DOCUMENT COVER Document
DOCUMENT COVER Document - $ / shares | 9 Months Ended | |
Sep. 29, 2019 | Dec. 31, 2018 | |
Cover page. | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 29, 2019 | |
Entity File Number | 1-4949 | |
Entity Registrant Name | CUMMINS INC. | |
Entity Incorporation, State or Country Code | IN | |
Entity Tax Identification Number | 35-0257090 | |
Entity Address, Address Line One | 500 Jackson Street | |
Entity Address, Address Line Two | Box 3005 | |
Entity Address, City or Town | Columbus | |
Entity Address, State or Province | IN | |
Entity Address, Postal Zip Code | 47202-3005 | |
City Area Code | 812 | |
Local Phone Number | 377-5000 | |
Title of 12(b) Security | Common stock, $2.50 par value | |
Trading Symbol | CMI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 153,203,601 | |
Common Stock, Par or Stated Value Per Share | $ 2.50 | $ 2.50 |
Entity Central Index Key | 0000026172 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Document Quarterly Report | true | |
Amendment Flag | false | |
Document Transition Report | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF NET INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | ||
Income Statement [Abstract] | |||||
Net Sales | [1] | $ 5,768 | $ 5,943 | $ 17,993 | $ 17,645 |
Cost of sales | 4,274 | 4,392 | 13,326 | 13,454 | |
GROSS MARGIN | 1,494 | 1,551 | 4,667 | 4,191 | |
OPERATING EXPENSES AND INCOME | |||||
Selling, general and administrative expenses | 600 | 604 | 1,822 | 1,794 | |
Research, development and engineering expenses | 242 | 229 | 730 | 658 | |
Equity, royalty and interest income from investees (Note 5) | 68 | 90 | 256 | 315 | |
Other operating income (expense), net | (21) | (5) | (25) | 1 | |
OPERATING INCOME | 699 | 803 | 2,346 | 2,055 | |
Interest income | 14 | 9 | 38 | 26 | |
Interest expense | 26 | 30 | 87 | 82 | |
Other income, net | 68 | 23 | 174 | 44 | |
INCOME BEFORE INCOME TAXES | 755 | 805 | 2,471 | 2,043 | |
Income tax expense (Note 6) | 139 | 107 | 501 | 466 | |
CONSOLIDATED NET INCOME | 616 | 698 | 1,970 | 1,577 | |
Less: Net income attributable to noncontrolling interests | (6) | 6 | 10 | 15 | |
NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 622 | $ 692 | $ 1,960 | $ 1,562 | |
EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CUMMINS INC. | |||||
Basic (in dollars per share) | $ 3.99 | $ 4.29 | $ 12.50 | $ 9.57 | |
Diluted (in dollars per share) | $ 3.97 | $ 4.28 | $ 12.45 | $ 9.53 | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||
Basic (in shares) | 155.9 | 161.3 | 156.8 | 163.3 | |
Dilutive effect of stock compensation awards (in shares) | 0.7 | 0.5 | 0.6 | 0.6 | |
Diluted (in shares) | 156.6 | 161.8 | 157.4 | 163.9 | |
Sales to nonconsolidated equity investees | $ 280 | $ 314 | $ 882 | $ 951 | |
[1] | Includes sales to nonconsolidated equity investees of $280 million and $882 million for the three and nine months ended September 29, 2019 , compared with $314 million and $951 million for the comparable periods in 2018. |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
CONSOLIDATED NET INCOME | $ 616 | $ 698 | $ 1,970 | $ 1,577 |
Other comprehensive income (loss), net of tax (Note 14) | ||||
Change in pension and other postretirement defined benefit plans | 6 | 13 | 2 | 34 |
Foreign currency translation adjustments | (182) | (159) | (197) | (374) |
Unrealized gain (loss) on derivatives | (29) | (3) | (40) | 4 |
Total other comprehensive loss, net of tax | (205) | (149) | (235) | (336) |
COMPREHENSIVE INCOME | 411 | 549 | 1,735 | 1,241 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | (11) | (11) | 8 | (25) |
COMPREHENSIVE INCOME ATTRIBUTABLE TO CUMMINS INC. | $ 422 | $ 560 | $ 1,727 | $ 1,266 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 29, 2019 | Dec. 31, 2018 | |
Current assets | |||
Cash and cash equivalents | $ 1,560 | $ 1,303 | |
Marketable securities (Note 7) | 303 | 222 | |
Total cash, cash equivalents and marketable securities | 1,863 | 1,525 | |
Accounts and notes receivable, net | |||
Trade and other | 3,677 | 3,635 | |
Nonconsolidated equity investees | 257 | 231 | |
Inventories (Note 8) | 3,821 | 3,759 | |
Prepaid expenses and other current assets | 610 | 668 | |
Total current assets | 10,228 | 9,818 | |
Long-term assets | |||
Property, plant and equipment | 8,452 | 8,319 | |
Accumulated depreciation | (4,396) | (4,223) | |
Property, plant and equipment, net | 4,056 | 4,096 | |
Investments and advances related to equity method investees | 1,250 | 1,222 | |
Goodwill | 1,288 | 1,126 | |
Other intangible assets, net | 1,022 | 909 | |
Pension assets | 970 | 929 | |
Other assets | 1,532 | 962 | |
Total assets | 20,346 | 19,062 | |
Current liabilities | |||
Accounts payable (principally trade) | 2,830 | 2,822 | |
Loans payable (Note 10) | [1] | 103 | 54 |
Commercial paper (Note 10) | [2] | 902 | 780 |
Accrued compensation, benefits and retirement costs | 494 | 679 | |
Current portion of accrued product warranty (Note 11) | 817 | 654 | |
Current portion of deferred revenue (Note 3) | 545 | 498 | |
Other accrued expenses (Note 12) | 997 | 852 | |
Current maturities of long-term debt (Note 10) | 37 | 45 | |
Total current liabilities | 6,725 | 6,384 | |
Long-term liabilities | |||
Long-term debt (Note 10) | 1,619 | 1,597 | |
Pensions and other postretirement benefits | 521 | 532 | |
Accrued product warranty (Note 11) | 645 | 740 | |
Deferred revenue (Note 3) | 769 | 658 | |
Other liabilities (Note 12) | 1,314 | 892 | |
Total liabilities | 11,593 | 10,803 | |
Commitments and contingencies (Note 13) | |||
Cummins Inc. shareholders' equity | |||
Common stock, $2.50 par value, 500 shares authorized, 222.4 and 222.4 shares issued | 2,322 | 2,271 | |
Retained earnings | 14,315 | 12,917 | |
Treasury stock, at cost, 69.2 and 64.4 shares | (6,784) | (6,028) | |
Common stock held by employee benefits trust, at cost, 0.3 and 0.4 shares | (3) | (5) | |
Accumulated other comprehensive loss (Note 14) | (2,040) | (1,807) | |
Total Cummins Inc. shareholders' equity | 7,810 | 7,348 | |
Noncontrolling interests | 943 | 911 | |
Total equity | 8,753 | 8,259 | |
Total liabilities and equity | $ 20,346 | $ 19,062 | |
[1] | Loans payable consist primarily of notes payable to various domestic and international financial institutions and it is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. | ||
[2] | The weighted-average interest rate, inclusive of all brokerage fees, was 2.18 percent and 2.59 percent at September 29, 2019 and December 31, 2018 , respectively. |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Millions | Sep. 29, 2019 | Dec. 31, 2018 |
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 | 69.2 | 64.4 |
Common stock held by employee benefits trust, shares | 0.3 | 0.4 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 29, 2019 | Sep. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Consolidated net income | $ 1,970 | $ 1,577 |
Adjustments to reconcile consolidated net income to net cash provided by operating activities | ||
Depreciation and amortization | 493 | 456 |
Deferred income taxes | (14) | (167) |
Equity in income of investees, net of dividends | (44) | (156) |
Pension contributions (in excess of) under expense, net (Note 4) | (62) | 36 |
Other postretirement benefits payments in excess of expense, net (Note 4) | (12) | (8) |
Stock-based compensation expense | 37 | 38 |
Gain on corporate owned life insurance | (64) | (8) |
Foreign currency remeasurement and transaction exposure | (54) | (27) |
Changes in current assets and liabilities, net of acquisitions | ||
Accounts and notes receivable | (101) | (429) |
Inventories | (62) | (773) |
Other current assets | 48 | (100) |
Accounts payable | (3) | 467 |
Accrued expenses | (74) | 276 |
Changes in other liabilities | 168 | 118 |
Other, net | 117 | 88 |
Net cash provided by operating activities | 2,343 | 1,388 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (395) | (361) |
Investments in internal use software | (50) | (55) |
Investments in and advances to equity investees | (16) | (9) |
Acquisitions of businesses, net of cash acquired (Note 15) | 237 | 70 |
Investments in marketable securities—acquisitions | (367) | (316) |
Investments in marketable securities—liquidations (Note 7) | 296 | 298 |
Cash flows from derivatives not designated as hedges | (86) | (56) |
Other, net | 26 | 50 |
Net cash used in investing activities | (829) | (519) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net borrowings of commercial paper (Note 10) | 122 | 502 |
Payments on borrowings and finance lease obligations | (47) | (54) |
Net borrowings under short-term credit agreements | 53 | 9 |
Distributions to noncontrolling interests | (33) | (30) |
Dividend payments on common stock | (562) | (537) |
Repurchases of common stock | (806) | (879) |
Other, net | 75 | 29 |
Net cash used in financing activities | (1,198) | (960) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (59) | (56) |
Net increase (decrease) in cash and cash equivalents | 257 | (147) |
Cash and cash equivalents at beginning of year | 1,303 | 1,369 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,560 | $ 1,222 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Common Stock Held in Trust | Accumulated Other Comprehensive Loss | Total Cummins Inc. Shareholders' Equity | Noncontrolling Interests | |
BALANCE AT BEGINNING OF PERIOD at Dec. 31, 2017 | $ 8,164 | $ 556 | $ 1,654 | $ 11,464 | $ (4,905) | $ (7) | $ (1,503) | $ 7,259 | $ 905 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Adoption of new accounting standards (1) | [1] | 30 | 30 | 30 | ||||||
Net income | 1,577 | 1,562 | 1,562 | 15 | ||||||
Other comprehensive income, net of tax (Note 14) | (336) | (296) | (296) | (40) | ||||||
Issuance of common stock | 10 | 10 | 10 | |||||||
Employee benefits trust activity | 11 | 10 | 1 | 11 | ||||||
Repurchases of common stock | (879) | (100) | (779) | (879) | ||||||
Cash dividends on common stock | (537) | (537) | (537) | |||||||
Distributions to noncontrolling interests | (30) | (30) | ||||||||
Stock-based awards | 7 | (3) | 10 | 7 | ||||||
Other shareholder transactions | 43 | 24 | 24 | 19 | ||||||
BALANCE AT END OF PERIOD at Sep. 30, 2018 | 8,060 | 556 | 1,595 | 12,519 | (5,674) | (6) | (1,799) | 7,191 | 869 | |
BALANCE AT BEGINNING OF PERIOD at Jul. 01, 2018 | 8,194 | 556 | 1,683 | 12,009 | (5,276) | (6) | (1,667) | 7,299 | 895 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 698 | 692 | 692 | 6 | ||||||
Other comprehensive income, net of tax (Note 14) | (149) | (132) | (132) | (17) | ||||||
Issuance of common stock | 2 | 2 | 2 | |||||||
Employee benefits trust activity | 2 | 2 | 2 | |||||||
Repurchases of common stock | (500) | (100) | (400) | (500) | ||||||
Cash dividends on common stock | (182) | (182) | (182) | |||||||
Distributions to noncontrolling interests | (19) | (19) | ||||||||
Stock-based awards | 3 | 1 | 2 | 3 | ||||||
Other shareholder transactions | 11 | 7 | 7 | 4 | ||||||
BALANCE AT END OF PERIOD at Sep. 30, 2018 | 8,060 | 556 | 1,595 | 12,519 | (5,674) | (6) | (1,799) | 7,191 | 869 | |
BALANCE AT BEGINNING OF PERIOD at Dec. 31, 2018 | 8,259 | 556 | 1,715 | 12,917 | (6,028) | (5) | (1,807) | 7,348 | 911 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 1,970 | 1,960 | 1,960 | 10 | ||||||
Other comprehensive income, net of tax (Note 14) | (235) | (233) | (233) | (2) | ||||||
Issuance of common stock | 2 | 2 | 2 | |||||||
Employee benefits trust activity | 28 | 26 | 2 | 28 | ||||||
Repurchases of common stock | (806) | (806) | (806) | |||||||
Cash dividends on common stock | (562) | (562) | (562) | |||||||
Distributions to noncontrolling interests | (33) | (33) | ||||||||
Stock-based awards | 48 | (2) | 50 | 48 | ||||||
Other shareholder transactions | 82 | 25 | 25 | 57 | ||||||
BALANCE AT END OF PERIOD at Sep. 29, 2019 | 8,753 | 556 | 1,766 | 14,315 | (6,784) | (3) | (2,040) | 7,810 | 943 | |
BALANCE AT BEGINNING OF PERIOD at Jun. 30, 2019 | 9,196 | 556 | 1,751 | 13,897 | (6,082) | (4) | (1,840) | 8,278 | 918 | |
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 616 | 622 | 622 | (6) | ||||||
Other comprehensive income, net of tax (Note 14) | (205) | (200) | (200) | (5) | ||||||
Employee benefits trust activity | 7 | 6 | 1 | 7 | ||||||
Repurchases of common stock | (706) | (706) | (706) | |||||||
Cash dividends on common stock | (204) | (204) | (204) | |||||||
Distributions to noncontrolling interests | (20) | (20) | ||||||||
Stock-based awards | 5 | 1 | 4 | 5 | ||||||
Other shareholder transactions | 64 | 8 | 8 | 56 | ||||||
BALANCE AT END OF PERIOD at Sep. 29, 2019 | $ 8,753 | $ 556 | $ 1,766 | $ 14,315 | $ (6,784) | $ (3) | $ (2,040) | $ 7,810 | $ 943 | |
[1] | Includes $28 million related to adoption of the revenue recognition standard and $2 million related to adoption of the accounting for certain financial instruments standard. See Note 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted and Recently Issued Accounting Pronouncements” of the Notes to the Consolidated Financial Statements of our 2018 Form 10-K |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Statement of Stockholders' Equity [Abstract] | ||||
