | 718 | 737 |
Research and Development Arrangement, Contract to Perform for Others, Compensation Earned | $ 131 | $ 98 | $ 121 |
Minimum | Buildings | |||
Property, Plant and Equipment | |||
Property, Plant and Equipment, Useful Life | 20 years | ||
Minimum | Machinery, equipment and fixtures | |||
Property, Plant and Equipment | |||
Property, Plant and Equipment, Useful Life | 3 years | ||
Minimum | Software developed or obtained for internal use | |||
Property, Plant and Equipment | |||
Software Intangible Assets Estimated useful life | 3 years | ||
Maximum | Buildings | |||
Property, Plant and Equipment | |||
Property, Plant and Equipment, Useful Life | 40 years | ||
Maximum | Machinery, equipment and fixtures | |||
Property, Plant and Equipment | |||
Property, Plant and Equipment, Useful Life | 20 years | ||
Maximum | Software developed or obtained for internal use | |||
Property, Plant and Equipment | |||
Software Intangible Assets Estimated useful life | 12 years |
INVESTMENTS IN EQUITY INVESTE55
INVESTMENTS IN EQUITY INVESTEES (Details) $ in Millions | 12 Months Ended | |||
Dec. 31, 2016USD ($)hpl | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | ||
Equity, royalty and interest income from investees | ||||
Investments and advances related to equity method investees | $ 946 | $ 975 | $ 981 | |
Cummins share of net income | 260 | 273 | 330 | |
Royalty and interest income | 41 | 42 | 40 | |
Equity, royalty and interest income from investees | 301 | 315 | 370 | |
Proceeds from Sale of Equity Method Investments | $ 60 | 4 | ||
Minimum | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 20.00% | |||
Maximum | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Distribution - Komatsu Cummins Chile, Ltda. | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 34 | 31 | 29 | |
Distribution - North American distributors | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | [1] | 50.00% | ||
Investments and advances related to equity method investees | [1] | $ 0 | 15 | |
Cummins share of net income | 21 | 33 | 107 | |
Distribution - All other distributors | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | $ 0 | 3 | 4 | |
Manufacturing Entities | Maximum | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Manufacturing - Beijing Foton Cummins Engine Co., Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Investments and advances related to equity method investees | $ 163 | 172 | ||
Cummins share of net income | $ 52 | 62 | (2) | |
Manufacturing - Beijing Foton Cummins Engine Company (Light-Duty) [Member] | Minimum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 2.8 | |||
Manufacturing - Beijing Foton Cummins Engine Company (Light-Duty) [Member] | Maximum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 3.8 | |||
Manuafacturing - Beijing Foton Cummins Engine Company (Heavy-Duty) [Member] | Minimum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 10.5 | |||
Manuafacturing - Beijing Foton Cummins Engine Company (Heavy-Duty) [Member] | Maximum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 11.8 | |||
Manufacturing - Dongfeng Cummins Engine Company, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Investments and advances related to equity method investees | $ 111 | 118 | ||
Cummins share of net income | $ 46 | 51 | 67 | |
Manufacturing - Dongfeng Cummins Engine Company, Ltd. | Minimum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 4 | |||
Power of mechanical engines (in horsepower) | hp | 125 | |||
Manufacturing - Dongfeng Cummins Engine Company, Ltd. | Maximum | ||||
Equity, royalty and interest income from investees | ||||
Capacity of mechanical engines (in liters) | l | 13 | |||
Power of mechanical engines (in horsepower) | hp | 545 | |||
Manufacturing - Chongqing Cummins Engine Company, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Investments and advances related to equity method investees | $ 73 | 80 | ||
Cummins share of net income | 38 | 41 | 51 | |
Manufacturing - All other manufacturers | ||||
Equity, royalty and interest income from investees | ||||
Cummins share of net income | 69 | 52 | 74 | |
Manufacturing - Komatsu manufacturing alliances | ||||
Equity, royalty and interest income from investees | ||||
Investments and advances related to equity method investees | $ 197 | 173 | ||
Manufacturing - Komatsu manufacturing alliances | Minimum | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 20.00% | |||
Manufacturing - Komatsu manufacturing alliances | Maximum | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Manufacturing - Cummins-Scania XPI Manufacturing, LLC | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Investments and advances related to equity method investees | $ 82 | 66 | ||
Manufacturing - Tata Cummins, Ltd. | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 50.00% | |||
Investments and advances related to equity method investees | $ 63 | 60 | ||
Other Distributors and Manufacturers | ||||
Equity, royalty and interest income from investees | ||||
Investments and advances related to equity method investees | 257 | 291 | ||
Power Systems | ||||
Equity, royalty and interest income from investees | ||||
Investments and advances related to equity method investees | 139 | 188 | 193 | |
Equity, royalty and interest income from investees | $ 42 | $ 56 | $ 68 | |
Power Systems | Cummins Olayan Energy | ||||
Equity, royalty and interest income from investees | ||||
Ownership percentage | 49.00% | |||
Equity Method Investment, Amount Sold | $ 61 | |||
Gain (Loss) on Sale of Equity Investments | 17 | |||
Proceeds from Sale of Equity Method Investments | $ 58 | |||
[1] | wnership percentage of North American distributor investments at December 31, 2015. |
INVESTMENTS IN EQUITY INVESTE56
INVESTMENTS IN EQUITY INVESTEES (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | |||
Investment account representing cumulative undistributed income in equity investees | $ 525 | ||
Dividends from the unconsolidated equity investees | 212 | $ 248 | $ 227 |
Net sales | 5,654 | 5,946 | 7,426 |
Gross margin | 1,182 | 1,265 | 1,539 |
Net income | 499 | 521 | 630 |
Cummins share of net income | 260 | 273 | 330 |
Royalty and interest income | 41 | 42 | 40 |
Equity, royalty and interest income from investees | 301 | 315 | $ 370 |
Current assets | 2,602 | 2,458 | |
Non-current assets | 1,377 | 1,539 | |
Current liabilities | (1,938) | (1,796) | |
Non-current liabilities | (232) | (284) | |
Net assets | 1,809 | 1,917 | |
Cummins share of net assets | $ 927 | $ 958 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income before income taxes: | |||
U.S. income | $ 995 | $ 1,275 | $ 1,407 |
Foreign income | 935 | 750 | 1,027 |
INCOME BEFORE INCOME TAXES | 1,930 | 2,025 | 2,434 |
Current: | |||
U.S. federal and state | 211 | 516 | 470 |
Foreign | 213 | 147 | 197 |
Total current | 424 | 663 | 667 |
Deferred: | |||
U.S. federal and state | 57 | (151) | 39 |
Foreign | (7) | 43 | (8) |
Total deferred | 50 | (108) | 31 |
Income tax expense | $ 474 | $ 555 | $ 698 |
Reconciliation of the income tax provision | |||
Statutory U.S. federal income tax rate | 35.00% | 35.00% | 35.00% |
State income tax, net of federal effect | 0.80% | 1.20% | 1.10% |
Differences in rates and taxability of foreign subsidiaries and joint ventures | (7.20%) | (6.60%) | (5.70%) |
Research tax credits | (1.70%) | (1.40%) | (1.50%) |
Other, net | (2.30%) | (0.80%) | (0.20%) |
Effective Income Tax Rate Reconciliation, Percent | 24.60% | 27.40% | 28.70% |
Income Tax Reconciliation, Increase (Decrease) in Effective Income Tax Rate, Percent | (2.80%) | ||
Income tax disclosures | |||
Permanently reinvested retained earnings | $ 3,400 | $ 3,300 | $ 3,800 |
U.S. deferred tax liability | 59 | 69 | |
Income (Loss) from Equity Method Investments - Foreign | 225 | 213 | 212 |
Effective Income Tax Rate Reconciliation, Equity in Earnings (Losses) of Unconsolidated Subsidiary, Amount for Repatriation of Equity Earnings | 13 | $ 20 | $ 14 |
China | |||
Income tax disclosures | |||
U.S. deferred tax liability | 139 | ||
Retained earnings and related cumulative translation adjustments in China operations | $ 616 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred tax assets: | |||
U.S. state carryforward benefits | $ 159 | $ 133 | |
Foreign carryforward benefits | 154 | 103 | |
Employee benefit plans | 401 | 377 | |
Warranty expenses | 405 | 369 | |
Accrued expenses | 107 | 76 | |
Other | 64 | 78 | |
Gross deferred tax assets | 1,290 | 1,136 | |
Valuation allowance | (307) | (209) | |
Total deferred tax assets | 983 | 927 | |
Deferred tax liabilities: | |||
Property, plant and equipment | (319) | (269) | |
Unremitted income of foreign subsidiaries and joint ventures | (59) | (69) | |
Employee benefit plans | (213) | (212) | |
Other | (48) | (21) | |
Total deferred tax liabilities | (639) | (571) | |
Net deferred tax assets | 344 | 356 | |
Net increase (decrease) in valuation allowance | 98 | 65 | |
Balance Sheet Related Disclosures | |||
Refundable income taxes | 192 | 176 | |
Other assets | 420 | 390 | |
Long-term refundable income taxes | 22 | 18 | |
Deferred tax liabilities | 76 | 34 | |
Reconciliation of unrecognized tax benefits | |||
Beginning balance | 135 | 174 | $ 169 |
Additions to current year tax positions | 10 | 8 | 8 |
Additions to prior years tax positions | 18 | 24 | 5 |
Reductions to prior years tax positions | 0 | 0 | (2) |
Reductions for tax positions due to settlements with taxing authorities | (104) | (71) | (5) |
Reductions for tax positions due to lapse of statute of limitations | 0 | 0 | (1) |
Ending balance | 59 | 135 | 174 |
Unrecognized tax benefits that would impact effective tax rate | 31 | 78 | |
Unrecognized tax benefits, interest accrued | 3 | 8 | 7 |
Net interest expense recognized | $ 2 | $ 5 | $ 4 |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||
Schedule of Available-for-sale Securities | ||||
Cost | $ 260 | $ 101 | ||
Gross unrealized gains/(losses) | (1) | |||
Estimated fair value | 260 | 100 | ||
Proceeds from sales and maturities of marketable securities | 306 | 270 | $ 336 | |
Gross realized gains from the sale of available-for-sale securities | [1] | 0 | 1 | $ 14 |
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract] | ||||
1 year or less | 247 | |||
5-10 years | 1 | |||
Total | 248 | |||
Significant other observable inputs Level 2 | Debt mutual funds | ||||
Schedule of Available-for-sale Securities | ||||
Cost | [2] | 132 | 88 | |
Gross unrealized gains/(losses) | [2] | 0 | 0 | |
Estimated fair value | [2] | 132 | 88 | |
Significant other observable inputs Level 2 | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Cost | [2] | 114 | 0 | |
Gross unrealized gains/(losses) | [2] | 0 | 0 | |
Estimated fair value | [2] | 114 | 0 | |
Significant other observable inputs Level 2 | Equity Funds | ||||
Schedule of Available-for-sale Securities | ||||
Cost | [2] | 12 | 11 | |
Gross unrealized gains/(losses) | [2] | 0 | (1) | |
Estimated fair value | [2] | 12 | 10 | |
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) | [2] | 0 | 0 | |
Estimated fair value | [2] | $ 2 | $ 2 | |
Minimum | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Time Deposits, Description | three months | |||
Maximum | Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Time Deposits, Description | five years | |||
[1] | Gross realized losses from the sale of available-for-sale securities were immaterial. | |||
[2] | All marketable securities are classified as Level 2 securities. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during 2016 and 2015. |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 1,779 | $ 1,796 |
Work-in-process and raw materials | 1,005 | 1,022 |
Inventories at FIFO cost | 2,784 | 2,818 |