CASH DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.311 | $ 1.14 | $ 3.59 | $ 3.30 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 9 Months Ended |
Sep. 29, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NOTE 1. NATURE OF OPERATIONS Cummins Inc. (“Cummins,” “we,” “our” or “us”) was founded in 1919 as Cummins Engine Company, a corporation in Columbus, Indiana, and one of the first diesel engine manufacturers. In 2001, we changed our name to Cummins Inc. We are a global power leader that designs, manufactures, distributes and services diesel and natural gas engines and powertrain-related component products (including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems and automated transmissions), electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. We sell our products to original equipment manufacturers (OEMs), distributors, dealers and other customers worldwide. We serve our customers through a network of approximately 600 wholly-owned and independent distributor locations and over 7,600 dealer locations in more than 190 countries and territories. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 29, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | NOTE 2. BASIS OF PRESENTATION Interim Condensed Financial Statements The unaudited Condensed Consolidated Financial Statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of operations, financial position and cash flows. All such adjustments are of a normal recurring nature. The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles in the United States of America ( GAAP ) pursuant to the rules and regulations of the Securities and Exchange Commission ( SEC ) for interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by such rules and regulations. These interim condensed financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 . Our interim period financial results for the three and nine month periods presented are not necessarily indicative of results to be expected for any other interim period or for the entire year. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP . Reclassifications Certain amounts for prior year periods have been reclassified to conform to the presentation of the current year. Use of Estimates in Preparation of Financial Statements Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Condensed Consolidated Financial Statements . Significant estimates and assumptions in these Condensed Consolidated Financial Statements require the exercise of judgment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. Reporting Period Our reporting period usually ends on the Sunday closest to the last day of the quarterly calendar period. The third quarters of 2019 and 2018 ended on September 29 and September 30, respectively. Our fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. Weighted-Average Diluted Shares Outstanding The weighted-average diluted common shares outstanding excludes the anti-dilutive effect of certain stock options since such options had an exercise price in excess of the monthly average market value of our common stock. The options excluded from diluted earnings per share were as follows: Three months ended Nine months ended September 29, September 30, September 29, September 30, Options excluded 874,604 1,481,750 631,042 799,337 |
REVENUE RECOGNITION LONG-TERM C
REVENUE RECOGNITION LONG-TERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE | 9 Months Ended |
Sep. 29, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contract with Customer | NOTE 3. REVENUE RECOGNITION Long-term Contracts Most of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that have not been satisfied as of September 29, 2019, was $809 million . We expect to recognize the related revenue of $180 million over the next 12 months and $629 million over periods up to 10 years . See NOTE 11 , " PRODUCT WARRANTY LIABILITY ," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of cost incurred when providing goods and services to our customers or represent sale-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: In millions September 29, December 31, Unbilled revenue $ 75 $ 64 Deferred revenue, primarily extended warranty 1,314 1,156 We recognized revenue of $79 million and $282 million for the three and nine months ended September 29, 2019 , compared with $71 million and $277 million for the comparable periods in 2018 , that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three and nine months ended September 29, 2019 . Disaggregation of Revenue Consolidated Revenue The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, United States $ 3,414 $ 3,407 $ 10,461 $ 9,829 China 481 559 1,698 1,753 India 185 240 643 722 Other international 1,688 1,737 5,191 5,341 Total net sales $ 5,768 $ 5,943 $ 17,993 $ 17,645 Segment Revenue Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Heavy-duty truck $ 635 $ 769 $ 2,112 $ 2,113 Medium-duty truck and bus 525 613 1,765 1,954 Light-duty automotive 451 446 1,216 1,099 Total on-highway 1,611 1,828 5,093 5,166 Off-highway 211 254 786 779 Total sales $ 1,822 $ 2,082 $ 5,879 $ 5,945 Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, North America $ 1,373 $ 1,331 $ 4,139 $ 3,954 Asia Pacific 224 223 667 621 Europe 135 113 380 387 China 82 77 264 238 Africa and Middle East 60 55 170 178 Latin America 48 42 134 125 India 46 49 142 142 Russia 33 37 113 117 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Parts $ 796 $ 797 $ 2,464 $ 2,415 Power generation 466 359 1,292 1,029 Service 376 372 1,109 1,091 Engines 363 399 1,144 1,227 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Emission solutions $ 660 $ 677 $ 2,144 $ 2,096 Filtration 249 242 771 756 Turbo technologies 151 173 522 571 Automated transmissions 146 150 451 408 Electronics and fuel systems 47 55 167 181 Total sales $ 1,253 $ 1,297 $ 4,055 $ 4,012 Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Power generation $ 372 $ 366 $ 1,060 $ 1,066 Industrial 227 184 704 593 Generator technologies 84 86 266 263 Total sales $ 683 $ 636 $ 2,030 $ 1,922 |
REVENUE RECOGNITION DISAGGREGAT
REVENUE RECOGNITION DISAGGREGATION OF REVENUES | 9 Months Ended |
Sep. 29, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contract with Customer | NOTE 3. REVENUE RECOGNITION Long-term Contracts Most of our contracts are for a period of less than one year. We have certain long-term maintenance agreements, construction contracts and extended warranty coverage arrangements that span a period in excess of one year. The aggregate amount of the transaction price for long-term maintenance agreements and construction contracts allocated to performance obligations that have not been satisfied as of September 29, 2019, was $809 million . We expect to recognize the related revenue of $180 million over the next 12 months and $629 million over periods up to 10 years . See NOTE 11 , " PRODUCT WARRANTY LIABILITY ," for additional disclosures on extended warranty coverage arrangements. Our other contracts generally are for a duration of less than one year, include payment terms that correspond to the timing of cost incurred when providing goods and services to our customers or represent sale-based royalties. Deferred and Unbilled Revenue The following is a summary of our unbilled and deferred revenue and related activity: In millions September 29, December 31, Unbilled revenue $ 75 $ 64 Deferred revenue, primarily extended warranty 1,314 1,156 We recognized revenue of $79 million and $282 million for the three and nine months ended September 29, 2019 , compared with $71 million and $277 million for the comparable periods in 2018 , that was included in the deferred revenue balance at the beginning of each year. We did not record any impairment losses on our unbilled revenues during the three and nine months ended September 29, 2019 . Disaggregation of Revenue Consolidated Revenue The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, United States $ 3,414 $ 3,407 $ 10,461 $ 9,829 China 481 559 1,698 1,753 India 185 240 643 722 Other international 1,688 1,737 5,191 5,341 Total net sales $ 5,768 $ 5,943 $ 17,993 $ 17,645 Segment Revenue Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Heavy-duty truck $ 635 $ 769 $ 2,112 $ 2,113 Medium-duty truck and bus 525 613 1,765 1,954 Light-duty automotive 451 446 1,216 1,099 Total on-highway 1,611 1,828 5,093 5,166 Off-highway 211 254 786 779 Total sales $ 1,822 $ 2,082 $ 5,879 $ 5,945 Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, North America $ 1,373 $ 1,331 $ 4,139 $ 3,954 Asia Pacific 224 223 667 621 Europe 135 113 380 387 China 82 77 264 238 Africa and Middle East 60 55 170 178 Latin America 48 42 134 125 India 46 49 142 142 Russia 33 37 113 117 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Parts $ 796 $ 797 $ 2,464 $ 2,415 Power generation 466 359 1,292 1,029 Service 376 372 1,109 1,091 Engines 363 399 1,144 1,227 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Emission solutions $ 660 $ 677 $ 2,144 $ 2,096 Filtration 249 242 771 756 Turbo technologies 151 173 522 571 Automated transmissions 146 150 451 408 Electronics and fuel systems 47 55 167 181 Total sales $ 1,253 $ 1,297 $ 4,055 $ 4,012 Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Power generation $ 372 $ 366 $ 1,060 $ 1,066 Industrial 227 184 704 593 Generator technologies 84 86 266 263 Total sales $ 683 $ 636 $ 2,030 $ 1,922 |
PENSION AND OTHER POSTRETIREMEN
PENSION AND OTHER POSTRETIREMENT BENEFITS | 9 Months Ended |
Sep. 29, 2019 | |
Retirement Benefits [Abstract] | |
PENSION AND OTHER POSTRETIREMENT BENEFITS | NOTE 4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS We sponsor funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit plans. Contributions to these plans were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Defined benefit pension plans Voluntary contribution $ 26 $ 4 $ 88 $ 11 Mandatory contribution 7 6 22 17 Defined benefit pension contributions $ 33 $ 10 $ 110 $ 28 Other postretirement benefit plans Benefit payments, net $ 5 $ 11 $ 20 $ 16 Defined contribution pension plans $ 23 $ 21 $ 80 $ 82 During the remainder of 2019 , we anticipate making additional defined benefit pension contributions of $13 million for our U.S. and U.K. pension plans. Approximately $91 million of the estimated $123 million of pension contributions for the full year are voluntary. These contributions may be made from trusts or company funds either to increase pension assets or to make direct benefit payments to plan participants. We expect our 2019 net periodic pension cost to approximate $64 million . The components of net periodic pension and other postretirement benefit costs under our plans were as follows: Pension U.S. Plans U.K. Plans Other Postretirement Benefits Three months ended In millions September 29, September 30, September 29, September 30, September 29, September 30, Service cost $ 29 $ 30 $ 6 $ 7 $ — $ — Interest cost 27 25 10 10 3 3 Expected return on plan assets (47 ) (49 ) (16 ) (17 ) — — Recognized net actuarial loss 4 8 3 7 — — Net periodic benefit cost $ 13 $ 14 $ 3 $ 7 $ 3 $ 3 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions September 29, September 30, September 29, September 30, September 29, September 30, Service cost $ 87 $ 90 $ 19 $ 22 $ — $ — Interest cost 81 74 32 31 8 8 Expected return on plan assets (142 ) (147 ) (52 ) (53 ) — — Amortization of prior service cost 1 — 1 — — — Recognized net actuarial loss 12 25 9 22 — — Net periodic benefit cost $ 39 $ 42 $ 9 $ 22 $ 8 $ 8 |
EQUITY, ROYALTY AND INTEREST IN
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | 9 Months Ended |
Sep. 29, 2019 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES | NOTE 5. EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. $ 15 $ 18 $ 56 $ 63 Dongfeng Cummins Engine Company, Ltd. 10 13 40 47 Chongqing Cummins Engine Company, Ltd. 10 11 32 43 All other manufacturers 21 30 76 100 Distribution entities Komatsu Cummins Chile, Ltda. 6 5 19 18 All other distributors 1 — — — Cummins share of net income 63 77 223 271 Royalty and interest income 5 13 33 44 Equity, royalty and interest income from investees $ 68 $ 90 $ 256 $ 315 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 29, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure | NOTE 6. INCOME TAXES Our effective tax rate for the year is expected to approximate 21.5 percent , excluding any discrete tax items that may arise. Our effective tax rates for the three and nine months ended September 29, 2019 , were 18.4 percent and 20.3 percent , respectively. The three months ended September 29, 2019, contained $23 million , or $0.14 per share, of favorable net discrete tax items, primarily due to withholding taxes and provision to return adjustments. The nine months ended September 29, 2019, contained $30 million , or $0.19 per share, of favorable net discrete tax items, primarily due to withholding taxes and provision to return adjustments. Our effective tax rates for the three and nine months ended September 30, 2018 , were 13.3 percent and 22.8 percent , respectively. The three months ended September 30, 2018, contained $37 million , or $0.23 per share, of favorable net discrete tax items, primarily due to $34 million of favorable discrete items related to the 2017 Tax Cuts and Jobs Act (Tax Legislation) and $3 million of other favorable discrete items. The nine months ended September 30, 2018, contained $37 million , or $0.23 per share, of unfavorable net discrete tax items, primarily due to $48 million of unfavorable discrete items related to the Tax Legislation, partially offset by $11 million of other favorable discrete items. See Note 4. "INCOME TAXES" of the Notes to the Consolidated Financial Statements of our 2018 Form 10-K for additional information. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Sep. 29, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | NOTE 7. MARKETABLE SECURITIES A summary of marketable securities, all of which were classified as current, was as follows: September 29, December 31, In millions Cost Gross unrealized gains/(losses) (1) Estimated Cost Gross unrealized gains/(losses) (1) Estimated Equity securities Certificates of deposit $ 147 $ — $ 147 $ 101 $ — $ 101 Debt mutual funds 132 3 135 103 1 104 Equity mutual funds 16 3 19 16 — 16 Bank debentures 1 — 1 — — — Debt securities 1 — 1 1 — 1 Total marketable securities $ 297 $ 6 $ 303 $ 221 $ 1 $ 222 ____________________________________ (1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . All debt securities are classified as available-for-sale. All marketable securities presented use a Level 2 fair value measure. The fair value of Level 2 securities is estimated using actively quoted prices for similar instruments from brokers and observable inputs where available, including market transactions and third-party pricing services, or net asset values provided to investors. We do not currently have any Level 3 securities and there were no transfers between Level 2 or 3 during the first nine months of 2019 or for the year ended December 31, 2018. A description of the valuation techniques and inputs used for our Level 2 fair value measures is as follows: • Certificates of deposit and 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 institution's month-end statement. • Debt mutual funds — The fair value measure for the vast majority of these investments is the daily net asset value published on a regulated governmental website. Daily quoted prices are available from the issuing brokerage and are used on a test basis to corroborate this Level 2 input. • 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. • 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 were as follows: Nine months ended In millions September 29, September 30, Proceeds from sales of marketable securities $ 179 $ 234 Proceeds from maturities of marketable securities 117 64 Investments in marketable securities - liquidations $ 296 $ 298 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 29, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 8. INVENTORIES Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 29, December 31, Finished products $ 2,421 $ 2,405 Work-in-process and raw materials 1,526 1,487 Inventories at FIFO cost 3,947 3,892 Excess of FIFO over LIFO (126 ) (133 ) Total inventories $ 3,821 $ 3,759 |
LEASES RECENTLY ADOPTED ACCOUNT
LEASES RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT (Notes) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | NOTE 9. LEASES Lease Accounting Pronouncement Adoption In February 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the accounting for leases. Under the new standard, lessees are now required to recognize substantially all leases on the balance sheet as both a right-of-use (ROU) asset and a liability. The standard continues to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases 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 the old standard. Finance leases result in an accelerated expense similar to the accounting for capital leases under the old standard. The determination of a lease classification as operating or finance will occur in a manner similar to the old standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement. We adopted the new standard on January 1, 2019, using a modified retrospective approach and as a result did not adjust prior periods. Adoption of the standard resulted in the recording of $450 million of operating lease ROU assets and operating lease liabilities, but did not have a material impact on our net income or cash flows. The cumulative effect adjustment of adopting the new standard was not material. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and to not re-evaluate existing contracts as to whether or not they contained a lease. NOTE 17. RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Recently Adopted On January 1, 2019, we adopted the new lease standard in accordance with GAAP. See NOTE 9 , " LEASES ," for detailed information about the adoption of this standard. On January 1, 2019, we adopted the new FASB standard related to accounting for derivatives and hedging. The new standard allows the initial hedge effectiveness assessment to be performed by the end of the first quarter in which the hedge is designated rather than concurrently with entering into the hedge transaction. The changes also expand the use of a periodic qualitative hedge effectiveness assessment in lieu of an ongoing quantitative assessment performed throughout the life of the hedge. The revision removes the requirement to record ineffectiveness on cash flow hedges through the income statement when a hedge is considered highly effective, instead deferring all related hedge gains and losses in other comprehensive income until the hedged item impacts earnings. The modifications permit hedging the contractually-specified price of a component of a commodity purchase and revises certain disclosure requirements. We adopted the new standard on a modified retrospective basis for existing cash flow hedges and prospectively for disclosures. The amendments did not have a material effect on our Condensed Consolidated Financial Statements and no transition adjustment was required upon adoption. The adoption of this standard did not materially change our policies for existing hedges. Accounting Pronouncements Issued But Not Yet Effective In August 2018, the FASB issued a new standard that aligns the accounting for implementation costs incurred in a cloud computing arrangement accounted for as a service contract with the model currently used for internal use software costs. Under the new standard, costs that meet certain criteria will be required to be capitalized on the balance sheet and subsequently amortized over the term of the hosting arrangement. The standard is effective for us beginning on January 1, 2020, with early adoption permitted. The standard allows for either prospective or retrospective transition. We are still evaluating the impact of this standard on our financial statements. In June 2016, the FASB amended its standards related to 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 do not expect adoption of this standard to have a material impact on our Consolidated Financial Statements. |
LEASES SUMMARY OF SIGNIFICANT A
LEASES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Notes) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Lease Policies We determine if an arrangement contains a lease in whole or in part at the inception of the contract. ROU assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases greater than 12 months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide the information required to determine the implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is determined considering factors such as the lease term, our credit standing and the economic environment of the location of the lease. We use the implicit rate when readily determinable. Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or a liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases are generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the liability is recognized utilizing the interest method that results in more expense during the early years of the lease. We have lease agreements with lease and non-lease components, primarily related to real estate, vehicle and information technology (IT) assets. For vehicle and real estate leases, we account for the lease and non-lease components as a single lease component. For IT leases, we allocate the payment between the lease and non-lease components based on the relative value of each component. |
LEASES FOOTNOTE DISCLOSURE (Not
LEASES FOOTNOTE DISCLOSURE (Notes) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
Leases of Lessee Disclosure | Leases Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 30 years and may contain renewal options for periods up to 2 years at our discretion. Our equipment lease portfolio consists primarily of vehicles (including service vehicles), forktrucks and IT equipment. These leases typically range in term from two years to three years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees other than our service vehicle fleet, which has a residual guarantee based on a percentage of the original cost declining over the lease term. The components of our lease expense were as follows: Three months ended Nine months ended In millions September 29, September 29, Operating lease cost $ 51 $ 155 Finance lease cost Amortization of right-of-use asset 3 12 Interest expense 1 7 Short-term lease cost 2 4 Variable lease cost 2 4 Total lease cost $ 59 $ 182 Supplemental balance sheet information related to leases: In millions September 29, 2019 Balance Sheet Location Assets Operating lease assets $ 446 Other assets Finance lease assets (1) 124 Property, plant and equipment, net Total lease assets $ 570 Liabilities Current Operating $ 124 Other accrued expenses Finance 12 Current maturities of long-term debt Long-term Operating 333 Other liabilities Finance 110 Long-term debt Total lease liabilities $ 579 ____________________________________ (1) Finance lease assets are recorded net of accumulated amortization of $62 million at September 29, 2019 . Supplemental cash flow and other information related to leases: Three months ended Nine months ended In millions September 29, September 29, Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 38 $ 115 Operating cash flows from finance leases 2 7 Financing cash flows from finance leases 3 10 Right-of-use assets obtained in exchange for lease obligations Operating leases 51 129 Finance leases 1 7 Additional information related to leases: September 29, Weighted-average remaining lease term (in years) Operating leases 5.3 Finance leases 13.9 Weighted-average discount rate Operating leases 3.3 % Finance leases 7.2 % Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at September 29, 2019 , together with the net present value of the minimum payments due to finance leases: In millions Finance Leases Operating Leases 2019 $ 5 $ 38 2020 19 129 2021 16 102 2022 15 77 2023 14 51 After 2023 146 110 Total minimum lease payments 215 507 Interest (93 ) (50 ) Present value of net minimum lease payments $ 122 $ 457 Following is a summary of the future minimum lease payments due to capital and operating leases with terms of more than one year at December 31, 2018, together with the net present value of the minimum payments due to capital leases under the previous lease standard: In millions Capital Leases Operating Leases 2019 $ 30 $ 138 2020 21 109 2021 16 81 2022 14 60 2023 13 39 After 2023 144 81 Total minimum lease payments $ 238 $ 508 Interest (106 ) Present value of net minimum lease payments $ 132 |
DEBT
DEBT | 9 Months Ended |