Excess of FIFO over LIFO | (109) | (111) |
Total inventories | $ 2,675 | $ 2,707 |
PROPERTY, PLANT AND EQUIPMENT61
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 7,635 | $ 7,322 |
Accumulated depreciation | (3,835) | (3,577) |
Property, plant and equipment, net | 3,800 | 3,745 |
Land and buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 2,075 | 1,978 |
Machinery, equipment and fixtures | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 4,898 | 4,739 |
Construction in process | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 662 | $ 605 |
GOODWILL AND OTHER INTANGIBLE62
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Changes in the carrying amount of goodwill | ||
Balance at beginning of period | $ 482 | $ 479 |
Acquisitions | 4 | 12 |
Translation and other | (6) | (9) |
Balance at end of period | 480 | 482 |
Components | ||
Changes in the carrying amount of goodwill | ||
Balance at beginning of period | 391 | 400 |
Acquisitions | 0 | 0 |
Translation and other | (5) | (9) |
Balance at end of period | 386 | 391 |
Distribution | ||
Changes in the carrying amount of goodwill | ||
Balance at beginning of period | 75 | 62 |
Acquisitions | 4 | 12 |
Translation and other | 0 | 1 |
Balance at end of period | 79 | 75 |
Power Systems | ||
Changes in the carrying amount of goodwill | ||
Balance at beginning of period | 10 | 11 |
Acquisitions | 0 | 0 |
Translation and other | (1) | (1) |
Balance at end of period | 9 | 10 |
Engine | ||
Changes in the carrying amount of goodwill | ||
Balance at beginning of period | 6 | 6 |
Acquisitions | 0 | 0 |
Translation and other | 0 | 0 |
Balance at end of period | $ 6 | $ 6 |
GOODWILL AND OTHER INTANGIBLE63
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Finite Lived Intangible Assets | |||
Intangible asset, Net | $ 332 | $ 328 | |
Amortization expense for software and other intangibles | 92 | 90 | $ 99 |
Projected amortization expense | |||
2,017 | 83 | ||
2,018 | 66 | ||
2,019 | 56 | ||
2,020 | 43 | ||
2,021 | 28 | ||
Software | |||
Finite Lived Intangible Assets | |||
Intangible asset, Gross | 617 | 536 | |
Less: Accumulated amortization | (330) | (269) | |
Intangible asset, Net | 287 | 267 | |
Trademarks, patents and other | |||
Finite Lived Intangible Assets | |||
Intangible asset, Gross | 164 | 165 | |
Less: Accumulated amortization | (119) | (104) | |
Intangible asset, Net | $ 45 | $ 61 |
PENSION AND OTHER POSTRETIREM64
PENSION AND OTHER POSTRETIREMENT BENEFITS - OBLIGATIONS, ASSETS AND FUNDED STATUS(Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016USD ($)country | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Amounts recognized in consolidated balance sheets | |||
Pension assets - long-term | $ 731 | $ 735 | |
Postretirement benefits other than pensions-long-term liabilities | (329) | (349) | |
Pensions - long-term liabilities | (326) | (298) | |
Pension Plan | |||
Change in plan assets | |||
Exchange rate changes | (28) | $ (7) | $ (18) |
Other Pension Plan | |||
Change in plan assets | |||
Employer contributions | $ 54 | ||
Less Significant Defined Benefit Plans Applicable to Number of Countries | country | 14 | ||
Maximum Percentage of Defined Benefit Plans Assets Included in Other Liabilities and Deferred Revenue | 3.00% | 4.00% | |
U.S. Plans | |||
Change in benefit obligation | |||
Benefit obligation at the beginning of the year | $ 2,533 | $ 2,579 | |
Service cost | 90 | 80 | 66 |
Interest cost | 109 | 102 | 105 |
Actuarial loss (gain) | 111 | (76) | |
Benefits paid from Fund | (175) | (139) | |
Benefits paid directly by employer | (16) | (13) | |
Plan amendments | 9 | ||
Benefit obligation at the end of the year | 2,661 | 2,533 | 2,579 |
Change in plan assets | |||
Fair value of plan assets | 2,751 | 2,636 | 2,713 |
Actual return on plan assets | 200 | (8) | |
Employer contributions | 90 | 70 | |
Funded status | |||
Funded status at end of year | 90 | 103 | |
Amounts recognized in consolidated balance sheets | |||
Pension assets - long-term | 429 | 413 | |
Accrued compensation, benefits and retirement costs - current liabilities | (13) | (12) | |
Pensions - long-term liabilities | (326) | (298) | |
Net amount recognized | 90 | 103 | |
Amounts recognized in accumulated other comprehensive loss consist of: | |||
Net actuarial loss | 770 | 689 | |
Prior service cost (credit) | 9 | (1) | |
Net amount recognized | 779 | 688 | |
Non-U.S. Plans | |||
Change in benefit obligation | |||
Benefit obligation at the beginning of the year | 1,390 | 1,522 | |
Service cost | 21 | 27 | 24 |
Interest cost | 50 | 56 | 63 |
Actuarial loss (gain) | 316 | (88) | |
Benefits paid from Fund | (55) | (53) | |
Exchange rate changes | (271) | (74) | |
Benefit obligation at the end of the year | 1,451 | 1,390 | 1,522 |
Change in plan assets | |||
Fair value of plan assets | 1,753 | 1,712 | 1,724 |
Actual return on plan assets | 402 | 20 | |
Employer contributions | 28 | 107 | |
Exchange rate changes | (334) | (86) | |
Funded status | |||
Funded status at end of year | 302 | 322 | |
Amounts recognized in consolidated balance sheets | |||
Pension assets - long-term | 302 | 322 | |
Net amount recognized | 302 | 322 | |
Amounts recognized in accumulated other comprehensive loss consist of: | |||
Net actuarial loss | 172 | 228 | |
Net amount recognized | 172 | 228 | |
Other Postretirement Benefit Plan | |||
Change in benefit obligation | |||
Benefit obligation at the beginning of the year | 385 | 408 | |
Interest cost | 16 | 15 | 17 |
Plan participants' contributions | 14 | 10 | |
Actuarial loss (gain) | 9 | 5 | |
Benefits paid from Fund | (60) | (53) | |
Benefit obligation at the end of the year | 364 | 385 | $ 408 |
Funded status | |||
Funded status at end of year | (364) | (385) | |
Amounts recognized in consolidated balance sheets | |||
Accrued compensation, benefits and retirement costs - current liabilities | (35) | (36) | |
Postretirement benefits other than pensions-long-term liabilities | (329) | (349) | |
Net amount recognized | (364) | (385) | |
Amounts recognized in accumulated other comprehensive loss consist of: | |||
Net actuarial loss | 69 | 66 | |
Prior service cost (credit) | (5) | (5) | |
Net amount recognized | 64 | $ 61 | |
GERMANY | |||
Change in plan assets | |||
Employer contributions | $ 44 |
PENSION AND OTHER POSTRETIREM65
PENSION AND OTHER POSTRETIREMENT BENEFITS - COMPONENTS OF NET PERIODIC PENSION COST (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Pension Plan | |||
Changes in benefit obligations and plan assets recognized in other comprehensive income | |||
Amortization of prior service credit | $ 0 | $ 1 | $ 1 |
Recognized net actuarial loss | (44) | (79) | (57) |
Incurred actuarial loss | 107 | 105 | 133 |
Foreign exchange translation adjustments | (28) | (7) | (18) |
Total recognized in other comprehensive income | 35 | 20 | 59 |
Total recognized in net periodic pension cost and other comprehensive income | 77 | 83 | 116 |
Defined Benefit Plan, Future Amortization of Gain (Loss) | 77 | ||
U.S. Plans | |||
Pension and other postretirement benefits | |||
Total accumulated benefit obligation | 2,625 | 2,499 | |
Plans with projected benefit obligation in excess of plan assets: | |||
Accumulated benefit obligation | 304 | 276 | |
Plans with accumulated benefit obligation in excess of plan assets: | |||
Projected benefit obligation | 339 | 311 | |
Components of Net Periodic Benefit Cost | |||
Service cost | 90 | 80 | 66 |
Interest cost | 109 | 102 | 105 |
Expected return on plan assets | (201) | (189) | (173) |
Amortization of prior service credit | (1) | (1) | |
Recognized net actuarial loss | 29 | 45 | 31 |
Net periodic pension cost | 27 | 37 | 28 |
Non-U.S. Plans | |||
Pension and other postretirement benefits | |||
Total accumulated benefit obligation | 1,366 | 1,311 | |
Components of Net Periodic Benefit Cost | |||
Service cost | 21 | 27 | 24 |
Interest cost | 50 | 56 | 63 |
Expected return on plan assets | (71) | (91) | (84) |
Recognized net actuarial loss | 15 | 34 | 26 |
Net periodic pension cost | 15 | 26 | 29 |
Changes in benefit obligations and plan assets recognized in other comprehensive income | |||
Foreign exchange translation adjustments | (334) | (86) | |
Other Postretirement Benefit Plan | |||
Components of Net Periodic Benefit Cost | |||
Interest cost | 16 | 15 | 17 |
Recognized net actuarial loss | 5 | 5 | |
Net periodic pension cost | 21 | 20 | 17 |
Changes in benefit obligations and plan assets recognized in other comprehensive income | |||
Recognized net actuarial loss | (6) | (5) | |
Incurred actuarial loss | 9 | 6 | 38 |
Total recognized in other comprehensive income | 3 | 1 | 38 |
Total recognized in net periodic pension cost and other comprehensive income | 24 | $ 21 | $ 55 |
Defined Benefit Plan, Future Amortization of Gain (Loss) | $ 7 |
PENSION AND OTHER POSTRETIREM66
PENSION AND OTHER POSTRETIREMENT BENEFITS - ASSUMPTIONS AND LESS SIGNIFICANT PLANS (Details 3) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Target Allocations | |||
Asset allocation covers exposure to changes in portion of discount rate (as a percent) | 14.00% | ||
U.S. Plans | |||
Assumptions Used in Determining the Pension Benefit Obligation | |||
Discount rate (as a percent) | 4.12% | 4.47% | |
Compensation increase rate (as a percent) | 4.87% | 4.88% | |
Assumptions Used in Determining the Net Periodic Pension Cost and OPEB | |||
Discount rate as a percent (as a percent) | 4.47% | 4.07% | 4.83% |
Expected return on plan assets (as a percent) | 7.50% | 7.50% | 7.50% |
Compensation increase rate (as a percent) | 4.87% | 4.88% | 4.91% |
Target Allocations | |||
Percentage assumption for the expected return on assets for following year | 7.25% | ||
Asset allocation as a percent | 100.00% | ||
U.S. Plans | U.S. Equity | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 18.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 8.00% | ||
Target Allocations | |||
Asset allocation as a percent | 13.00% | ||
U.S. Plans | Non-U.S. Equity | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 8.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 2.00% | ||
Target Allocations | |||
Asset allocation as a percent | 5.00% | ||
U.S. Plans | Global Equities | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 9.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 3.00% | ||
Target Allocations | |||
Asset allocation as a percent | 6.00% | ||
U.S. Plans | Equity Securities | |||
Target Allocations | |||
Asset allocation as a percent | 24.00% | ||
U.S. Plans | Real estate | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 10.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 0.00% | ||
Target Allocations | |||
Asset allocation as a percent | 7.50% | ||
U.S. Plans | Private equity / venture capital | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 10.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 0.00% | ||
Target Allocations | |||
Asset allocation as a percent | 7.50% | ||
U.S. Plans | Opportunistic credit | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 10.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 0.00% | ||
Target Allocations | |||
Asset allocation as a percent | 4.00% | ||
U.S. Plans | Fixed income | |||
Pension and other postretirement benefits | |||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 62.00% | ||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 52.00% | ||
Target Allocations | |||
Asset allocation as a percent | 57.00% | ||
Asset allocation covers exposure to changes in portion of discount rate (as a percent) | 100.00% | ||
Non-U.S. Plans | |||
Assumptions Used in Determining the Pension Benefit Obligation | |||
Discount rate (as a percent) | 2.70% | 3.95% | |
Compensation increase rate (as a percent) | 3.75% | 3.75% | |