Sep. 29, 2019 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 10. DEBT Loans Payable and Commercial Paper Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions September 29, December 31, Loans payable (1) $ 103 $ 54 Commercial paper (2) 902 780 ____________________________________ (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions and it is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. (2) The weighted-average interest rate, inclusive of all brokerage fees, was 2.18 percent and 2.59 percent at September 29, 2019 and December 31, 2018 , respectively. We can issue up to $3.5 billion of unsecured, short-term promissory notes ("commercial paper") pursuant to our board authorized commercial paper programs. The programs facilitate the private placement of unsecured short-term debt through third party brokers. We intend to use the net proceeds from the commercial paper borrowings for general corporate purposes. Revolving Credit Facilities On August 21, 2019, we entered into an amended and restated 364-day credit agreement that allows us to borrow up to $1.5 billion of unsecured funds at any time through August 18, 2020. This credit agreement amends and restates the prior $1.5 billion 364-day credit facility that matured on August 21, 2019. We have access to committed credit facilities that total $3.5 billion , including the new $1.5 billion 364-day facility that expires August 19, 2020 and a $2.0 billion five-year facility that expires on August 22, 2023. We intend to maintain credit facilities of a similar aggregate amount by renewing or replacing these facilities before expiration. These revolving credit facilities are maintained primarily to provide backup liquidity for our commercial paper borrowings and for general corporate purposes. At September 29, 2019, the $902 million of outstanding commercial paper effectively reduced the $3.5 billion of revolving credit capacity to $2.6 billion and we had an additional $200 million available for borrowings under our international and other domestic credit facilities. Long-term Debt A summary of long-term debt was as follows: In millions Interest Rate September 29, December 31, Long-term debt Senior notes, due 2023 3.65% $ 500 $ 500 Debentures, due 2027 6.75% 58 58 Debentures, due 2028 7.125% 250 250 Senior notes, due 2043 4.875% 500 500 Debentures, due 2098 (1) 5.65% 165 165 Other debt 70 64 Unamortized discount (50 ) (52 ) Fair value adjustments due to hedge on indebtedness 41 25 Finance leases 122 132 Total long-term debt 1,656 1,642 Less: Current maturities of long-term debt 37 45 Long-term debt $ 1,619 $ 1,597 ____________________________________ (1) The effective interest rate on this debt is 7.48% . Principal payments required on long-term debt during the next five years are as follows: In millions 2019 2020 2021 2022 2023 Principal payments $ 16 $ 30 $ 45 $ 9 $ 507 Interest Rate Risk In the third quarter, we entered into a series of interest rate lock agreements to reduce the variability of the cash flows of the interest payments on $250 million of fixed rate debt forecast to be issued in 2023 to replace our Senior notes at maturity. The terms of the rate locks mirror those of the debt, matching the time period of the expected fixed rate debt issuance and the expected timing of interest payments on that debt. The gains and losses on these derivative instruments will be initially recorded in "Other comprehensive income" and will be released to earnings in "Interest expense" in future periods to reflect the difference in (1) the fixed rates economically locked in at the inception of the hedge and (2) the actual fixed rates established in the debt instrument at issuance. The loss included in "Other comprehensive income" for the three months ended September 29, 2019 was $28 million . 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 values and carrying values of total debt, including current maturities, were as follows: In millions September 29, December 31, Fair value of total debt (1) $ 3,031 $ 2,679 Carrying values of total debt 2,661 2,476 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. Shelf Registration As a well-known seasoned issuer, we filed an automatic shelf registration for an undetermined amount of debt and equity securities with the SEC on February 13, 2019. 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. |
PRODUCT WARRANTY LIABILITY
PRODUCT WARRANTY LIABILITY | 9 Months Ended |
Sep. 29, 2019 | |
Product Warranties Disclosures [Abstract] | |
PRODUCT WARRANTY LIABILITY | NOTE 11. PRODUCT WARRANTY LIABILITY A tabular reconciliation of the product warranty liability, including the deferred revenue related to our extended warranty coverage and accrued product campaigns was as follows: Nine months ended In millions September 29, September 30, Balance, beginning of year $ 2,208 $ 1,687 Provision for base warranties issued 360 337 Deferred revenue on extended warranty contracts sold 254 211 Provision for product campaigns issued 163 456 Payments made during period (431 ) (313 ) Amortization of deferred revenue on extended warranty contracts (174 ) (179 ) Changes in estimates for pre-existing product warranties (16 ) 18 Foreign currency translation and other (9 ) (6 ) Balance, end of period $ 2,355 $ 2,211 We recognized supplier recoveries of $3 million and $64 million for the three and nine months ended September 29, 2019 , compared with $3 million and $16 million for the comparable periods in 2018 . Warranty related deferred revenues and the long-term portion of the warranty liabilities on our Condensed Consolidated Balance Sheets were as follows: In millions September 29, December 31, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 225 $ 227 Current portion of deferred revenue Long-term portion 668 587 Deferred revenue Total $ 893 $ 814 Product warranty Current portion $ 817 $ 654 Current portion of accrued product warranty Long-term portion 645 740 Accrued product warranty Total $ 1,462 $ 1,394 Total warranty accrual $ 2,355 $ 2,208 Engine System Campaign Accrual During 2017, the California Air Resources Board (CARB) and the U.S. Environmental Protection Agency (EPA) selected certain of our pre-2013 model year engine systems for additional emissions testing. Some of these engine systems failed CARB and EPA tests as a result of degradation of an aftertreatment component. In the first quarter of 2018, we concluded based upon additional emission testing performed, and further discussions with the EPA and CARB that the field campaigns should be expanded to include a larger population of our engine systems that are subject to the aftertreatment component degradation, including our model years 2010 through 2015. As a result, we recorded an additional charge of $187 million or $0.87 per share, to cost of sales in our Condensed Consolidated Statements of Net Income ( $94 million recorded in the Components segment and $93 million in the Engine segment). In the second quarter of 2018, we reached agreement with the CARB and EPA regarding our plans to address the affected populations. In finalizing our plans, we increased the number of systems to be addressed through hardware replacement compared to our assumptions resulting in an additional charge of $181 million , or $0.85 per share, to cost of sales in our Condensed Consolidated Statements of Net Income ( $91 million recorded in the Engine segment and $90 million in the Components segment). The campaigns launched in the third quarter of 2018 and are being completed in phases across the affected population with a projection to be substantially complete by December 31, 2020. The total engine system campaign charge, excluding supplier recoveries, was $410 million . At September 29, 2019 , the remaining accrual balance was $279 million . |
SUPPLEMENTAL BALANCE SHEET DATA
SUPPLEMENTAL BALANCE SHEET DATA | 9 Months Ended |
Sep. 29, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
SUPPLEMENTAL BALANCE SHEET DATA | NOTE 12. SUPPLEMENTAL BALANCE SHEET DATA Other accrued expenses included the following: In millions September 29, December 31, 2018 Marketing accruals $ 208 $ 199 Other taxes payable 185 196 Income taxes payable 132 97 Current portion of operating lease liabilities 124 — Other 348 360 Other accrued expenses $ 997 $ 852 Other liabilities included the following: In millions September 29, December 31, Operating lease liabilities $ 333 $ — Deferred income taxes 301 263 Income taxes payable 293 293 Accrued compensation 161 173 Other long-term liabilities 226 163 Other liabilities $ 1,314 $ 892 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 29, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 13. 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. On April 29, 2019, we announced that we were conducting a formal internal review of our emissions certification process and compliance with emissions standards for our pick-up truck applications, following conversations with the EPA and CARB regarding certification of our engines in model year 2019 RAM 2500 and 3500 trucks. This review is being conducted with external advisors to ensure the certification and compliance processes for all of our pick-up truck applications are consistent with our internal policies, engineering standards and applicable laws. In addition, we voluntarily disclosed our formal internal review to our regulators and to other government agencies, the Department of Justice (DOJ) and the SEC , and have been working cooperatively with them to ensure a complete and thorough review. During conversations with the EPA and CARB about the effectiveness of our pick-up truck applications, the regulators raised concerns that certain aspects of our emissions systems may reduce the effectiveness of our emissions control systems and thereby act as defeat devices. As a result, our internal review focuses, in part, on the regulators’ concerns. We are working closely with the regulators to enhance our emission systems to improve the effectiveness of all of our pick-up truck applications and to fully address the regulators’ requirements. Based on discussions with the regulators, we have developed a new calibration for the engines in model year 2019 RAM 2500 and 3500 trucks that has been included in all engines shipped since September 2019. During our discussions, the regulators have asked us to look at other model years and other engines, though the primary focus of our review has been the model year 2019 RAM. We are also fully cooperating with the DOJ's and the SEC's information requests and inquiries. Due to the continuing nature of our formal review, our ongoing cooperation with our regulators and other government agencies, and the presence of many unknown facts and circumstances, we cannot predict the final outcome of this review and these regulatory and agency processes, and we cannot provide assurance that the matter will not have a materially adverse impact on our results of operations and cash flows. Guarantees and Commitments Periodically, we enter into guarantee arrangements, including guarantees of non-U.S. distributor financings, residual value guarantees on equipment under operating leases and other miscellaneous guarantees of joint ventures or third-party obligations. At September 29, 2019, the maximum potential loss related to these guarantees was $54 million . We have arrangements with certain suppliers that require us to purchase minimum volumes or be subject to monetary penalties. At September 29, 2019, if we were to stop purchasing from each of these suppliers, the aggregate amount of the penalty would be approximately $54 million . Most of these arrangements enable us to secure supplies of critical components. We do not currently anticipate paying any penalties under these contracts. We enter into physical forward contracts with suppliers of platinum and palladium to purchase certain volumes of the commodities at contractually stated prices for various periods, which generally fall within two years . At September 29, 2019, the total commitments under these contracts were $33 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 $140 million at September 29, 2019 . Indemnifications Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include: • product liability and license, patent or trademark indemnifications; • asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and • any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract. We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 29, 2019 | |
Equity [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 14. ACCUMULATED OTHER COMPREHENSIVE LOSS Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended: Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total Balance at June 30, 2019 $ (675 ) $ (1,156 ) $ — $ (9 ) $ (1,840 ) Other comprehensive income before reclassifications Before tax amount — (177 ) — (39 ) (216 ) $ (5 ) $ (221 ) Tax benefit (expense) — — — 8 8 — 8 After tax amount — (177 ) — (31 ) (208 ) (5 ) (213 ) Amounts reclassified from accumulated other comprehensive loss (1) 6 — — 2 8 — 8 Net current period other comprehensive income (loss) 6 (177 ) — (29 ) (200 ) $ (5 ) $ (205 ) Balance at September 29, 2019 $ (669 ) $ (1,333 ) $ — $ (38 ) $ (2,040 ) Balance at July 1, 2018 $ (668 ) $ (1,003 ) $ — $ 4 $ (1,667 ) Other comprehensive income before reclassifications Before tax amount — (139 ) 2 1 (136 ) $ (17 ) $ (153 ) Tax benefit (expense) — (3 ) — — (3 ) — (3 ) After tax amount — (142 ) 2 1 (139 ) (17 ) (156 ) Amounts reclassified from accumulated other comprehensive loss (1) 13 — (2 ) (4 ) 7 — 7 Net current period other comprehensive income (loss) 13 (142 ) — (3 ) (132 ) $ (17 ) $ (149 ) Balance at September 30, 2018 $ (655 ) $ (1,145 ) $ — $ 1 $ (1,799 ) ____________________________________ (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. Following are the changes in accumulated other comprehensive income (loss) by component for the nine months ended : Nine months ended In millions Change in Foreign Unrealized gain (loss) on debt securities Unrealized gain Total Noncontrolling Total Balance at December 31, 2018 $ (671 ) $ (1,138 ) $ — $ 2 $ (1,807 ) Other comprehensive income before reclassifications Before tax amount (22 ) (194 ) — (47 ) (263 ) $ (2 ) $ (265 ) Tax benefit (expense) 5 (1 ) — 11 15 — 15 After tax amount (17 ) (195 ) — (36 ) (248 ) (2 ) (250 ) Amounts reclassified from accumulated other comprehensive loss (1) 19 — — (4 ) 15 — 15 Net current period other comprehensive income (loss) 2 (195 ) — (40 ) (233 ) $ (2 ) $ (235 ) Balance at September 29, 2019 $ (669 ) $ (1,333 ) $ — $ (38 ) $ (2,040 ) Balance at December 31, 2017 $ (689 ) $ (812 ) $ 1 $ (3 ) $ (1,503 ) Other comprehensive income before reclassifications Before tax amount (8 ) (342 ) 2 16 (332 ) $ (41 ) $ (373 ) Tax benefit (expense) 2 9 — (6 ) 5 — 5 After tax amount (6 ) (333 ) 2 10 (327 ) (41 ) (368 ) Amounts reclassified from accumulated other comprehensive loss (1) 40 — (3 ) (6 ) 31 1 32 Net current period other comprehensive income (loss) 34 (333 ) (1 ) 4 (296 ) $ (40 ) $ (336 ) Balance at September 30, 2018 $ (655 ) $ (1,145 ) $ — $ 1 $ (1,799 ) ____________________________________ (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
ACQUISITION
ACQUISITION | 9 Months Ended |
Sep. 29, 2019 | |
Business Combinations [Abstract] | |
Mergers, Acquisitions and Dispositions Disclosures | NOTE 15. ACQUISITIONS Acquisitions for the nine months ended September 29, 2019 and September 30, 2018 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) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended 2019 Hydrogenics Corporation 09/09/19 81% $ 235 $ — $ 235 COMB $ 166 $ 158 $ 34 2018 Efficient Drivetrains, Inc. 08/15/18 100% $ 51 $ 2 $ 64 (3) COMB $ 49 $ 15 $ 3 Johnson Matthey Battery Systems, Ltd. 01/31/18 100% 9 — 9 COMB — 5 3 ____________________________________________________ (1) Newly consolidated entities were accounted for as business combinations (COMB) and were included in the Electrified Power Segment on the date of acquisition. (2) Intangible assets acquired in business combinations were mostly technology and customer related, the majority of which will be amortized over a period of up to 20 years from the date of the acquisition. (3) The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. A portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. Hydrogenics Corporation On September 9, 2019, we acquired an 81 percent interest in Hydrogenics Corporation for total consideration of $235 million . The Hydrogen Company, a wholly-owned subsidiary of L’Air Liquide, S.A., will maintain a non-controlling interest in Hydrogenics. We accounted for the transaction as a business combination and included it in the Electrified Power segment in the third quarter of 2019. We have not yet assigned this business to a reporting unit for goodwill impairment purposes. The preliminary purchase price allocation was as follows: In millions Inventory $ 21 Other current assets 25 Intangible assets Technology assets 94 Customer relationships 28 In-process research and development 35 Other intangible assets 1 Goodwill 166 Other assets 18 Current liabilities (50 ) Other liabilities (47 ) Total business valuation 291 Less: Noncontrolling interest 56 Total purchase consideration $ 235 At September 29, 2019 , our purchase accounting was not complete. The above table represents our current estimate of the allocation. We are reviewing and validating the significant assumptions used to value the intangible assets and expect that these amounts could change as we finalize our allocation by the end of 2019. We expect the "Intangible assets" to be amortized over periods ranging from 3 to 20 years . We are also validating our calculations related to deferred tax assets and liabilities. "Goodwill" was determined based on the residual difference between the fair value of consideration transferred and the value assigned to tangible and intangible assets and liabilities. The goodwill amount is provisional and subject to changes, pending the completion of the valuation of acquired assets and liabilities. The goodwill amount will not be deductible for tax purposes. Among the factors contributing to a purchase price resulting in the recognition of goodwill are the acquisition of engineering talent in the fuel cell space, the ability to be one of the forerunners in the development of clean fuel cell energy and the continued opportunity to expand our position as a global power leader. This business was included in our September results but the amounts were not significant. Pro forma financial information was not provided as the historical financial statement activity of Hydrogenics is not material to our consolidated results. |
OPERATING SEGMENTS
OPERATING SEGMENTS | 9 Months Ended |
Sep. 29, 2019 | |
Segment Reporting [Abstract] | |
OPERATING SEGMENTS | NOTE 16. 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 President and Chief Operating Officer. Our reportable operating segments consist of Engine, Distribution, Components, Power Systems and Electrified Power. This reporting structure is organized according to the products and markets each segment serves . The Engine segment produces engines (15 liters and smaller) 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, electronics, fuel systems and automated transmissions. The Power Systems segment is an integrated power provider, which designs, manufactures and sells engines (16 liters and larger) for industrial applications (including mining, oil and gas, marine and rail), standby and prime power generator sets, alternators and other power components. The Electrified Power segment designs, manufactures, sells and supports electrified power systems ranging from fully electric to hybrid and, with the acquisition of Hydrogenics Corporation in the third quarter of 2019, also offers hydrogen generation, and fuel cell products. We continue to serve all our markets as they adopt electrification and alternative power technologies, meeting the needs of our OEM partners and end customers. We use EBITDA (defined as earnings before interest expense, income taxes, noncontrolling interests, depreciation and amortization) as the primary basis for the CODM to evaluate the performance of each of our reportable operating segments. Segment amounts exclude certain expenses not specifically identifiable to segments. The accounting policies of our operating segments are the same as those applied in our Condensed Consolidated Financial Statements. We prepared the financial results of our operating segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We allocate certain common costs and expenses, primarily corporate functions, among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. These include certain costs and expenses of shared services, such as information technology, human resources, legal, finance and supply chain management. We do not allocate gains (losses) of corporate owned life insurance to individual segments. EBITDA may not be consistent with measures used by other companies. Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below: In millions Engine Distribution Components Power Systems Electrified Power Total Segments Intersegment Eliminations (1) Total Three months ended September 29, 2019 External sales $ 1,822 $ 2,001 $ 1,253 $ 683 $ 9 $ 5,768 $ — $ 5,768 Intersegment sales 594 3 397 443 — 1,437 (1,437 ) — Total sales 2,416 2,004 1,650 1,126 9 7,205 (1,437 ) 5,768 Research, development and engineering expenses 79 7 73 58 25 242 — 242 Equity, royalty and interest income from investees 34 12 9 13 — 68 — 68 Interest income 5 4 2 3 — 14 — 14 Segment EBITDA 341 186 286 158 (36 ) 935 23 958 Depreciation and amortization (2) 50 29 67 29 2 177 — 177 Three months ended September 30, 2018 External sales $ 2,082 $ 1,927 $ 1,297 $ 636 $ 1 $ 5,943 $ — $ 5,943 Intersegment sales 644 4 457 471 1 1,577 (1,577 ) — Total sales 2,726 1,931 1,754 1,107 2 7,520 (1,577 ) 5,943 Research, development and engineering expenses 74 5 71 57 22 229 — 229 Equity, royalty and interest income from investees 55 9 12 14 — 90 — 90 Interest income 3 4 1 1 — 9 — 9 Segment EBITDA 405 155 288 163 (30 ) 981 2 983 Depreciation and amortization (2) 46 27 44 29 2 148 — 148 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 29, 2019 and September 30, 2018 . (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." Summarized financial information regarding our reportable operating segments for the nine months ended is shown in the table below: In millions Engine Distribution Components Power Systems Electrified Power Total Segments Intersegment Eliminations (1) Total Nine months ended September 29, 2019 External sales $ 5,879 $ 6,009 $ 4,055 $ 2,030 $ 20 $ 17,993 $ — $ 17,993 Intersegment sales 1,893 24 1,302 1,376 — 4,595 (4,595 ) — Total sales 7,772 6,033 5,357 3,406 20 22,588 (4,595 ) 17,993 Research, development and engineering expenses 245 21 223 171 70 730 — 730 Equity, royalty and interest income from investees 152 35 30 39 — 256 — 256 Interest income 13 12 6 7 — 38 — 38 Segment EBITDA 1,195 529 908 469 (98 ) 3,003 46 3,049 Depreciation and amortization (2) 151 86 160 88 6 491 — 491 Nine months ended September 30, 2018 External sales $ 5,945 $ 5,762 $ 4,012 $ 1,922 $ 4 $ 17,645 $ — $ 17,645 Intersegment sales 1,923 16 1,382 1,505 1 4,827 (4,827 ) — Total sales 7,868 5,778 5,394 3,427 5 22,472 (4,827 ) 17,645 Research, development and engineering expenses 229 15 195 174 45 658 — 658 Equity, royalty and interest income from investees 189 33 42 51 — 315 — 315 Interest income 8 9 4 5 — 26 — 26 Segment EBITDA 1,053 423 752 491 (61 ) 2,658 (78 ) 2,580 Depreciation and amortization (2) 142 81 137 91 4 455 — 455 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 29, 2019 and September 30, 2018 . (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $1 million for the nine months ended September 29, 2019 and September 30, 2018 , respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Total EBITDA $ 958 $ 983 $ 3,049 $ 2,580 Less: Depreciation and amortization 177 148 491 455 Interest expense 26 30 87 82 Income before income taxes $ 755 $ 805 $ 2,471 $ 2,043 |
RECENTLY ADOPTED AND RECENTLY I
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 29, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | NOTE 9. LEASES Lease Accounting Pronouncement Adoption In February 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the accounting for leases. Under the new standard, lessees are now required to recognize substantially all leases on the balance sheet as both a right-of-use (ROU) asset and a liability. The standard continues to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases 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 the old standard. Finance leases result in an accelerated expense similar to the accounting for capital leases under the old standard. The determination of a lease classification as operating or finance will occur in a manner similar to the old standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement. We adopted the new standard on January 1, 2019, using a modified retrospective approach and as a result did not adjust prior periods. Adoption of the standard resulted in the recording of $450 million of operating lease ROU assets and operating lease liabilities, but did not have a material impact on our net income or cash flows. The cumulative effect adjustment of adopting the new standard was not material. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and to not re-evaluate existing contracts as to whether or not they contained a lease. NOTE 17. RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Recently Adopted On January 1, 2019, we adopted the new lease standard in accordance with GAAP. See NOTE 9 , " LEASES ," for detailed information about the adoption of this standard. On January 1, 2019, we adopted the new FASB standard related to accounting for derivatives and hedging. The new standard allows the initial hedge effectiveness assessment to be performed by the end of the first quarter in which the hedge is designated rather than concurrently with entering into the hedge transaction. The changes also expand the use of a periodic qualitative hedge effectiveness assessment in lieu of an ongoing quantitative assessment performed throughout the life of the hedge. The revision removes the requirement to record ineffectiveness on cash flow hedges through the income statement when a hedge is considered highly effective, instead deferring all related hedge gains and losses in other comprehensive income until the hedged item impacts earnings. The modifications permit hedging the contractually-specified price of a component of a commodity purchase and revises certain disclosure requirements. We adopted the new standard on a modified retrospective basis for existing cash flow hedges and prospectively for disclosures. The amendments did not have a material effect on our Condensed Consolidated Financial Statements and no transition adjustment was required upon adoption. The adoption of this standard did not materially change our policies for existing hedges. Accounting Pronouncements Issued But Not Yet Effective In August 2018, the FASB issued a new standard that aligns the accounting for implementation costs incurred in a cloud computing arrangement accounted for as a service contract with the model currently used for internal use software costs. Under the new standard, costs that meet certain criteria will be required to be capitalized on the balance sheet and subsequently amortized over the term of the hosting arrangement. The standard is effective for us beginning on January 1, 2020, with early adoption permitted. The standard allows for either prospective or retrospective transition. We are still evaluating the impact of this standard on our financial statements. In June 2016, the FASB amended its standards related to 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 do not expect adoption of this standard to have a material impact on our Consolidated Financial Statements. |