Assumptions Used in Determining the Net Periodic Pension Cost and OPEB | |||
Discount rate as a percent (as a percent) | 3.95% | 3.80% | 4.60% |
Expected return on plan assets (as a percent) | 4.70% | 5.80% | 5.80% |
Compensation increase rate (as a percent) | 3.75% | 4.25% | 4.50% |
Target Allocations | |||
Percentage assumption for the expected return on assets for following year | 4.50% | ||
Asset allocation as a percent | 100.00% | ||
Non-U.S. Plans | Global Equities | |||
Target Allocations | |||
Asset allocation as a percent | 23.00% | ||
Non-U.S. Plans | Real estate | |||
Target Allocations | |||
Asset allocation as a percent | 5.00% | ||
Non-U.S. Plans | Reinsurance | |||
Target Allocations | |||
Asset allocation as a percent | 8.00% | ||
Non-U.S. Plans | Corporate Credit Instruments | |||
Target Allocations | |||
Asset allocation as a percent | 7.50% | ||
Non-U.S. Plans | Fixed income | |||
Target Allocations | |||
Asset allocation as a percent | 56.50% | ||
Other Postretirement Benefit Plan | |||
Assumptions Used in Determining the Pension Benefit Obligation | |||
Discount rate (as a percent) | 4.00% | 4.35% | |
Assumptions Used in Determining the Net Periodic Pension Cost and OPEB | |||
Discount rate as a percent (as a percent) | 4.35% | 3.90% | 4.55% |
Defined Benefit Plan, Assumed Health Care Cost Trend Rates [Abstract] | |||
Annual rate of increase in the per capita cost of covered health care benefits | 7.63% | ||
Ultimate per capita trend rate for health care costs | 5.00% | ||
Increase in APBO due to increase of one percent | $ 19 | ||
Decrease in net periodic other postretirement benefit expense due to decrease in health care cost trends of one percent | 1 | ||
Decrease in APBO due to decrease in health care cost rends of one percent | 16 | ||
Increase in net periodic other postretirement benet expense due to incease in health care cost trend rates of one percent | $ 1 |
PENSION AND OTHER POSTRETIREM67
PENSION AND OTHER POSTRETIREMENT BENEFITS - FAIR VALUE OF PLAN ASSETS (Details 4) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
U.S. Plans | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | $ 2,751 | $ 2,636 | $ 2,713 | |
Total Fair Value of Defined Benefit Plan assets subject to leveling | 1,738 | 1,559 | ||
Pending Trade Purchases, Sales | (83) | (27) | ||
Accrued Investment Income Receivable | [1] | 12 | 10 | |
Fair Value of Plan Assets Measured on Recurring Basis | 1,084 | 1,094 | ||
U.S. Plans | U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 145 | 96 | ||
U.S. Plans | Non-U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 125 | 130 | ||
U.S. Plans | Global Equities | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 511 | 335 | ||
U.S. Plans | US Treasury and Government | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 570 | 533 | ||
Fair Value of Plan Assets Measured on Recurring Basis | 178 | 287 | ||
U.S. Plans | Domestic Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 497 | 406 | ||
U.S. Plans | Foreign Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 84 | 80 | ||
U.S. Plans | U.S. and non-U.S. corporate debt | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 265 | 346 | ||
U.S. Plans | Real estate | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 129 | 119 | ||
U.S. Plans | Asset-backed Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 58 | 56 | ||
Fair Value of Plan Assets Measured on Recurring Basis | 1 | 7 | ||
U.S. Plans | Cash Equivalents | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [2] | 38 | 52 | |
U.S. Plans | Derivative | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [3] | 9 | 3 | |
U.S. Plans | Private Equity and Real Estate | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [4] | 212 | 203 | |
U.S. Plans | Fair Value, Inputs, Level 1 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 288 | 268 | ||
U.S. Plans | Fair Value, Inputs, Level 1 | U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 145 | 96 | ||
U.S. Plans | Fair Value, Inputs, Level 1 | Non-U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 125 | 130 | ||
U.S. Plans | Fair Value, Inputs, Level 1 | Cash Equivalents | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [2] | 18 | 42 | |
U.S. Plans | Significant other observable inputs Level 2 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 1,238 | 1,088 | ||
U.S. Plans | Significant other observable inputs Level 2 | US Treasury and Government | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 570 | 533 | ||
U.S. Plans | Significant other observable inputs Level 2 | Domestic Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 497 | 406 | ||
U.S. Plans | Significant other observable inputs Level 2 | Foreign Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 84 | 80 | ||
U.S. Plans | Significant other observable inputs Level 2 | Asset-backed Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 58 | 56 | ||
U.S. Plans | Significant other observable inputs Level 2 | Cash Equivalents | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [2] | 20 | 10 | |
U.S. Plans | Significant other observable inputs Level 2 | Derivative | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [3] | 9 | 3 | |
U.S. Plans | Fair Value, Inputs, Level 3 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 212 | 203 | 202 | |
U.S. Plans | Fair Value, Inputs, Level 3 | Real estate | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 64 | 60 | 54 | |
U.S. Plans | Fair Value, Inputs, Level 3 | Private Equity and Real Estate | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [4] | 212 | 203 | |
Non-U.S. Plans | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 1,753 | 1,712 | 1,724 | |
Total Fair Value of Defined Benefit Plan assets subject to leveling | 1,004 | 1,198 | ||
Fair Value of Plan Assets Measured on Recurring Basis | 749 | 514 | ||
Non-U.S. Plans | U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 174 | 250 | ||
Non-U.S. Plans | Non-U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 193 | 269 | ||
Non-U.S. Plans | Foreign Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 45 | |||
Non-U.S. Plans | U.S. and non-U.S. corporate debt | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 655 | 458 | ||
Non-U.S. Plans | Cash Equivalents | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [5] | 24 | 33 | |
Non-U.S. Plans | Private Equity Real Estate and Insurance | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [6] | 613 | 601 | |
Non-U.S. Plans | Reinsurance | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 56 | 56 | ||
Non-U.S. Plans | Managed Futures Funds | ||||
Pension and other postretirement benefits | ||||
Fair Value of Plan Assets Measured on Recurring Basis | 38 | 0 | ||
Non-U.S. Plans | Fair Value, Inputs, Level 1 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 24 | 33 | ||
Non-U.S. Plans | Fair Value, Inputs, Level 1 | Cash Equivalents | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [5] | 24 | 33 | |
Non-U.S. Plans | Significant other observable inputs Level 2 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 367 | 564 | ||
Non-U.S. Plans | Significant other observable inputs Level 2 | U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 174 | 250 | ||
Non-U.S. Plans | Significant other observable inputs Level 2 | Non-U.S. Equity | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 193 | 269 | ||
Non-U.S. Plans | Significant other observable inputs Level 2 | Foreign Corporate Debt Securities | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 45 | |||
Non-U.S. Plans | Fair Value, Inputs, Level 3 | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 613 | 601 | 604 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Real estate | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | 57 | 57 | $ 61 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Private Equity Real Estate and Insurance | ||||
Pension and other postretirement benefits | ||||
Fair value of plan assets | [6] | $ 613 | $ 601 | |
[1] | Accruals include interest or dividends that were not settled at December 31. | |||
[2] | Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. | |||
[3] | Derivative instruments include interest rate swaps and credit default swaps. | |||
[4] | The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. | |||
[5] | Cash equivalents include commercial paper, short-term government/agency, mortgage and credit instruments. | |||
[6] | The instruments in private equity, real estate and insurance funds, for which quoted market prices are not available, are valued at their estimated fair value as determined by applicable investment managers or by audited financial statement of the funds. |
PENSION AND OTHER POSTRETIREM68
PENSION AND OTHER POSTRETIREMENT BENEFITS - LEVEL 3 FAIR VALUE RECONCILIATION (Details 5) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2012 | Dec. 31, 2016 | Dec. 31, 2015 | |
U.S. Plans | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | $ 2,636 | $ 2,713 | |
Fair value of plan assets at the end of the year | 2,751 | 2,636 | |
U.S. Plans | Fair Value, Inputs, Level 3 | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 203 | 202 | |
Unrealized gains on assets still held at the reporting date | 12 | 25 | |
Purchases, sales and settlements, net | (3) | (24) | |
Fair value of plan assets at the end of the year | 212 | 203 | |
U.S. Plans | Fair Value, Inputs, Level 3 | Private equity / venture capital | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 143 | 148 | |
Unrealized gains on assets still held at the reporting date | 6 | 17 | |
Purchases, sales and settlements, net | (1) | (22) | |
Fair value of plan assets at the end of the year | 148 | 143 | |
U.S. Plans | Fair Value, Inputs, Level 3 | Real estate | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 60 | 54 | |
Unrealized gains on assets still held at the reporting date | 6 | 8 | |
Purchases, sales and settlements, net | (2) | (2) | |
Fair value of plan assets at the end of the year | 64 | 60 | |
Non-U.S. Plans | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 1,712 | 1,724 | |
Fair value of plan assets at the end of the year | 1,753 | 1,712 | |
Non-U.S. Plans | Insurance Contract [Member] | |||
Summary of changes in the fair value of level 3 assets | |||
Insurance Contract Payment Deferment Period | 10 years | ||
Non-U.S. Plans | Fair Value, Inputs, Level 3 | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 601 | 604 | |
Unrealized gains on assets still held at the reporting date | 2 | 23 | |
Purchases, sales and settlements, net | 10 | (26) | |
Fair value of plan assets at the end of the year | 613 | 601 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Insurance Contract [Member] | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 445 | ||
Fair value of plan assets at the end of the year | 439 | 445 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Private equity / venture capital | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 99 | 81 | |
Unrealized gains on assets still held at the reporting date | 15 | 10 | |
Purchases, sales and settlements, net | 3 | 8 | |
Fair value of plan assets at the end of the year | 117 | 99 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Real estate | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 57 | 61 | |
Unrealized gains on assets still held at the reporting date | (7) | 7 | |
Purchases, sales and settlements, net | 7 | (11) | |
Fair value of plan assets at the end of the year | 57 | 57 | |
Non-U.S. Plans | Fair Value, Inputs, Level 3 | Insurance | |||
Summary of changes in the fair value of level 3 assets | |||
Fair value of plan assets at the beginning of the year | 445 | 462 | |
Unrealized gains on assets still held at the reporting date | (6) | 6 | |
Purchases, sales and settlements, net | 0 | (23) | |
Fair value of plan assets at the end of the year | $ 439 | $ 445 |
PENSION AND OTHER POSTRETIREM69
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details 6) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016USD ($)country | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block | |||
Defined Benefit Plan, Expected Contributions in Current Fiscal Year | $ 134 | ||
Other Defined Pension Contribution Plan | |||
Defined Contribution Plan Disclosure | |||
Defined contribution pension plans | 68 | $ 74 | $ 73 |
Pension Plan | |||
Expected benefit payments | |||
2,017 | 241 | ||
2,018 | 237 | ||
2,019 | 243 | ||
2,020 | 249 | ||
2,021 | 254 | ||
2022-2026 | 1,322 | ||
Other Postretirement Benefit Plan | |||
Expected benefit payments | |||
2,017 | 35 | ||
2,018 | 33 | ||
2,019 | 32 | ||
2,020 | 30 | ||
2,021 | 29 | ||
2022-2026 | $ 126 | ||
Less Significant Postretirement Benefit Plans Applicable To Number of Countries | country | 4 | ||
Maximum Percentage of Defined Benefit Plans, Obligations Included in Other Liabilities and Deferred Revenue | 5.00% | 3.00% |
DEBT (Details)
DEBT (Details) | Nov. 13, 2015USD ($) | Feb. 28, 2014USD ($) | Nov. 30, 2005USD ($) | Dec. 31, 2016USD ($)Rate | Dec. 31, 2015USD ($)Rate | Dec. 31, 2014USD ($)Rate | Sep. 19, 2013USD ($) | |
Debt Instruments | ||||||||
Loans payable | $ 41,000,000 | $ 24,000,000 | ||||||
Commercial Paper | 212,000,000 | 0 | ||||||
Letters of credit against international credit facilities | 27,000,000 | |||||||
Unamortized discount | (56,000,000) | (57,000,000) | ||||||
Fair value adjustment due to hedge on indebtedness | 47,000,000 | 63,000,000 | ||||||
Capital leases | 88,000,000 | 81,000,000 | ||||||
Total long-term debt | 1,603,000,000 | 1,615,000,000 | ||||||
Less: Current maturities of long-term debt | 35,000,000 | 39,000,000 | ||||||
Long-term debt | 1,568,000,000 | 1,576,000,000 | ||||||
Debt Instrument Face Amount, upon issuance | $ 1,000,000,000 | |||||||
Principal payments required on long-term debt | ||||||||
2,017 | 35,000,000 | |||||||
2,018 | 33,000,000 | |||||||
2,019 | 29,000,000 | |||||||
2,020 | 8,000,000 | |||||||
2,021 | 4,000,000 | |||||||
Fair value | ||||||||
Fair value of total debt | [1] | 2,077,000,000 | 1,821,000,000 | |||||
Carrying value of total debt | 1,856,000,000 | 1,639,000,000 | ||||||
Loans payable | ||||||||
Debt Instruments | ||||||||
Total interest incurred | 75,000,000 | 68,000,000 | $ 71,000,000 | |||||
Interest capitalized | $ 6,000,000 | 3,000,000 | 7,000,000 | |||||
5-year revolving credit agreement | ||||||||
Debt Instruments | ||||||||
Term of loan | 5 years | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,750,000,000 | |||||||
Revolving credit facility amount available for swingline loans | $ 300,000,000 | |||||||
Debt Instrument, Description of Variable Rate Basis | LIBOR | |||||||
Percentage added to reference rate to compute the variable interest rate | 0.75% | |||||||
Leverage ratio | 3.50 | |||||||
International credit capacity, net of letters of credit | $ 1,540,000,000 | |||||||
International and other domestic short-term credit facilities | ||||||||
Debt Instruments | ||||||||
International credit capacity, net of letters of credit | 128,000,000 | |||||||
Senior Notes, 3.65%, due 2023 | ||||||||
Debt Instruments | ||||||||
Unsecured Debt | $ 500,000,000 | 500,000,000 | ||||||
Debt Instrument Face Amount, upon issuance | 500,000,000 | |||||||
Debt instrument interest rate (as a percent) | 3.65% | |||||||
Debentures, 6.75%, due 2027 | ||||||||
Debt Instruments | ||||||||
Unsecured Debt | $ 58,000,000 | 58,000,000 | ||||||
Debt instrument interest rate (as a percent) | 6.75% | |||||||
Debentures, 7.125%, due 2028 | ||||||||
Debt Instruments | ||||||||
Unsecured Debt | 250,000,000 | |||||||
Debt Instrument Face Amount, upon issuance | $ 250,000,000 | |||||||
Debt instrument interest rate (as a percent) | 7.125% | |||||||
Senior Notes 4.875 Percent, Due 2043 | ||||||||
Debt Instruments | ||||||||
Unsecured Debt | $ 500,000,000 | 500,000,000 | ||||||
Debt Instrument Face Amount, upon issuance | 500,000,000 | |||||||
Debt instrument interest rate (as a percent) | 4.875% | |||||||
Debentures, 5.65%, due 2098 (effective interest rate 7.48%) | ||||||||
Debt Instruments | ||||||||
Unsecured Debt | 165,000,000 | |||||||
Debt Instrument Face Amount, upon issuance | $ 165,000,000 | |||||||
Debt instrument interest rate (as a percent) | 5.65% | |||||||
Effective interest rate (as a percent) | 7.48% | |||||||
Other long-term debt | ||||||||
Debt Instruments | ||||||||
Other Long-term Debt | $ 51,000,000 | 55,000,000 | ||||||
Interest rate contracts | Senior Notes, 3.65%, due 2023 | ||||||||
Debt Instruments | ||||||||
Debt Instrument Face Amount, upon issuance | $ 500,000,000 | |||||||
Debt instrument interest rate (as a percent) | 3.65% | |||||||
Interest rate contracts | Debentures, 7.125%, due 2028 | ||||||||
Debt Instruments | ||||||||
Debt Instrument Face Amount, upon issuance | $ 250,000,000 | |||||||
Other debt disclosure | ||||||||
Deferred Gain (Loss) on Discontinuation of Interest Rate Fair Value Hedge | $ 52,000,000 | |||||||
Amortization Period of Deferred Gain (Loss) on Discontinuation of Interest Rate Fair Value Hedge | 14 years | |||||||
London Interbank Offered Rate (LIBOR) | Interest rate contracts | Senior Notes, 3.65%, due 2023 | ||||||||
Debt Instruments | ||||||||
Debt Instrument, Description of Variable Rate Basis | one-month LIBOR | |||||||
London Interbank Offered Rate (LIBOR) | Interest rate contracts | Debentures, 7.125%, due 2028 | ||||||||
Debt Instruments | ||||||||
Debt Instrument, Description of Variable Rate Basis | LIBOR | |||||||
Interest Expense | Interest rate contracts | ||||||||
Other debt disclosure | ||||||||
Gain/(Loss) on Swaps | [2] | (8,000,000) | 6,000,000 | 23,000,000 | ||||
Gain/(Loss) on Borrowings | [2] | 12,000,000 | (2,000,000) | $ (19,000,000) | ||||
Loans payable | ||||||||
Debt Instruments | ||||||||
Loans payable | $ 41,000,000 | $ 24,000,000 | ||||||
Weighted average interest rate (as a percent) | Rate | 4.20% | 3.65% | 3.70% | |||||
Commercial Paper | ||||||||
Debt Instruments | ||||||||
Weighted average interest rate (as a percent) | Rate | 0.79% | |||||||
Commercial Paper | $ 212,000,000 | |||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,750,000,000 | |||||||
[1] | The fair value of debt is derived from Level 2 inputs. | |||||||
[2] | The difference between the gain/(loss) on swaps and borrowings represents hedge ineffectiveness. |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Product Warranty Liability: | ||
Balance, beginning of year | $ 1,404 | $ 1,283 |
Provision for warranties issued | 334 | 391 |
Deferred revenue on extended warranty contracts sold | 231 | 290 |
Payments | (385) | (389) |
Amortization of deferred revenue on extended warranty contracts | (201) | (179) |
Changes in estimates for pre-existing warranties | 44 | 20 |
Foreign currency translation | (13) | (12) |
Balance, end of period | 1,414 | 1,404 |
Product Warranty Liability | ||
Current portion of deferred revenue | 468 | 403 |
Total deferred revenue related to extended coverage programs | 745 | 718 |
Long-term portion of warranty liability | 336 | 327 |
Current portion of deferred revenue | ||
Product Warranty Liability | ||
Current portion of deferred revenue | 218 | 189 |
Other liabilities and deferred revenue | ||
Product Warranty Liability | ||
Deferred revenue related to extended coverage programs, Noncurrent portion | 527 | 529 |
Long-term portion of warranty liability | $ 336 | $ 327 |
OTHER LIABILITIES AND DEFERRE72
OTHER LIABILITIES AND DEFERRED REVENUE (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 |
Other liabilities and deferred revenue: | ||
Deferred revenue | $ 589 | $ 583 |
Accrued warranty | 336 | 327 |
Accrued compensation | 151 | 199 |
Other long-term liabilities | 213 | 249 |
Other liabilities and deferred revenue | $ 1,289 | $ 1,358 |
COMMITMENTS AND CONTINGENCIES73
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||
Oct. 02, 2016 | Jul. 03, 2016 | [2] | Dec. 31, 2016 | Dec. 31, 2015 | [1] | Dec. 31, 2014 | ||
Guarantee Obligations: | ||||||||
Loss Contingency, Loss in Period | $ 138 | [1] | $ 60 | $ 0 | ||||
Other Guarantees and Commitments | ||||||||
Guarantee Obligations: | ||||||||
Guarantee obligations, maximum potential loss | 24 | |||||||
Long-term purchase commitment, penalty exposure | 90 | |||||||
Commodity Contract Liability Noncurrent | 45 | |||||||
Components Supplier | ||||||||
Guarantee Obligations: | ||||||||
Long-term purchase commitment, penalty exposure | 47 | |||||||
Performance bonds and other performance-related guarantees | ||||||||
Guarantee Obligations: | ||||||||
Guarantee obligations, current carrying value | 85 | |||||||
Engine | ||||||||
Guarantee Obligations: | ||||||||
Loss Contingency, Loss in Period | $ 99 | $ 39 | $ 138 | [1] | $ 60 | |||
[1] | See Note 12, "COMMITMENTS AND CONTINGENCIES," for additional information. | |||||||
[2] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. |
COMMITMENTS AND CONTINGENCIES O
COMMITMENTS AND CONTINGENCIES OPERATING AND CAIPITAL LEASES (Details 2) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Leased property under leases by major classes | |||
Rent expense | $ 210 | $ 205 | $ 195 |
Less: Accumulated amortization | (133) | (112) | |
Total | 104 | 102 | |
Net present value of the minimum payments due under capital leases | |||
2,017 | 25 | ||
2,018 | 22 | ||
2,019 | 19 | ||
2,020 | 7 | ||
2,021 | 6 | ||
After 2,021 | 39 | ||
Total minimum lease payments | 118 | ||
Interest | (30) | ||
Present value of net minimum lease payments | 88 | ||
Net present value of the minimum payments due under operating Leases | |||
2,017 | 141 | ||
2,018 | 101 | ||
2,019 | 81 | ||
2,020 | 59 | ||
2,021 | 44 | ||
After 2,021 | 93 | ||
Total minimum lease payments | 519 | ||
Buildings | |||
Leased property under leases by major classes | |||
Capital lease asset | 113 | 113 | |
Equipment | |||
Leased property under leases by major classes | |||
Capital lease asset | 109 | 86 | |
Land | |||
Leased property under leases by major classes | |||
Capital lease asset | $ 15 | $ 15 | |
Maximum | |||
Leased property under leases by major classes | |||
Lessee Leasing Arrangements, Operating Leases, Term of Contract | 10 years | ||
Operating Leases, Future Minimum Payments Receivable, Current | $ 1 | ||
Operating Leases, Future Minimum Payments Receivable, in Two Years | 1 | ||
Operating Leases, Future Minimum Payments Receivable, in Three Years | 1 | ||
Operating Leases, Future Minimum Payments Receivable, in Four Years | 1 | ||
Operating Leases, Future Minimum Payments Receivable, in Five Years | $ 1 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||||
Jul. 31, 2016 | Jul. 31, 2015 | Jul. 31, 2014 | Dec. 31, 2016 | Oct. 02, 2016 | Jul. 03, 2016 | Apr. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 31, 2014 | Sep. 28, 2014 | Jun. 29, 2014 | Mar. 30, 2014 | Jul. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Changes in shares of stock | |||||||||||||||||||
Shares acquired (in shares) | 4.7 | ||||||||||||||||||
Dividends Paid | |||||||||||||||||||
Dividend payments on common stock (in dollars) | $ 676 | $ 622 | $ 512 | ||||||||||||||||
Preferred Stock | |||||||||||||||||||
Class of Stock | |||||||||||||||||||
Preferred Stock, Shares Authorized | 1 | 1 | |||||||||||||||||
Preference Stock | |||||||||||||||||||
Class of Stock | |||||||||||||||||||
Preferred Stock, Shares Authorized | 1 | 1 | |||||||||||||||||
Common Stock | |||||||||||||||||||
Changes in shares of stock | |||||||||||||||||||
Balance at beginning of period (in shares) | 222.4 | 222.3 | 222.3 | 222.4 | 222.4 | 222.3 | 222.3 | ||||||||||||