LEASES SUMMARY OF SIGNIFICANT_2
LEASES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES LEASES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
Lessee, Leases - Policy | We determine if an arrangement contains a lease in whole or in part at the inception of the contract. ROU assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases greater than 12 months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide the information required to determine the implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is determined considering factors such as the lease term, our credit standing and the economic environment of the location of the lease. We use the implicit rate when readily determinable. Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or a liability. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases are generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the liability is recognized utilizing the interest method that results in more expense during the early years of the lease. We have lease agreements with lease and non-lease components, primarily related to real estate, vehicle and information technology (IT) assets. For vehicle and real estate leases, we account for the lease and non-lease components as a single lease component. For IT leases, we allocate the payment between the lease and non-lease components based on the relative value of each component. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Options excluded from diluted earnings per share | The options excluded from diluted earnings per share were as follows: Three months ended Nine months ended September 29, September 30, September 29, September 30, Options excluded 874,604 1,481,750 631,042 799,337 |
REVENUE RECOGNITION LONGTERM CO
REVENUE RECOGNITION LONGTERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Contract with Customer, Asset and Liability | The following is a summary of our unbilled and deferred revenue and related activity: In millions September 29, December 31, Unbilled revenue $ 75 $ 64 Deferred revenue, primarily extended warranty 1,314 1,156 |
REVENUE RECOGNITION DISAGGREG_2
REVENUE RECOGNITION DISAGGREGATION OF REVENUES (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Geographic Areas | The table below presents our consolidated sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer. Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, United States $ 3,414 $ 3,407 $ 10,461 $ 9,829 China 481 559 1,698 1,753 India 185 240 643 722 Other international 1,688 1,737 5,191 5,341 Total net sales $ 5,768 $ 5,943 $ 17,993 $ 17,645 |
Engine | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Market | Engine segment external sales by market were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Heavy-duty truck $ 635 $ 769 $ 2,112 $ 2,113 Medium-duty truck and bus 525 613 1,765 1,954 Light-duty automotive 451 446 1,216 1,099 Total on-highway 1,611 1,828 5,093 5,166 Off-highway 211 254 786 779 Total sales $ 1,822 $ 2,082 $ 5,879 $ 5,945 |
Distribution | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Geographic Areas | Distribution segment external sales by region were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, North America $ 1,373 $ 1,331 $ 4,139 $ 3,954 Asia Pacific 224 223 667 621 Europe 135 113 380 387 China 82 77 264 238 Africa and Middle East 60 55 170 178 Latin America 48 42 134 125 India 46 49 142 142 Russia 33 37 113 117 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 |
Revenue from External Customers by Products and Services | Distribution segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Parts $ 796 $ 797 $ 2,464 $ 2,415 Power generation 466 359 1,292 1,029 Service 376 372 1,109 1,091 Engines 363 399 1,144 1,227 Total sales $ 2,001 $ 1,927 $ 6,009 $ 5,762 |
Components | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Products and Services | Components segment external sales by business were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Emission solutions $ 660 $ 677 $ 2,144 $ 2,096 Filtration 249 242 771 756 Turbo technologies 151 173 522 571 Automated transmissions 146 150 451 408 Electronics and fuel systems 47 55 167 181 Total sales $ 1,253 $ 1,297 $ 4,055 $ 4,012 |
Power Systems | |
Disaggregation of Revenue [Line Items] | |
Revenue from External Customers by Products and Services | Power Systems segment external sales by product line were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Power generation $ 372 $ 366 $ 1,060 $ 1,066 Industrial 227 184 704 593 Generator technologies 84 86 266 263 Total sales $ 683 $ 636 $ 2,030 $ 1,922 |
PENSION AND OTHER POSTRETIREM_2
PENSION AND OTHER POSTRETIREMENT BENEFITS (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Retirement Benefits [Abstract] | |
Schedule Benefit Plans Disclosures Cash Contributions | Contributions to these plans were as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Defined benefit pension plans Voluntary contribution $ 26 $ 4 $ 88 $ 11 Mandatory contribution 7 6 22 17 Defined benefit pension contributions $ 33 $ 10 $ 110 $ 28 Other postretirement benefit plans Benefit payments, net $ 5 $ 11 $ 20 $ 16 Defined contribution pension plans $ 23 $ 21 $ 80 $ 82 |
Components of net periodic pension and other postretirement benefit cost | The components of net periodic pension and other postretirement benefit costs under our plans were as follows: Pension U.S. Plans U.K. Plans Other Postretirement Benefits Three months ended In millions September 29, September 30, September 29, September 30, September 29, September 30, Service cost $ 29 $ 30 $ 6 $ 7 $ — $ — Interest cost 27 25 10 10 3 3 Expected return on plan assets (47 ) (49 ) (16 ) (17 ) — — Recognized net actuarial loss 4 8 3 7 — — Net periodic benefit cost $ 13 $ 14 $ 3 $ 7 $ 3 $ 3 Pension U.S. Plans U.K. Plans Other Postretirement Benefits Nine months ended In millions September 29, September 30, September 29, September 30, September 29, September 30, Service cost $ 87 $ 90 $ 19 $ 22 $ — $ — Interest cost 81 74 32 31 8 8 Expected return on plan assets (142 ) (147 ) (52 ) (53 ) — — Amortization of prior service cost 1 — 1 — — — Recognized net actuarial loss 12 25 9 22 — — Net periodic benefit cost $ 39 $ 42 $ 9 $ 22 $ 8 $ 8 |
EQUITY, ROYALTY AND INTEREST _2
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity, royalty and interest income from investees | Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Manufacturing entities Beijing Foton Cummins Engine Co., Ltd. $ 15 $ 18 $ 56 $ 63 Dongfeng Cummins Engine Company, Ltd. 10 13 40 47 Chongqing Cummins Engine Company, Ltd. 10 11 32 43 All other manufacturers 21 30 76 100 Distribution entities Komatsu Cummins Chile, Ltda. 6 5 19 18 All other distributors 1 — — — Cummins share of net income 63 77 223 271 Royalty and interest income 5 13 33 44 Equity, royalty and interest income from investees $ 68 $ 90 $ 256 $ 315 |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of marketable securities | A summary of marketable securities, all of which were classified as current, was as follows: September 29, December 31, In millions Cost Gross unrealized gains/(losses) (1) Estimated Cost Gross unrealized gains/(losses) (1) Estimated Equity securities Certificates of deposit $ 147 $ — $ 147 $ 101 $ — $ 101 Debt mutual funds 132 3 135 103 1 104 Equity mutual funds 16 3 19 16 — 16 Bank debentures 1 — 1 — — — Debt securities 1 — 1 1 — 1 Total marketable securities $ 297 $ 6 $ 303 $ 221 $ 1 $ 222 ____________________________________ (1) Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . |
Schedule of proceeds from sales and maturities | The proceeds from sales and maturities of marketable securities were as follows: Nine months ended In millions September 29, September 30, Proceeds from sales of marketable securities $ 179 $ 234 Proceeds from maturities of marketable securities 117 64 Investments in marketable securities - liquidations $ 296 $ 298 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories are stated at the lower of cost or market. Inventories included the following: In millions September 29, December 31, Finished products $ 2,421 $ 2,405 Work-in-process and raw materials 1,526 1,487 Inventories at FIFO cost 3,947 3,892 Excess of FIFO over LIFO (126 ) (133 ) Total inventories $ 3,821 $ 3,759 |
LEASES FOOTNOTE DISCLOSURE (Tab
LEASES FOOTNOTE DISCLOSURE (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Leases [Abstract] | |
Lease, Cost | The components of our lease expense were as follows: Three months ended Nine months ended In millions September 29, September 29, Operating lease cost $ 51 $ 155 Finance lease cost Amortization of right-of-use asset 3 12 Interest expense 1 7 Short-term lease cost 2 4 Variable lease cost 2 4 Total lease cost $ 59 $ 182 |
Schedule Of Supplemental Balance Sheet Information Related To Leases Table | Supplemental balance sheet information related to leases: In millions September 29, 2019 Balance Sheet Location Assets Operating lease assets $ 446 Other assets Finance lease assets (1) 124 Property, plant and equipment, net Total lease assets $ 570 Liabilities Current Operating $ 124 Other accrued expenses Finance 12 Current maturities of long-term debt Long-term Operating 333 Other liabilities Finance 110 Long-term debt Total lease liabilities $ 579 ____________________________________ (1) Finance lease assets are recorded net of accumulated amortization of $62 million at September 29, 2019 |
Schedule Of Supplemental Cash Flow Information Related To Leases Table | Supplemental cash flow and other information related to leases: Three months ended Nine months ended In millions September 29, September 29, Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 38 $ 115 Operating cash flows from finance leases 2 7 Financing cash flows from finance leases 3 10 Right-of-use assets obtained in exchange for lease obligations Operating leases 51 129 Finance leases 1 7 |
Schedule Of Supplemental Other Information Related To Leases Table | Additional information related to leases: September 29, Weighted-average remaining lease term (in years) Operating leases 5.3 Finance leases 13.9 Weighted-average discount rate Operating leases 3.3 % Finance leases 7.2 % |
Lessee, Financing and Operating Lease, Liability, Maturity | Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at September 29, 2019 , together with the net present value of the minimum payments due to finance leases: In millions Finance Leases Operating Leases 2019 $ 5 $ 38 2020 19 129 2021 16 102 2022 15 77 2023 14 51 After 2023 146 110 Total minimum lease payments 215 507 Interest (93 ) (50 ) Present value of net minimum lease payments $ 122 $ 457 |
Schedule of Future Minimum Rental Payments for Operating Leases Prior to Adoption of New Standard[Table Text Block] | Following is a summary of the future minimum lease payments due to capital and operating leases with terms of more than one year at December 31, 2018, together with the net present value of the minimum payments due to capital leases under the previous lease standard: In millions Capital Leases Operating Leases 2019 $ 30 $ 138 2020 21 109 2021 16 81 2022 14 60 2023 13 39 After 2023 144 81 Total minimum lease payments $ 238 $ 508 Interest (106 ) Present value of net minimum lease payments $ 132 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Short-term Debt | Loans payable, commercial paper and the related weighted-average interest rates were as follows: In millions September 29, December 31, Loans payable (1) $ 103 $ 54 Commercial paper (2) 902 780 ____________________________________ (1) Loans payable consist primarily of notes payable to various domestic and international financial institutions and it is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. (2) The weighted-average interest rate, inclusive of all brokerage fees, was 2.18 percent and 2.59 percent at September 29, 2019 and December 31, 2018 , respectively. |