Stock Issued During Period, Shares, New Issues | 0 | 0.1 | 0.1 | ||||||||||||||||
Other shareholder transactions (in shares) | (0.1) | ||||||||||||||||||
Balance at the end of the period (in shares) | 222.4 | 222.4 | 222.3 | 222.4 | 222.4 | 222.3 | |||||||||||||
Dividends Paid | |||||||||||||||||||
Percentage increase in cash dividend per common share | 5.10% | 25.00% | 25.00% | ||||||||||||||||
Cash dividend (in dollars per share) | $ 1.025 | $ 1.025 | $ 0.975 | $ 0.975 | $ 0.975 | $ 0.975 | $ 0.78 | $ 0.78 | $ 0.78 | $ 0.78 | $ 0.625 | $ 0.625 | $ 4 | $ 3.51 | $ 2.81 | ||||
Treasury Stock, Common | |||||||||||||||||||
Changes in shares of stock | |||||||||||||||||||
Balance at beginning of period (in shares) | 47.2 | 40.1 | 35.6 | 47.2 | 47.2 | 40.1 | 35.6 | ||||||||||||
Shares acquired (in shares) | 7.3 | 7.2 | 4.8 | ||||||||||||||||
Stock Issued During Period, Shares, New Issues | (0.3) | (0.1) | (0.3) | ||||||||||||||||
Balance at the end of the period (in shares) | 54.2 | 47.2 | 40.1 | 54.2 | 47.2 | 40.1 | |||||||||||||
Common Stock Held in Trust | |||||||||||||||||||
Changes in shares of stock | |||||||||||||||||||
Balance at beginning of period (in shares) | 0.9 | 1.1 | 1.3 | 0.9 | 0.9 | 1.1 | 1.3 | ||||||||||||
Stock Issued During Period, Shares, New Issues | (0.2) | (0.2) | (0.2) | ||||||||||||||||
Balance at the end of the period (in shares) | 0.7 | 0.9 | 1.1 | 0.7 | 0.9 | 1.1 | |||||||||||||
Employee Benefits Trust | |||||||||||||||||||
Contributions charged to income | $ 23 | $ 25 | $ 24 |
SHAREHOLDERS' EQUITY (Details 2
SHAREHOLDERS' EQUITY (Details 2) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2016 | Nov. 30, 2015 | Dec. 31, 2016 | Oct. 02, 2016 | Jul. 03, 2016 | Apr. 03, 2016 | Jul. 03, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Feb. 09, 2016 | ||
Share repurchase programs | ||||||||||||
Shares acquired | 4.7 | |||||||||||
Average Cost Per Share (in dollars per share) | $ 106.48 | |||||||||||
Repurchases of common stock | $ 778 | |||||||||||
Treasury Stock, Value, Acquired, Cost Method | $ 778 | $ 900 | $ 670 | |||||||||
Accelerated Share Repurchases, Settlement (Payment) or Receipt | $ 500 | |||||||||||
Fair value of option grant estimated on the grant date using Black-Scholes option pricing model assumptions | The fair value of each option grant was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: 2016 2015 2014 Expected life (years) 5 5 5 Risk-free interest rate 1.34 % 1.41 % 1.80 % Expected volatility 30.96 % 33.06 % 41.17 % Dividend yield 2.10 % 1.69 % 1.61 % | |||||||||||
Accelerated Share Repurchases, Final Price Paid Per Share | $ 105.50 | |||||||||||
Repurchases of common stock | $ 778 | $ 900 | $ 670 | |||||||||
1 billion repurchase program 2014 | ||||||||||||
Share repurchase programs | ||||||||||||
Average Cost Per Share (in dollars per share) | $ 100.12 | |||||||||||
Repurchases of common stock | $ 274 | |||||||||||
Remaining Authorized Capacity | [1] | $ 0 | ||||||||||
1 billion repurchase program 2015 | ||||||||||||
Share repurchase programs | ||||||||||||
Average Cost Per Share (in dollars per share) | $ 130.70 | $ 126.13 | $ 109.79 | $ 105.50 | $ 110.29 | |||||||
Repurchases of common stock | $ 33 | $ 50 | $ 192 | $ 229 | $ 504 | |||||||
Remaining Authorized Capacity | [1] | $ 496 | $ 496 | $ 529 | $ 579 | $ 671 | $ 579 | $ 496 | ||||
Treasury Stock, Common | ||||||||||||
Share repurchase programs | ||||||||||||
Shares acquired | 7.3 | 7.2 | 4.8 | |||||||||
Treasury Stock, Common | 1 billion repurchase program 2014 | ||||||||||||
Share repurchase programs | ||||||||||||
Shares acquired | 2.7 | |||||||||||
Treasury Stock, Common | 1 billion repurchase program 2015 | ||||||||||||
Share repurchase programs | ||||||||||||
Treasury Stock Repurchase Authorization Value | $ 1,000 | |||||||||||
Shares acquired | 0.2 | 0.4 | 1.8 | 2.2 | 4.6 | |||||||
Treasury Stock, Common | 1 billion repurchase program 2016 | ||||||||||||
Share repurchase programs | ||||||||||||
Treasury Stock Repurchase Authorization Value | $ 1,000 | |||||||||||
Additional paid-in Capital | ||||||||||||
Share repurchase programs | ||||||||||||
Treasury Stock, Value, Acquired, Cost Method | $ (100) | $ 100 | ||||||||||
[1] | The remaining authorized capacity under the 2015 Plan was calculated based on the cost to purchase the shares but excludes commission expenses in accordance with the authorized Plan. |
OTHER COMPREHENSIVE INCOME (L77
OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | $ (1,348) | |||
Before tax amount | (634) | $ (445) | $ (440) | |
Tax benefit (expense) | 88 | 110 | 104 | |
After tax amount | (546) | (335) | (336) | |
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 56 | 50 | 31 |
Net current period other comprehensive income (loss) | (490) | (285) | (305) | |
Balance at the end of period | (1,821) | (1,348) | ||
Total attributable to Cummins Inc. | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | (1,348) | (1,078) | (784) | |
Before tax amount | (617) | (430) | (433) | |
Tax benefit (expense) | 88 | 110 | 104 | |
After tax amount | (529) | (320) | (329) | |
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 56 | 50 | 35 |
Net current period other comprehensive income (loss) | (473) | (270) | (294) | |
Balance at the end of period | (1,821) | (1,348) | (1,078) | |
Change in pensions and other postretirement defined benefit plans | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | (654) | (669) | (611) | |
Before tax amount | (111) | (81) | (196) | |
Tax benefit (expense) | 44 | 35 | 92 | |
After tax amount | (67) | (46) | (104) | |
Net current period other comprehensive income (loss) | (31) | 15 | (58) | |
Balance at the end of period | (685) | (654) | (669) | |
Foreign currency translation adjustment | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | (696) | (406) | (179) | |
Before tax amount | (469) | (366) | (241) | |
Tax benefit (expense) | 38 | 76 | 14 | |
After tax amount | (431) | (290) | (227) | |
Net current period other comprehensive income (loss) | (431) | (290) | (227) | |
Balance at the end of period | (1,127) | (696) | (406) | |
Unrealized gain (loss) on marketable securities | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | (2) | (1) | 7 | |
Before tax amount | 1 | 2 | ||
Tax benefit (expense) | 0 | (1) | ||
After tax amount | 1 | 1 | ||
Net current period other comprehensive income (loss) | 1 | (1) | (8) | |
Balance at the end of period | (1) | (2) | (1) | |
Unrealized gain (loss) on derivatives | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Balance at the beginning of period | 4 | (2) | (1) | |
Before tax amount | (38) | 17 | 2 | |
Tax benefit (expense) | 6 | (1) | (1) | |
After tax amount | (32) | 16 | 1 | |
Net current period other comprehensive income (loss) | (12) | 6 | (1) | |
Balance at the end of period | (8) | 4 | (2) | |
Noncontrolling interests | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Before tax amount | (17) | (15) | (7) | |
After tax amount | (17) | (15) | (7) | |
Net current period other comprehensive income (loss) | (17) | (15) | (11) | |
Reclassification out of accumulated other comprehensive income (loss) | Change in pensions and other postretirement defined benefit plans | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 36 | 61 | 46 |
Reclassification out of accumulated other comprehensive income (loss) | Unrealized gain (loss) on marketable securities | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | (1) | (9) | |
Reclassification out of accumulated other comprehensive income (loss) | Unrealized gain (loss) on derivatives | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | 20 | $ (10) | (2) |
Reclassification out of accumulated other comprehensive income (loss) | Noncontrolling interests | ||||
Changes in accumulated other comprehensive income (loss) by component: | ||||
Amounts reclassified from accumulated other comprehensive income | [1],[2] | $ 0 | $ (4) | |
[1] | Amounts are net of tax. | |||
[2] | See reclassifications out of accumulated other comprehensive (loss) income disclosure below for further details. |
OTHER COMPREHENSIVE INCOME (L78
OTHER COMPREHENSIVE INCOME (LOSS) (Details 2) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||||
Dec. 31, 2016 | Oct. 02, 2016 | Jul. 03, 2016 | Apr. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
Other income (expense), net | $ (48) | $ (9) | $ (110) | ||||||||||||
NET SALES | $ (4,503) | $ (4,187) | $ (4,528) | $ (4,291) | $ (4,766) | $ (4,620) | $ (5,015) | $ (4,709) | (17,509) | [1] | (19,110) | [1] | (19,221) | [1] | |
Cost of sales | 13,057 | 14,163 | 14,360 | ||||||||||||
Total before taxes | (1,930) | (2,025) | (2,434) | ||||||||||||
Tax effect | 474 | 555 | 698 | ||||||||||||
Total reclassifications for the period | (1,456) | (1,470) | (1,736) | ||||||||||||
Reclassification out of accumulated other comprehensive income (loss) | |||||||||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
Total reclassifications for the period | 56 | 50 | 31 | ||||||||||||
Change in pensions and other postretirement defined benefit plans | Reclassification out of accumulated other comprehensive income (loss) | |||||||||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
Recognized actuarial loss | [2] | (53) | (87) | (63) | |||||||||||
Tax effect | (17) | (26) | (17) | ||||||||||||
Total reclassifications for the period | 36 | 61 | 46 | ||||||||||||
Realized gain on marketable securities | Reclassification 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) | (14) | ||||||||||||
Tax effect | 1 | ||||||||||||||
Total reclassifications for the period | 0 | (1) | (13) | ||||||||||||
Realized loss (gain) on derivatives | Reclassification out of accumulated other comprehensive income (loss) | |||||||||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
Total before taxes | 27 | (11) | (3) | ||||||||||||
Tax effect | (7) | 1 | 1 | ||||||||||||
Total reclassifications for the period | 20 | (10) | (2) | ||||||||||||
Realized loss (gain) on derivatives | Foreign currency forward contracts | Reclassification out of accumulated other comprehensive income (loss) | |||||||||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
NET SALES | $ 27 | $ (11) | (5) | ||||||||||||
Realized loss (gain) on derivatives | Commodity swap contracts | Reclassification out of accumulated other comprehensive income (loss) | |||||||||||||||
Reclassified out of accumulated other comprehensive income (loss) and related tax effects | |||||||||||||||
Cost of sales | $ 2 | ||||||||||||||
[1] | Includes sales to nonconsolidated equity investees of $1,028 million, $1,209 million and $2,063 million for the years ended December 31, 2016, 2015 and 2014, respectively. | ||||||||||||||
[2] | These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8, ''PENSION AND OTHER POSTRETIREMENT BENEFITS''). |
STOCK INCENTIVE AND STOCK OPT79
STOCK INCENTIVE AND STOCK OPTION PLANS (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016USD ($)optionshares | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Number of stock-based awards authorized to be granted to executives, employees and non-employee directors under the 2012 Omnibus Plant (in shares) | shares | 3,500,000 | ||
Stock options' expiration from the date of grant | 10 years | ||
Stock options vesting period | 3 years | ||
Number of shares in every even block of KESIP shares | shares | 100 | ||
Stock options granted for every even block of 100 KESIP shares purchased by the employee | option | 50 | ||
Performance period of performance shares | 3 years | ||
Excess tax benefit / (deficiency) associated with share-based plans | $ 1 | $ 1 | $ 5 |
Total unrecognized compensation expense (net of estimated forfeitures) | $ 28 | ||
Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Weighted-average maximum period of recognition of total unrecognized compensation expense related to nonvested awards | 2 years | ||
Performance Shares | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Target award based on the actual ROE performance (as a percent) | 0.00% | ||
Performance Shares | Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Target award based on the actual ROE performance (as a percent) | 200.00% | ||
Restricted Shares | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Period after which portion of issued restricted shares will be released | 2 years | ||
Restricted shares released after two years (as a percent) | 33.33% | ||
Restricted shares released on the grant date each year after the first two years (as a percent) | 33.33% | ||
Employee Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Compensation expense (net of estimated forfeitures) | $ 31 | 22 | 35 |
Non-Employee Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Compensation expense (net of estimated forfeitures) | $ 1 | $ 2 | $ 1 |
STOCK INCENTIVE AND STOCK OPT80
STOCK INCENTIVE AND STOCK OPTION PLANS (Details 2) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Stock option plan activity | |||
Balance, at the beginning of the period (in shares) | 2,029,686 | 1,626,724 | 1,462,336 |
Granted (in shares) | 984,430 | 476,205 | 350,630 |
Exercised (in shares) | (215,890) | (53,545) | (175,526) |
Forfeited (in shares) | (63,462) | (19,698) | (10,716) |
Balance, at the end of the period (in shares) | 2,734,764 | 2,029,686 | 1,626,724 |
Exercisable (in shares) | 1,149,549 | 1,318,101 | 903,059 |
Weighted average exercise price activity | |||
Weighted-average Exercise Price at the beginning of the period (in dollars per share) | $ 115.02 | $ 108.30 | $ 95.35 |
Weighted-average Exercise Price Granted (in dollars per share) | 109.24 | 135.21 | 148.98 |
Weighted-average Exercise Price Exercised (in dollars per share) | 87.27 | 82.89 | 82.06 |
Weighted-average Exercise Price Forfeited (in dollars per share) | 119.56 | 135.89 | 102.56 |
Weighted-average Exercise Price at the end of the period (in dollars per share) | 115.02 | 115.02 | 108.30 |
Weighted-average Exercise Price Exercisable (in dollars per share) | $ 104.19 | $ 100.55 | $ 92.18 |
Weighted-average remaining contractual life of options outstanding | 7 years 1 month 14 days | ||
Weighted-average remaining contractual life of options exercisable | 4 years 9 months 23 days | 5 years 8 months 23 days | 6 years 18 days |
Aggregate intrinsic value of options outstanding | $ 64 | ||
Aggregate intrinsic value of options exercisable | $ 38 | $ 13 | $ 48 |
Weighted average grant date fair value of options granted (in dollars per share) | $ 25.28 | $ 35.25 | $ 49.16 |
Total intrinsic value of options exercised | $ 9 | $ 3 | $ 12 |
STOCK INCENTIVE AND STOCK OPT81
STOCK INCENTIVE AND STOCK OPTION PLANS (Details 3) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Black-Scholes option pricing model assumptions | |||
Expected life | 5 years | 5 years | 5 years |
Risk-free interest rate | 1.34% | 1.41% | 1.80% |
Expected volatility | 30.96% | 33.06% | 41.17% |
Dividend yield | 2.10% | 1.69% | 1.61% |
Performance Shares | |||
Share-based compensation plan, other than stock options, activity | |||
Nonvested at the beginning of the period (in shares) | 420,369 | 466,693 | 475,913 |
Granted (in shares) | 169,150 | 133,975 | 206,031 |
Vested (in shares) | (115,680) | (112,901) | (207,093) |
Forfeited (in shares) | (69,345) | (67,398) | (8,158) |
Nonvested at the end of the period (in shares) | 404,494 | 420,369 | 466,693 |
Share-based compensation plan, other than stock options, weighted average grant date fair value activity | |||
Weighted-average Fair Value, Nonvested at the beginning of the period (in dollars per share) | $ 123.88 | $ 119.78 | $ 109.93 |
Granted (in dollars per share) | 98.26 | 128.48 | 130.38 |
Vested (in dollars per share) | 106.55 | 115.48 | 107.64 |
Forfeited (in dollars per share) | 110.52 | 118.71 | 121.18 |
Weighted-average Nonvested, Outstanding at the end of the period (in dollars per share) | $ 120.41 | $ 123.88 | $ 119.78 |
Total fair value of equity instruments other than options vested in period (in dollars) | $ 12 | $ 11 | $ 30 |
Restricted Shares | |||
Share-based compensation plan, other than stock options, activity | |||
Nonvested at the beginning of the period (in shares) | 4,254 | 11,275 | 32,541 |
Granted (in shares) | 8,089 | 0 | 0 |
Vested (in shares) | (2,502) | (7,021) | (21,266) |
Forfeited (in shares) | 0 | 0 | 0 |
Nonvested at the end of the period (in shares) | 9,841 | 4,254 | 11,275 |
Share-based compensation plan, other than stock options, weighted average grant date fair value activity | |||
Weighted-average Fair Value, Nonvested at the beginning of the period (in dollars per share) | $ 111.40 | $ 110.94 | $ 81.49 |
Granted (in dollars per share) | 117.69 | 0 | 0 |
Vested (in dollars per share) | 114.57 | 110.66 | 65.88 |
Forfeited (in dollars per share) | 0 | 0 | 0 |
Weighted-average Nonvested, Outstanding at the end of the period (in dollars per share) | $ 115.76 | $ 111.40 | $ 110.94 |
Total fair value of equity instruments other than options vested in period (in dollars) | $ 1 | $ 3 | |
Maximum | Restricted Shares | |||
Share-based compensation plan, other than stock options, weighted average grant date fair value activity | |||
Total fair value of equity instruments other than options vested in period (in dollars) | $ 1 |
NONCONTROLLING INTERESTS (Detai
NONCONTROLLING INTERESTS (Details) - USD ($) $ in Millions | Dec. 31, 2016 | Dec. 31, 2015 | |
Noncontrolling Interest | |||
Noncontrolling interests in the equity | $ 299 | $ 344 | |
Cummins India Ltd. | |||
Noncontrolling Interest | |||
Noncontrolling interests in the equity | 285 | 271 | |
Wuxi Cummins Turbo Technologies Co. Ltd. | |||
Noncontrolling Interest | |||
Noncontrolling interests in the equity | [1] | 0 | 54 |
Other | |||
Noncontrolling Interest | |||
Noncontrolling interests in the equity | $ 14 | $ 19 | |
[1] | In December 2016, we purchased the remaining interest in Wuxi Cummins Turbo Technologies Co. Ltd. See Note 18, "ACQUISITIONS," for additional information. |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||||||||
Dec. 31, 2016 | Oct. 02, 2016 | [1] | Jul. 03, 2016 | [1] | Apr. 03, 2016 | Dec. 31, 2015 | [2] | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||||||
Earnings Per Share [Abstract] | |||||||||||||||||||
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 378 | $ 289 | $ 406 | $ 321 | $ 161 | $ 380 | $ 471 | $ 387 | $ 1,394 | $ 1,399 | $ 1,651 | ||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||
Basic (in shares) | 169,038,410 | 178,037,581 | 182,637,568 | ||||||||||||||||
Dilutive effect of stock compensation awards (in shares) | 298,206 | 369,247 | 441,727 | ||||||||||||||||
Diluted (in shares) | 169,336,616 | 178,406,828 | 183,079,295 | ||||||||||||||||
Options excluded (in shares) | 1,091,799 | 866,262 | 165,840 | ||||||||||||||||
Earnings per common share attributable to Cummins Inc. | |||||||||||||||||||
Basic (in dollars per share) | $ 2.26 | [3] | $ 1.72 | [3] | $ 2.41 | [3] | $ 1.87 | [3] | $ 0.92 | [3] | $ 2.15 | [3] | $ 2.63 | [3] | $ 2.14 | [3] | $ 8.25 | $ 7.86 | $ 9.04 |
Diluted (in dollars per share) | $ 2.25 | [3] | $ 1.72 | [3] | $ 2.40 | [3] | $ 1.87 | [3] | $ 0.92 | [3] | $ 2.14 | [3] | $ 2.62 | [3] | $ 2.14 | [3] | $ 8.23 | $ 7.84 | $ 9.02 |
[1] | The second quarter of 2016, included an additional $39 million loss contingency charge ($24 million after-tax). The third quarter of 2016 included an additional $99 million loss contingency charge ($50 million net of favorable compensation impact and after-tax). | ||||||||||||||||||
[2] | The fourth quarter of 2015, included a $211 million impairment of light-duty diesel assets ($133 million after-tax), a $90 million restructuring charge ($61 million after-tax) and a $60 million charge for a loss contingency ($38 million after-tax). | ||||||||||||||||||
[3] | Earnings per share in each quarter is computed using the weighted-average number of shares outstanding during that quarter while earnings per share for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters earnings per share may not equal the full year earnings per share. |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - USD ($) $ in Millions | Dec. 05, 2016 | Oct. 04, 2016 | Jan. 01, 2016 | Aug. 03, 2015 | Jun. 29, 2015 | Nov. 03, 2014 | Sep. 29, 2014 | Aug. 04, 2014 | May 05, 2014 | Mar. 31, 2014 | Feb. 14, 2014 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Business Acquisition [Line Items] | ||||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | $ 15 | $ 18 | $ 73 | |||||||||||||
Business Combination Purchase Price Distributed in Future Quarters | 2 | |||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Goodwill | $ 480 | 482 | 479 | |||||||||||||
Wuxi Cummins Turbo Technologies Co. Ltd. | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 45.00% | |||||||||||||||
Cash paid for business acquisition | $ 86 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 0 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | 0 | |||||||||||||||
Consideration transferred | $ 86 | |||||||||||||||
Cummins Pacific LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 30 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 67 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 15 | ||||||||||||||
Net sales prior to acquisition | [2] | $ 391 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Accounts receivable | 65 | |||||||||||||||
Inventory | 35 | |||||||||||||||
Fixed assets | 56 | |||||||||||||||
Intangible assets, other than goodwill | [3] | 8 | ||||||||||||||
Goodwill | 4 | |||||||||||||||
Other current assets | 10 | |||||||||||||||
Current liabilities | (46) | |||||||||||||||
Non-current liabilities | 0 | |||||||||||||||
Total business valuation | 132 | |||||||||||||||
Fair value of pre-existing interest | (33) | |||||||||||||||
Consideration transferred | [4] | $ 99 | ||||||||||||||
Cummins Northeast LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 35.00% | |||||||||||||||
Cash paid for business acquisition | $ 12 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 0 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | 0 | |||||||||||||||
Consideration transferred | $ 12 | |||||||||||||||
Cummins Crosspoint LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 29 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 36 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 10 | ||||||||||||||
Net sales prior to acquisition | [2] | 258 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 2 | ||||||||||||||
Goodwill | 7 | |||||||||||||||
Consideration transferred | $ 65 | |||||||||||||||
Cummins Atlantic LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 51.00% | |||||||||||||||
Cash paid for business acquisition | $ 21 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 28 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 8 | ||||||||||||||
Net sales prior to acquisition | [2] | $ 245 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 6 | ||||||||||||||
Goodwill | 5 | |||||||||||||||
Consideration transferred | $ 49 | |||||||||||||||
Cummins Central Power LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 20.01% | |||||||||||||||
Cash paid for business acquisition | $ 8 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 0 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | 0 | |||||||||||||||
Consideration transferred | $ 8 | |||||||||||||||
Cummins Bridgeway LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 54.00% | |||||||||||||||