Summary of long-term debt | A summary of long-term debt was as follows: In millions Interest Rate September 29, December 31, Long-term debt Senior notes, due 2023 3.65% $ 500 $ 500 Debentures, due 2027 6.75% 58 58 Debentures, due 2028 7.125% 250 250 Senior notes, due 2043 4.875% 500 500 Debentures, due 2098 (1) 5.65% 165 165 Other debt 70 64 Unamortized discount (50 ) (52 ) Fair value adjustments due to hedge on indebtedness 41 25 Finance leases 122 132 Total long-term debt 1,656 1,642 Less: Current maturities of long-term debt 37 45 Long-term debt $ 1,619 $ 1,597 ____________________________________ (1) The effective interest rate on this debt is 7.48% . |
Principal repayments on long-term debt | Principal payments required on long-term debt during the next five years are as follows: In millions 2019 2020 2021 2022 2023 Principal payments $ 16 $ 30 $ 45 $ 9 $ 507 |
Fair value and carrying value of total debt | Based on borrowing rates currently available to us for bank loans with similar terms and average maturities, considering our risk premium, the fair values and carrying values of total debt, including current maturities, were as follows: In millions September 29, December 31, Fair value of total debt (1) $ 3,031 $ 2,679 Carrying values of total debt 2,661 2,476 _________________________________________________ (1) The fair value of debt is derived from Level 2 inputs. |
PRODUCT WARRANTY LIABILITY (Tab
PRODUCT WARRANTY LIABILITY (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
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 product campaigns was as follows: Nine months ended In millions September 29, September 30, Balance, beginning of year $ 2,208 $ 1,687 Provision for base warranties issued 360 337 Deferred revenue on extended warranty contracts sold 254 211 Provision for product campaigns issued 163 456 Payments made during period (431 ) (313 ) Amortization of deferred revenue on extended warranty contracts (174 ) (179 ) Changes in estimates for pre-existing product warranties (16 ) 18 Foreign currency translation and other (9 ) (6 ) Balance, end of period $ 2,355 $ 2,211 |
Warranty related deferred revenue and the long-term portion of the warranty liability | Warranty related deferred revenues and the long-term portion of the warranty liabilities on our Condensed Consolidated Balance Sheets were as follows: In millions September 29, December 31, Balance Sheet Location Deferred revenue related to extended coverage programs Current portion $ 225 $ 227 Current portion of deferred revenue Long-term portion 668 587 Deferred revenue Total $ 893 $ 814 Product warranty Current portion $ 817 $ 654 Current portion of accrued product warranty Long-term portion 645 740 Accrued product warranty Total $ 1,462 $ 1,394 Total warranty accrual $ 2,355 $ 2,208 |
SUPPLEMENTAL BALANCE SHEET DA_2
SUPPLEMENTAL BALANCE SHEET DATA (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Balance Sheet Related Disclosures [Abstract] | |
Accrued Expenses | Other accrued expenses included the following: In millions September 29, December 31, 2018 Marketing accruals $ 208 $ 199 Other taxes payable 185 196 Income taxes payable 132 97 Current portion of operating lease liabilities 124 — Other 348 360 Other accrued expenses $ 997 $ 852 |
Other Noncurrent Liabilities | Other liabilities included the following: In millions September 29, December 31, Operating lease liabilities $ 333 $ — Deferred income taxes 301 263 Income taxes payable 293 293 Accrued compensation 161 173 Other long-term liabilities 226 163 Other liabilities $ 1,314 $ 892 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Equity [Abstract] | |
Changes in accumulated other comprehensive income (loss) by component | Following are the changes in accumulated other comprehensive income (loss) by component for the three months ended: Three months ended In millions Change in Foreign Unrealized gain Unrealized gain Total Noncontrolling Total Balance at June 30, 2019 $ (675 ) $ (1,156 ) $ — $ (9 ) $ (1,840 ) Other comprehensive income before reclassifications Before tax amount — (177 ) — (39 ) (216 ) $ (5 ) $ (221 ) Tax benefit (expense) — — — 8 8 — 8 After tax amount — (177 ) — (31 ) (208 ) (5 ) (213 ) Amounts reclassified from accumulated other comprehensive loss (1) 6 — — 2 8 — 8 Net current period other comprehensive income (loss) 6 (177 ) — (29 ) (200 ) $ (5 ) $ (205 ) Balance at September 29, 2019 $ (669 ) $ (1,333 ) $ — $ (38 ) $ (2,040 ) Balance at July 1, 2018 $ (668 ) $ (1,003 ) $ — $ 4 $ (1,667 ) Other comprehensive income before reclassifications Before tax amount — (139 ) 2 1 (136 ) $ (17 ) $ (153 ) Tax benefit (expense) — (3 ) — — (3 ) — (3 ) After tax amount — (142 ) 2 1 (139 ) (17 ) (156 ) Amounts reclassified from accumulated other comprehensive loss (1) 13 — (2 ) (4 ) 7 — 7 Net current period other comprehensive income (loss) 13 (142 ) — (3 ) (132 ) $ (17 ) $ (149 ) Balance at September 30, 2018 $ (655 ) $ (1,145 ) $ — $ 1 $ (1,799 ) ____________________________________ (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. Following are the changes in accumulated other comprehensive income (loss) by component for the nine months ended : Nine months ended In millions Change in Foreign Unrealized gain (loss) on debt securities Unrealized gain Total Noncontrolling Total Balance at December 31, 2018 $ (671 ) $ (1,138 ) $ — $ 2 $ (1,807 ) Other comprehensive income before reclassifications Before tax amount (22 ) (194 ) — (47 ) (263 ) $ (2 ) $ (265 ) Tax benefit (expense) 5 (1 ) — 11 15 — 15 After tax amount (17 ) (195 ) — (36 ) (248 ) (2 ) (250 ) Amounts reclassified from accumulated other comprehensive loss (1) 19 — — (4 ) 15 — 15 Net current period other comprehensive income (loss) 2 (195 ) — (40 ) (233 ) $ (2 ) $ (235 ) Balance at September 29, 2019 $ (669 ) $ (1,333 ) $ — $ (38 ) $ (2,040 ) Balance at December 31, 2017 $ (689 ) $ (812 ) $ 1 $ (3 ) $ (1,503 ) Other comprehensive income before reclassifications Before tax amount (8 ) (342 ) 2 16 (332 ) $ (41 ) $ (373 ) Tax benefit (expense) 2 9 — (6 ) 5 — 5 After tax amount (6 ) (333 ) 2 10 (327 ) (41 ) (368 ) Amounts reclassified from accumulated other comprehensive loss (1) 40 — (3 ) (6 ) 31 1 32 Net current period other comprehensive income (loss) 34 (333 ) (1 ) 4 (296 ) $ (40 ) $ (336 ) Balance at September 30, 2018 $ (655 ) $ (1,145 ) $ — $ 1 $ (1,799 ) ____________________________________ (1) Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
ACQUISITION ACQUISITION (Tables
ACQUISITION ACQUISITION (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | Acquisitions for the nine months ended September 29, 2019 and September 30, 2018 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) Goodwill Acquired Intangibles Recognized (2) Net Sales Previous Fiscal Year Ended 2019 Hydrogenics Corporation 09/09/19 81% $ 235 $ — $ 235 COMB $ 166 $ 158 $ 34 2018 Efficient Drivetrains, Inc. 08/15/18 100% $ 51 $ 2 $ 64 (3) COMB $ 49 $ 15 $ 3 Johnson Matthey Battery Systems, Ltd. 01/31/18 100% 9 — 9 COMB — 5 3 ____________________________________________________ (1) Newly consolidated entities were accounted for as business combinations (COMB) and were included in the Electrified Power Segment on the date of acquisition. (2) Intangible assets acquired in business combinations were mostly technology and customer related, the majority of which will be amortized over a period of up to 20 years from the date of the acquisition. (3) The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. A portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | In millions Inventory $ 21 Other current assets 25 Intangible assets Technology assets 94 Customer relationships 28 In-process research and development 35 Other intangible assets 1 Goodwill 166 Other assets 18 Current liabilities (50 ) Other liabilities (47 ) Total business valuation 291 Less: Noncontrolling interest 56 Total purchase consideration $ 235 |
OPERATING SEGMENTS (Tables)
OPERATING SEGMENTS (Tables) | 9 Months Ended |
Sep. 29, 2019 | |
Segment Reporting [Abstract] | |
Financial information regarding reportable operating segments | Summarized financial information regarding our reportable operating segments for the three months ended is shown in the table below: In millions Engine Distribution Components Power Systems Electrified Power Total Segments Intersegment Eliminations (1) Total Three months ended September 29, 2019 External sales $ 1,822 $ 2,001 $ 1,253 $ 683 $ 9 $ 5,768 $ — $ 5,768 Intersegment sales 594 3 397 443 — 1,437 (1,437 ) — Total sales 2,416 2,004 1,650 1,126 9 7,205 (1,437 ) 5,768 Research, development and engineering expenses 79 7 73 58 25 242 — 242 Equity, royalty and interest income from investees 34 12 9 13 — 68 — 68 Interest income 5 4 2 3 — 14 — 14 Segment EBITDA 341 186 286 158 (36 ) 935 23 958 Depreciation and amortization (2) 50 29 67 29 2 177 — 177 Three months ended September 30, 2018 External sales $ 2,082 $ 1,927 $ 1,297 $ 636 $ 1 $ 5,943 $ — $ 5,943 Intersegment sales 644 4 457 471 1 1,577 (1,577 ) — Total sales 2,726 1,931 1,754 1,107 2 7,520 (1,577 ) 5,943 Research, development and engineering expenses 74 5 71 57 22 229 — 229 Equity, royalty and interest income from investees 55 9 12 14 — 90 — 90 Interest income 3 4 1 1 — 9 — 9 Segment EBITDA 405 155 288 163 (30 ) 981 2 983 Depreciation and amortization (2) 46 27 44 29 2 148 — 148 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 29, 2019 and September 30, 2018 . (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." Summarized financial information regarding our reportable operating segments for the nine months ended is shown in the table below: In millions Engine Distribution Components Power Systems Electrified Power Total Segments Intersegment Eliminations (1) Total Nine months ended September 29, 2019 External sales $ 5,879 $ 6,009 $ 4,055 $ 2,030 $ 20 $ 17,993 $ — $ 17,993 Intersegment sales 1,893 24 1,302 1,376 — 4,595 (4,595 ) — Total sales 7,772 6,033 5,357 3,406 20 22,588 (4,595 ) 17,993 Research, development and engineering expenses 245 21 223 171 70 730 — 730 Equity, royalty and interest income from investees 152 35 30 39 — 256 — 256 Interest income 13 12 6 7 — 38 — 38 Segment EBITDA 1,195 529 908 469 (98 ) 3,003 46 3,049 Depreciation and amortization (2) 151 86 160 88 6 491 — 491 Nine months ended September 30, 2018 External sales $ 5,945 $ 5,762 $ 4,012 $ 1,922 $ 4 $ 17,645 $ — $ 17,645 Intersegment sales 1,923 16 1,382 1,505 1 4,827 (4,827 ) — Total sales 7,868 5,778 5,394 3,427 5 22,472 (4,827 ) 17,645 Research, development and engineering expenses 229 15 195 174 45 658 — 658 Equity, royalty and interest income from investees 189 33 42 51 — 315 — 315 Interest income 8 9 4 5 — 26 — 26 Segment EBITDA 1,053 423 752 491 (61 ) 2,658 (78 ) 2,580 Depreciation and amortization (2) 142 81 137 91 4 455 — 455 ____________________________________ (1) Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 29, 2019 and September 30, 2018 . (2) Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $1 million for the nine months ended September 29, 2019 and September 30, 2018 , respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." |
Reconciliation of segment information | A reconciliation of our segment information to the corresponding amounts in the Condensed Consolidated Statements of Net Income is shown in the table below: Three months ended Nine months ended In millions September 29, September 30, September 29, September 30, Total EBITDA $ 958 $ 983 $ 3,049 $ 2,580 Less: Depreciation and amortization 177 148 491 455 Interest expense 26 30 87 82 Income before income taxes $ 755 $ 805 $ 2,471 $ 2,043 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 9 Months Ended |
Sep. 29, 2019countrylocation | |
Nature of Operations | |
Company Owned and Independent Distributor Locations Number | 600 |
Dealer Locations Number | 7,600 |
Countries and Territories Number | country | 190 |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Options excluded (in shares) | 874,604 | 1,481,750 | 631,042 | 799,337 |
REVENUE RECOGNITION LONGTERM _2
REVENUE RECOGNITION LONGTERM CONTRACTS AND DEFERRED AND UNBILLED REVENUE (Details 1) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 809 | $ 809 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Unbilled revenue | 75 | 75 | $ 64 | ||
Deferred revenue, primarily extended warranty | 1,314 | 1,314 | $ 1,156 | ||
Contract with Customer, Liability, Revenue Recognized | 79 | $ 71 | 282 | $ 277 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-09-30 | |||||
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 180 | $ 180 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 12 months | 12 months | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-30 | |||||
Revenue from Contract with Customer [Abstract] | |||||
Revenue, Remaining Performance Obligation, Amount | $ 629 | $ 629 | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 10 years | 10 years |
REVENUE RECOGNITION DISAGGREG_3