Cash paid for business acquisition | $ 32 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 45 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 13 | ||||||||||||||
Net sales prior to acquisition | [2] | $ 331 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 15 | ||||||||||||||
Goodwill | 4 | |||||||||||||||
Consideration transferred | $ 77 | |||||||||||||||
Cummins Npower LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 39 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 34 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 15 | ||||||||||||||
Net sales prior to acquisition | [2] | 374 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 8 | ||||||||||||||
Goodwill | 7 | |||||||||||||||
Consideration transferred | $ 73 | |||||||||||||||
Cummins Power South LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 19 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 16 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 7 | ||||||||||||||
Net sales prior to acquisition | [2] | 239 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 1 | ||||||||||||||
Goodwill | 8 | |||||||||||||||
Consideration transferred | $ 35 | |||||||||||||||
Cummins Eastern Canada LP | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 30 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 32 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 18 | ||||||||||||||
Net sales prior to acquisition | [2] | 228 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Intangible assets, other than goodwill | [3] | 4 | ||||||||||||||
Goodwill | 5 | |||||||||||||||
Consideration transferred | $ 62 | |||||||||||||||
Cummins Power Systems LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 30.00% | |||||||||||||||
Cash paid for business acquisition | $ 14 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Consideration transferred | $ 14 | |||||||||||||||
Cummins Southern Plains LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 50.00% | |||||||||||||||
Cash paid for business acquisition | $ 44 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 48 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 13 | ||||||||||||||
Net sales prior to acquisition | [2] | 433 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Accounts receivable | 63 | |||||||||||||||
Inventory | 59 | |||||||||||||||
Fixed assets | 47 | |||||||||||||||
Intangible assets, other than goodwill | [3] | 11 | ||||||||||||||
Goodwill | 1 | |||||||||||||||
Other current assets | 8 | |||||||||||||||
Current liabilities | (53) | |||||||||||||||
Non-current liabilities | 0 | |||||||||||||||
Total business valuation | 136 | |||||||||||||||
Fair value of pre-existing interest | (44) | |||||||||||||||
Consideration transferred | $ 92 | |||||||||||||||
Cummins Mid-South LLC | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 62.20% | |||||||||||||||
Cash paid for business acquisition | $ 57 | |||||||||||||||
Payments to Acquire Businesses Liabilities Paid | 61 | |||||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | [1] | 7 | ||||||||||||||
Net sales prior to acquisition | [2] | $ 368 | ||||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | ||||||||||||||||
Accounts receivable | 71 | |||||||||||||||
Inventory | 70 | |||||||||||||||
Fixed assets | 37 | |||||||||||||||
Intangible assets, other than goodwill | [3] | 8 | ||||||||||||||
Goodwill | 4 | |||||||||||||||
Other current assets | 10 | |||||||||||||||
Current liabilities | (43) | |||||||||||||||
Non-current liabilities | (4) | |||||||||||||||
Total business valuation | 153 | |||||||||||||||
Fair value of pre-existing interest | (35) | |||||||||||||||
Consideration transferred | $ 118 | |||||||||||||||
Maximum | ||||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | |||||||||||||||
[1] | All results from acquired entities were included in 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 Consolidated Statements of Income as "Other income, net." | |||||||||||||||
[2] | 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. | |||||||||||||||
[3] | 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. | |||||||||||||||
[4] | 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 outstanding consideration at December 31, 2016, was $2 million. |
IMPAIRMENTS (Details)
IMPAIRMENTS (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
LDD Asset Gross Prior to Impairment | $ 279 | ||||
Property, plant and equipment, net | $ 3,800 | 3,745 | |||
Impairment of light-duty diesel assets | $ 0 | 211 | [1],[2] | $ 0 | |
Impairment of Light-duty diesel assets Held-for-use (After-tax) | 133 | ||||
Engine | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Impairment of light-duty diesel assets | [2] | 202 | |||
Components | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Impairment of light-duty diesel assets | [2] | 9 | |||
Assets measured prior to impairment | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Property, plant and equipment, net | [1] | 246 | |||
Assets measured prior to impairment | Engine | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Property, plant and equipment, net | [1] | 235 | |||
Assets measured prior to impairment | Components | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Property, plant and equipment, net | [1] | 11 | |||
Assets measured after impairment | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Assets, Fair Value After Impairment | [1] | 35 | |||
Assets measured after impairment | Engine | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Assets, Fair Value After Impairment | [1] | 33 | |||
Assets measured after impairment | Components | |||||
Impaired Long-Lived Assets Held and Used [Line Items] | |||||
Assets, Fair Value After Impairment | [1] | $ 2 | |||
[1] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. | ||||
[2] | See Note 19, "IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS," for additional information. |
RESTRUCTURING AND OTHER CHARG86
RESTRUCTURING AND OTHER CHARGES (Details) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($)employee | Dec. 31, 2014USD ($) | |||
Restructuring and other charges | |||||
Restructuring and Related Cost, Expected Number of Positions Eliminated | employee | 1,900 | ||||
Restructuring actions and other charges | [1] | $ 90 | |||
Restructuring Charges, Net of Tax | 61 | ||||
Impairment and other restructuring charges | 4 | ||||
Restructuring related accruals | |||||
Workforce reductions | 86 | ||||
Payments for Restructuring | $ (58) | (26) | |||
Restructuring reserve, beginning of year | 60 | ||||
Change in estimate, restructuring | (1) | ||||
Restructuring reserve, balance at end of year | $ 1 | $ 60 | |||
Voluntary Retirement, Number of employees | |||||
Restructuring and other charges | |||||
Restructuring and Related Cost, Expected Number of Positions Eliminated | employee | 370 | ||||
Power Systems | |||||
Restructuring and other charges | |||||
Restructuring actions and other charges | $ 26 | [1] | $ 32 | ||
Distribution | |||||
Restructuring and other charges | |||||
Restructuring actions and other charges | [1] | 23 | |||
Engine | |||||
Restructuring and other charges | |||||
Restructuring actions and other charges | [1] | 17 | |||
Components | |||||
Restructuring and other charges | |||||
Restructuring actions and other charges | [1] | 13 | |||
Corporate | |||||
Restructuring and other charges | |||||
Restructuring actions and other charges | [1] | $ 11 | |||
[1] | See Note 20, "RESTRUCTURING ACTIONS AND OTHER CHARGES," for additional information. |
OPERATING SEGMENTS FINANCIAL IN
OPERATING SEGMENTS FINANCIAL INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||||||
Dec. 31, 2016 | Oct. 02, 2016 | Jul. 03, 2016 | Apr. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||||||
Operating results: | ||||||||||||||||
Total sales | $ 4,503 | $ 4,187 | $ 4,528 | $ 4,291 | $ 4,766 | $ 4,620 | $ 5,015 | $ 4,709 | $ 17,509 | [1] | $ 19,110 | [1] | $ 19,221 | [1] | ||
Depreciation and amortization | [2] | 527 | 511 | 452 | ||||||||||||
Research, development and engineering expenses | 636 | 735 | 754 | |||||||||||||
Equity, royalty and interest income from investees | 301 | 315 | 370 | |||||||||||||
Interest income | 23 | 24 | 23 | |||||||||||||
Loss Contingency, Loss in Period | 138 | [3] | 60 | [3] | 0 | |||||||||||
Impairment of light-duty diesel assets | 0 | 211 | [4],[5] | 0 | ||||||||||||
Restructuring actions and other charges | [6] | 90 | ||||||||||||||
Segment EBIT | 1,999 | 2,090 | 2,498 | |||||||||||||
Less: Interest expense | 69 | 65 | 64 | |||||||||||||
INCOME BEFORE INCOME TAXES | 1,930 | 2,025 | 2,434 | |||||||||||||
Amortization of Debt Discount (Premium) | 3 | 3 | 3 | |||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | 15 | 18 | 73 | |||||||||||||
Statement of Financial Position | ||||||||||||||||
Investments and advances related to equity method investees | 946 | 975 | 946 | 975 | 981 | |||||||||||
Capital expenditures | 531 | 744 | 743 | |||||||||||||
Net assets for operating segments | 8,721 | 9,064 | 8,721 | 9,064 | 9,737 | |||||||||||
Liabilities deducted in arriving at net assets | 6,152 | 5,920 | 6,152 | 5,920 | 6,009 | |||||||||||
Pension and other postretirement benefit adjustments excluded from net assets | (284) | (242) | (284) | (242) | (319) | |||||||||||
Deferred tax assets not allocated to segments | 420 | 390 | 420 | 390 | 314 | |||||||||||
Debt-related costs not allocated to segments | 2 | 2 | 2 | 2 | 23 | |||||||||||
Total assets | 15,011 | 15,134 | 15,011 | 15,134 | 15,764 | |||||||||||
Engine | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 7,804 | 8,670 | 8,967 | |||||||||||||
Depreciation and amortization | [2] | 163 | 187 | 163 | ||||||||||||
Research, development and engineering expenses | 226 | 263 | 265 | |||||||||||||
Equity, royalty and interest income from investees | 148 | 146 | 118 | |||||||||||||
Interest income | 10 | 11 | 9 | |||||||||||||
Loss Contingency, Loss in Period | $ 99 | $ 39 | [4] | 138 | [3] | 60 | [3] | |||||||||
Impairment of light-duty diesel assets | [5] | 202 | ||||||||||||||
Restructuring actions and other charges | [6] | 17 | ||||||||||||||
Segment EBIT | 686 | 636 | 1,031 | |||||||||||||
Statement of Financial Position | ||||||||||||||||
Investments and advances related to equity method investees | 427 | 445 | 427 | 445 | 415 | |||||||||||
Capital expenditures | 200 | 345 | 268 | |||||||||||||
Net assets for operating segments | 1,620 | 2,107 | 1,620 | 2,107 | 2,401 | |||||||||||
Distribution | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 6,181 | 6,229 | 5,174 | |||||||||||||
Depreciation and amortization | [2] | 116 | 105 | 86 | ||||||||||||
Research, development and engineering expenses | 13 | 10 | 9 | |||||||||||||
Equity, royalty and interest income from investees | 70 | 78 | 148 | |||||||||||||
Interest income | 4 | 4 | 4 | |||||||||||||
Restructuring actions and other charges | [6] | 23 | ||||||||||||||
Segment EBIT | [4] | 392 | 412 | 491 | ||||||||||||
Gain on remeasurement of pre-existing ownership interest in the acquiree company | 15 | 18 | 73 | |||||||||||||
Statement of Financial Position | ||||||||||||||||
Investments and advances related to equity method investees | 204 | 192 | 204 | 192 | 209 | |||||||||||
Capital expenditures | 96 | 125 | 89 | |||||||||||||
Net assets for operating segments | 2,604 | 2,330 | 2,604 | 2,330 | 2,441 | |||||||||||
Components | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 4,836 | 5,172 | 5,118 | |||||||||||||
Depreciation and amortization | [2] | 133 | 109 | 106 | ||||||||||||
Research, development and engineering expenses | 208 | 236 | 230 | |||||||||||||
Equity, royalty and interest income from investees | 41 | 35 | 36 | |||||||||||||
Interest income | 4 | 4 | 4 | |||||||||||||
Impairment of light-duty diesel assets | [5] | 9 | ||||||||||||||
Restructuring actions and other charges | [6] | 13 | ||||||||||||||
Segment EBIT | 641 | 727 | 684 | |||||||||||||
Statement of Financial Position | ||||||||||||||||
Investments and advances related to equity method investees | 176 | 150 | 176 | 150 | 164 | |||||||||||
Capital expenditures | 143 | 137 | 162 | |||||||||||||
Net assets for operating segments | 1,868 | 1,891 | 1,868 | 1,891 | 2,152 | |||||||||||
Power Systems | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 3,517 | 4,067 | 4,414 | |||||||||||||
Depreciation and amortization | [2] | 115 | 110 | 97 | ||||||||||||
Research, development and engineering expenses | 189 | 226 | 250 | |||||||||||||
Equity, royalty and interest income from investees | 42 | 56 | 68 | |||||||||||||
Interest income | 5 | 5 | 6 | |||||||||||||
Restructuring actions and other charges | 26 | [6] | 32 | |||||||||||||
Segment EBIT | 263 | [7] | 335 | 361 | [8] | |||||||||||
Statement of Financial Position | ||||||||||||||||
Investments and advances related to equity method investees | 139 | 188 | 139 | 188 | 193 | |||||||||||
Capital expenditures | 92 | 137 | 224 | |||||||||||||
Net assets for operating segments | $ 2,629 | $ 2,736 | 2,629 | 2,736 | 2,743 | |||||||||||
Intersegment eliminations | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | (4,829) | (5,028) | (4,452) | |||||||||||||
Intersegment eliminations and corporate items | ||||||||||||||||
Operating results: | ||||||||||||||||
Segment EBIT | 17 | (20) | (69) | |||||||||||||
Corporate | ||||||||||||||||
Operating results: | ||||||||||||||||
Restructuring actions and other charges | [6] | 11 | ||||||||||||||
External sales | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 17,509 | 19,110 | 19,221 | |||||||||||||
External sales | Engine | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 5,774 | 6,733 | 7,462 | |||||||||||||
External sales | Distribution | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 6,157 | 6,198 | 5,135 | |||||||||||||
External sales | Components | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 3,514 | 3,745 | 3,791 | |||||||||||||
External sales | Power Systems | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 2,064 | 2,434 | 2,833 | |||||||||||||
Intersegment sales | Engine | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 2,030 | 1,937 | 1,505 | |||||||||||||
Intersegment sales | Distribution | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 24 | 31 | 39 | |||||||||||||
Intersegment sales | Components | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 1,322 | 1,427 | 1,327 | |||||||||||||
Intersegment sales | Power Systems | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | 1,453 | 1,633 | 1,581 | |||||||||||||
Intersegment sales | Intersegment eliminations | ||||||||||||||||
Operating results: | ||||||||||||||||
Total sales | (4,829) | $ (5,028) | $ (4,452) | |||||||||||||
Cummins Olayan Energy | Power Systems | ||||||||||||||||
Operating results: | ||||||||||||||||
Gain (Loss) on Sale of Equity Investments | $ 17 | |||||||||||||||
[1] | Includes sales to nonconsolidated equity investees of $1,028 million, $1,209 million and $2,063 million for the years ended December 31, 2016, 2015 and 2014, respectively. | |||||||||||||||
[2] | Depreciation and amortization as shown on a segment basis excludes the amortization of debt discount and deferred costs that are included in the Consolidated Statements of Income as "Interest expense." The amortization of debt discount and deferred costs were $3 million, $3 million and $3 million for the years ended December 31, 2016, 2015 and 2014, respectively. | |||||||||||||||
[3] | See Note 12, "COMMITMENTS AND CONTINGENCIES," for additional information. | |||||||||||||||
[4] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. | |||||||||||||||
[5] | See Note 19, "IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS," for additional information. | |||||||||||||||
[6] | See Note 20, "RESTRUCTURING ACTIONS AND OTHER CHARGES," for additional information. | |||||||||||||||
[7] | Power Systems segment EBIT included a $17 million gain on the sale of an equity investee. | |||||||||||||||
[8] | Power Systems segment EBIT included $32 million of restructuring charges primarily related to the closure of a plant in Germany. |
OPERATING SEGMENTS - GEOGRAPHIC
OPERATING SEGMENTS - GEOGRAPHIC INFORMATION AND LARGEST CUSTOMER (Details 2) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||||
Dec. 31, 2016 | Oct. 02, 2016 | Jul. 03, 2016 | Apr. 03, 2016 | Dec. 31, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||||
Segment reporting | ||||||||||||||
NET SALES | $ 4,503 | $ 4,187 | $ 4,528 | $ 4,291 | $ 4,766 | $ 4,620 | $ 5,015 | $ 4,709 | $ 17,509 | [1] | $ 19,110 | [1] | $ 19,221 | [1] |
Total long-lived assets | 5,318 | 5,233 | 5,318 | 5,233 | $ 5,184 | |||||||||
Concentration Risk, Percentage | 14.00% | |||||||||||||
United States | ||||||||||||||
Segment reporting | ||||||||||||||
NET SALES | 9,476 | 10,757 | $ 10,058 | |||||||||||
Total long-lived assets | 3,092 | 2,968 | 3,092 | 2,968 | 2,949 | |||||||||
China | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 652 | 668 | 652 | 668 | 692 | |||||||||
India | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 475 | 450 | 475 | 450 | 391 | |||||||||
United Kingdom | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 254 | 349 | 254 | 349 | 339 | |||||||||
Netherlands | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 197 | 172 | 197 | 172 | 156 | |||||||||
Brazil | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 149 | 124 | 149 | 124 | 161 | |||||||||
Canada | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 132 | 133 | 132 | 133 | 126 | |||||||||
Mexico | ||||||||||||||
Segment reporting | ||||||||||||||
Total long-lived assets | 131 | 108 | 131 | 108 | 96 | |||||||||
Other foreign countries | ||||||||||||||
Segment reporting | ||||||||||||||
NET SALES | 8,033 | 8,353 | 9,163 | |||||||||||
Total long-lived assets | $ 236 | $ 261 | 236 | 261 | 274 | |||||||||
Sales Revenue, Goods, Net | ||||||||||||||
Segment reporting | ||||||||||||||
NET SALES | $ 2,359 | $ 2,949 | $ 2,706 | |||||||||||
Concentration Risk, Percentage | 13.00% | 15.00% | ||||||||||||
[1] | Includes sales to nonconsolidated equity investees of $1,028 million, $1,209 million and $2,063 million for the years ended December 31, 2016, 2015 and 2014, respectively. |
QUARTERLY FINANCIAL INFORMATI89
QUARTERLY FINANCIAL INFORMATION DISCLOSURE (unaudited) (Details) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||||||||||||||||
Dec. 31, 2016USD ($)$ / shares | Oct. 02, 2016USD ($)$ / shares | Jul. 03, 2016USD ($)$ / shares | Apr. 03, 2016USD ($)$ / shares | Dec. 31, 2015USD ($)$ / shares | Sep. 27, 2015USD ($)$ / shares | Jun. 28, 2015USD ($)$ / shares | Mar. 29, 2015USD ($)$ / shares | Dec. 31, 2014$ / shares | Sep. 28, 2014$ / shares | Jun. 29, 2014$ / shares | Mar. 30, 2014$ / shares | Dec. 31, 2016USD ($)$ / shares | Dec. 31, 2015USD ($)$ / shares | Dec. 31, 2014USD ($)$ / shares | |||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||||||||||||||
NET SALES | $ 4,503 | $ 4,187 | $ 4,528 | $ 4,291 | $ 4,766 | $ 4,620 | $ 5,015 | $ 4,709 | $ 17,509 | [1] | $ 19,110 | [1] | $ 19,221 | [1] | |||||||||||||
Gross Profit | 1,120 | 1,079 | 1,197 | 1,056 | 1,212 | 1,208 | 1,332 | 1,195 | 4,452 | 4,947 | 4,861 | ||||||||||||||||
Net Income (Loss) Available to Common Stockholders, Basic | $ 378 | $ 289 | [2] | $ 406 | [2] | $ 321 | $ 161 | [3] | $ 380 | $ 471 | $ 387 | $ 1,394 | $ 1,399 | $ 1,651 | |||||||||||||
Basic (in dollars per share) | $ / shares | $ 2.26 | [4] | $ 1.72 | [2],[4] | $ 2.41 | [2],[4] | $ 1.87 | [4] | $ 0.92 | [3],[4] | $ 2.15 | [4] | $ 2.63 | [4] | $ 2.14 | [4] | $ 8.25 | $ 7.86 | $ 9.04 | ||||||||
Diluted (in dollars per share) | $ / shares | $ 2.25 | [4] | 1.72 | [2],[4] | 2.40 | [2],[4] | 1.87 | [4] | 0.92 | [3],[4] | 2.14 | [4] | 2.62 | [4] | 2.14 | [4] | $ 8.23 | $ 7.84 | $ 9.02 | ||||||||
Selected Quarterly Financial Information [Abstract] | |||||||||||||||||||||||||||
Loss Contingency, Loss in Period | $ 138 | [5] | $ 60 | [5] | $ 0 | ||||||||||||||||||||||
Impairment of light-duty diesel assets | $ 0 | 211 | [6],[7] | $ 0 | |||||||||||||||||||||||
Impairment of Light-duty diesel assets Held-for-use (After-tax) | 133 | ||||||||||||||||||||||||||
Restructuring actions and other charges | [8] | 90 | |||||||||||||||||||||||||
Restructuring Charges, Net of Tax | $ 61 | ||||||||||||||||||||||||||
Registered Shareholders Total | 3,536 | 3,536 | |||||||||||||||||||||||||
Maximum | |||||||||||||||||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||||||||||||||
Sale of Stock, Price Per Share | $ / shares | $ 147.10 | 128.60 | 120 | 111.29 | 115.37 | 132.96 | 143.40 | 148.04 | $ 147.10 | $ 115.37 | |||||||||||||||||
Minimum | |||||||||||||||||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||||||||||||||
Sale of Stock, Price Per Share | $ / shares | 121.22 | 107.51 | 104.30 | 79.88 | 84.99 | 108.27 | 133.36 | 133.50 | 121.22 | 84.99 | |||||||||||||||||
Common Stock | |||||||||||||||||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||||||||||||||
Cash dividend (in dollars per share) | $ / shares | $ 1.025 | $ 1.025 | $ 0.975 | $ 0.975 | $ 0.975 | $ 0.975 | $ 0.78 | $ 0.78 | $ 0.78 | $ 0.78 | $ 0.625 | $ 0.625 | $ 4 | $ 3.51 | $ 2.81 | ||||||||||||
Engine | |||||||||||||||||||||||||||
Effect of Fourth Quarter Events [Line Items] | |||||||||||||||||||||||||||
NET SALES | $ 7,804 | $ 8,670 | $ 8,967 | ||||||||||||||||||||||||
Selected Quarterly Financial Information [Abstract] | |||||||||||||||||||||||||||
Loss Contingency, Loss in Period | $ 99 | $ 39 | [6] | $ 138 | [5] | 60 | [5] | ||||||||||||||||||||
Loss in Period for Contingency, Net of Tax | $ 50 | $ 24 | 38 | ||||||||||||||||||||||||
Impairment of light-duty diesel assets | [7] | 202 | |||||||||||||||||||||||||
Restructuring actions and other charges | [8] | $ 17 | |||||||||||||||||||||||||
[1] | Includes sales to nonconsolidated equity investees of $1,028 million, $1,209 million and $2,063 million for the years ended December 31, 2016, 2015 and 2014, respectively. | ||||||||||||||||||||||||||
[2] | The second quarter of 2016, included an additional $39 million loss contingency charge ($24 million after-tax). The third quarter of 2016 included an additional $99 million loss contingency charge ($50 million net of favorable compensation impact and after-tax). | ||||||||||||||||||||||||||
[3] | The fourth quarter of 2015, included a $211 million impairment of light-duty diesel assets ($133 million after-tax), a $90 million restructuring charge ($61 million after-tax) and a $60 million charge for a loss contingency ($38 million after-tax). | ||||||||||||||||||||||||||
[4] | Earnings per share in each quarter is computed using the weighted-average number of shares outstanding during that quarter while earnings per share for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters earnings per share may not equal the full year earnings per share. | ||||||||||||||||||||||||||
[5] | See Note 12, "COMMITMENTS AND CONTINGENCIES," for additional information. | ||||||||||||||||||||||||||
[6] | Distribution segment EBIT included gains on the fair value adjustment resulting from the acquisition of controlling interests in North American distributors of $15 million, $18 million and $73 million for the years ended December 31, 2016, 2015 and 2014, respectively. See Note 18, "ACQUISITIONS," for additional information. | ||||||||||||||||||||||||||
[7] | See Note 19, "IMPAIRMENT OF LIGHT-DUTY DIESEL ASSETS," for additional information. | ||||||||||||||||||||||||||
[8] | See Note 20, "RESTRUCTURING ACTIONS AND OTHER CHARGES," for additional information. |