REVENUE RECOGNITION DISAGGREGATION OF REVENUES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | ||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | [1] | $ 5,768 | $ 5,943 | $ 17,993 | $ 17,645 |
Heavy-duty truck (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 635 | 769 | 2,112 | 2,113 | |
Medium-duty truck and bus (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 525 | 613 | 1,765 | 1,954 | |
Light-duty automotive (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 451 | 446 | 1,216 | 1,099 | |
On-highway (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,611 | 1,828 | 5,093 | 5,166 | |
Off-highway (EBU market) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 211 | 254 | 786 | 779 | |
Parts (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 796 | 797 | 2,464 | 2,415 | |
Power Generation (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 466 | 359 | 1,292 | 1,029 | |
Service (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 376 | 372 | 1,109 | 1,091 | |
Engines (DBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 363 | 399 | 1,144 | 1,227 | |
Emission solutions (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 660 | 677 | 2,144 | 2,096 | |
Filtration (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 249 | 242 | 771 | 756 | |
Turbo technologies (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 151 | 173 | 522 | 571 | |
Automated Transmissions (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 146 | 150 | 451 | 408 | |
Electronics and Fuel systems (CBU business) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 47 | 55 | 167 | 181 | |
Power Generation (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 372 | 366 | 1,060 | 1,066 | |
Industrial (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 227 | 184 | 704 | 593 | |
Generator technologies (PSBU product line) | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 84 | 86 | 266 | 263 | |
Engine | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 2,416 | 2,726 | 7,772 | 7,868 | |
Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 2,004 | 1,931 | 6,033 | 5,778 | |
Components | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,650 | 1,754 | 5,357 | 5,394 | |
Power Systems | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,126 | 1,107 | 3,406 | 3,427 | |
External Sales | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 5,768 | 5,943 | 17,993 | 17,645 | |
External Sales | Engine | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,822 | 2,082 | 5,879 | 5,945 | |
External Sales | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 2,001 | 1,927 | 6,009 | 5,762 | |
External Sales | Components | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,253 | 1,297 | 4,055 | 4,012 | |
External Sales | Power Systems | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 683 | 636 | 2,030 | 1,922 | |
UNITED STATES | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 3,414 | 3,407 | 10,461 | 9,829 | |
CHINA | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 481 | 559 | 1,698 | 1,753 | |
CHINA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 82 | 77 | 264 | 238 | |
INDIA | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 185 | 240 | 643 | 722 | |
INDIA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 46 | 49 | 142 | 142 | |
OTHER INTERNATIONAL | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,688 | 1,737 | 5,191 | 5,341 | |
NORTH AMERICA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 1,373 | 1,331 | 4,139 | 3,954 | |
ASIA PACIFIC | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 224 | 223 | 667 | 621 | |
EUROPE | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 135 | 113 | 380 | 387 | |
AFRICA AND MIDDLE EAST | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 60 | 55 | 170 | 178 | |
LATIN AMERICA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | 48 | 42 | 134 | 125 | |
RUSSIA | Distribution | |||||
Disaggregation of Revenue [Line Items] | |||||
Net Sales | $ 33 | $ 37 | $ 113 | $ 117 | |
[1] | Includes sales to nonconsolidated equity investees of $280 million and $882 million for the three and nine months ended September 29, 2019 , compared with $314 million and $951 million for the comparable periods in 2018. |
PENSION AND OTHER POSTRETIREM_3
PENSION AND OTHER POSTRETIREMENT BENEFITS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | |
Pension Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | $ 33 | $ 10 | $ 110 | $ 28 | |
Pension Plan | Voluntary | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | 26 | 4 | 88 | 11 | |
Pension Plan | Mandatory | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | 7 | 6 | 22 | 17 | |
Other Postretirement Benefits Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Plan Assets, Contributions by Employer | 5 | 11 | 20 | 16 | |
Components of Net Periodic Benefit Cost | |||||
Service cost | 0 | 0 | 0 | 0 | |
Interest cost | 3 | 3 | 8 | 8 | |
Expected return on plan assets | 0 | 0 | 0 | 0 | |
Amortization of prior service cost | 0 | 0 | |||
Recognized net actuarial loss | 0 | 0 | 0 | 0 | |
Net periodic benefit cost | 3 | 3 | 8 | 8 | |
Defined contribution pension plan | |||||
Pension and other postretirement benefits | |||||
Defined contribution pension plans | 23 | 21 | 80 | 82 | |
Estimate | Pension Plan | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Expected Future Employer Contributions, Remainder of Fiscal Year | $ 13 | ||||
Defined Benefit Plan, Expected Future Employer Contributions, Current Fiscal Year | 123 | ||||
Net periodic pension cost | 64 | ||||
Estimate | Pension Plan | Voluntary | |||||
Pension and other postretirement benefits | |||||
Defined Benefit Plan, Expected Future Employer Contributions, Current Fiscal Year | $ 91 | ||||
UNITED STATES | Pension Plan | |||||
Components of Net Periodic Benefit Cost | |||||
Service cost | 29 | 30 | 87 | 90 | |
Interest cost | 27 | 25 | 81 | 74 | |
Expected return on plan assets | (47) | (49) | (142) | (147) | |
Amortization of prior service cost | 1 | 0 | |||
Recognized net actuarial loss | 4 | 8 | 12 | 25 | |
Net periodic benefit cost | 13 | 14 | 39 | 42 | |
UNITED KINGDOM | Pension Plan | |||||
Components of Net Periodic Benefit Cost | |||||
Service cost | 6 | 7 | 19 | 22 | |
Interest cost | 10 | 10 | 32 | 31 | |
Expected return on plan assets | (16) | (17) | (52) | (53) | |
Amortization of prior service cost | 1 | 0 | |||
Recognized net actuarial loss | 3 | 7 | 9 | 22 | |
Net periodic benefit cost | $ 3 | $ 7 | $ 9 | $ 22 |
EQUITY, ROYALTY AND INTEREST _3
EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | ||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | $ 63 | $ 77 | $ 223 | $ 271 | |
Royalty and interest income | [1] | 5,768 | 5,943 | 17,993 | 17,645 |
Equity, royalty and interest income from investees | 68 | 90 | 256 | 315 | |
Beijing Foton Cummins Engine Company | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 15 | 18 | 56 | 63 | |
Dongfeng Cummins Engine Company Ltd | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 10 | 13 | 40 | 47 | |
Chongqing Cummins Engine Company, Ltd. | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 10 | 11 | 32 | 43 | |
All other manufacturers | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 21 | 30 | 76 | 100 | |
Komatsu Cummins Chile, Ltda. (Distribution) | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 6 | 5 | 19 | 18 | |
All other distributors | |||||
Equity, royalty and interest income from investees | |||||
Cummins share of net income | 1 | 0 | 0 | 0 | |
Royalty and interest income | |||||
Equity, royalty and interest income from investees | |||||
Royalty and interest income | $ 5 | $ 13 | $ 33 | $ 44 | |
[1] | Includes sales to nonconsolidated equity investees of $280 million and $882 million for the three and nine months ended September 29, 2019 , compared with $314 million and $951 million for the comparable periods in 2018. |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ / shares in Units, $ in Millions | Sep. 30, 2019 | Sep. 29, 2019 | Sep. 30, 2018 | Jul. 01, 2018 | Apr. 01, 2018 | Sep. 29, 2019 | Sep. 30, 2018 |
Income Tax [Line Items] | |||||||
Effective tax rate (as a percent) | 18.40% | 13.30% | 20.30% | 22.80% | |||
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability | $ 23 | $ 37 | $ 30 | $ 37 | |||
Income (Loss) from Continuing Operations, Per Diluted Share | $ 0.14 | $ 0.23 | $ 0.85 | $ 0.87 | $ 0.19 | $ 0.23 | |
Tax Cuts and Jobs Act of 2017, Final Adjustment CY/ Incomplete Accounting PY, Total Impact, Net | $ 34 | $ 48 | |||||
Deferred Other Tax Expense (Benefit) | $ 3 | $ 11 | |||||
Estimate | |||||||
Income Tax [Line Items] | |||||||
Effective tax rate (as a percent) | 21.50% |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 29, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | ||
Schedule of Available-for-sale Securities | ||||
Debt Securities, Available-for-sale, Amortized Cost | $ 1 | $ 1 | ||
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax | [1] | 0 | 0 | |
Debt Securities, Available-for-sale | 1 | 1 | ||
Total Marketable Securities, Amortized Cost Basis | 297 | 221 | ||
Total Marketable Securities, Accumulated Gross Unrealized Gain (Loss), before Tax | [1] | 6 | 1 | |
Total Marketable Securities, Estimated Fair Value | 303 | 222 | ||
Proceeds from Sale of Marketable Securities | 179 | $ 234 | ||
Proceeds from Maturity of Marketable Securities | 117 | 64 | ||
Proceeds from sales and maturities of marketable securities | 296 | $ 298 | ||
Certificates of Deposit | ||||
Schedule of Available-for-sale Securities | ||||
Available-for-sale Equity Securities, Amortized Cost Basis | 147 | 101 | ||
Available-for-sale Equity Securities, Accumulated Gross Unrealized Gain, before Tax | [1] | 0 | 0 | |
Available-for-sale Securities, Equity Securities | 147 | 101 | ||
Debt Mutual Funds | ||||
Schedule of Available-for-sale Securities | ||||
Available-for-sale Equity Securities, Amortized Cost Basis | 132 | 103 | ||
Available-for-sale Equity Securities, Accumulated Gross Unrealized Gain, before Tax | [1] | 3 | 1 | |
Available-for-sale Securities, Equity Securities | 135 | 104 | ||
Equity mutual funds | ||||
Schedule of Available-for-sale Securities | ||||
Available-for-sale Equity Securities, Amortized Cost Basis | 16 | 16 | ||
Available-for-sale Equity Securities, Accumulated Gross Unrealized Gain, before Tax | [1] | 3 | 0 | |
Available-for-sale Securities, Equity Securities | 19 | 16 | ||
Bank debentures | ||||
Schedule of Available-for-sale Securities | ||||
Available-for-sale Equity Securities, Amortized Cost Basis | 1 | 0 | ||
Available-for-sale Equity Securities, Accumulated Gross Unrealized Gain, before Tax | [1] | 0 | 0 | |
Available-for-sale Securities, Equity Securities | $ 1 | $ 0 | ||
Minimum | Certificates of Deposit | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Bank Debentures Description | P3M | |||
Maximum | Certificates of Deposit | ||||
Schedule of Available-for-sale Securities | ||||
Maturities of Bank Debentures Description | P5Y | |||
[1] | Unrealized gains and losses for debt securities are recorded in other comprehensive income while unrealized gains and losses for equity securities are recorded in "Other income, net" in our Condensed Consolidated Statements of Net Income . |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Sep. 29, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 2,421 | $ 2,405 |
Work-in-process and raw materials | 1,526 | 1,487 |
Inventories at FIFO cost | 3,947 | 3,892 |
Excess of FIFO over LIFO | (126) | (133) |
Total inventories | $ 3,821 | $ 3,759 |
LEASES RECENTLY ADOPTED ACCOU_2
LEASES RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENT (Details) - USD ($) $ in Millions | Jan. 01, 2019 | Sep. 29, 2019 | Sep. 30, 2018 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Adjustment for adoption of new accounting standards | [1] | $ 30 | ||
ASU 2016-02 Leases | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
New Accounting Pronouncement or Change in Accounting Principle, Description | In February 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the accounting for leases. Under the new standard, lessees are now required to recognize substantially all leases on the balance sheet as both a right-of-use (ROU) asset and a liability. The standard continues to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases 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 the old standard. Finance leases result in an accelerated expense similar to the accounting for capital leases under the old standard. The determination of a lease classification as operating or finance will occur in a manner similar to the old standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement. We adopted the new standard on January 1, 2019, using a modified retrospective approach and as a result did not adjust prior periods. Adoption of the standard resulted in the recording of $450 million of operating lease ROU assets and operating lease liabilities, but did not have a material impact on our net income or cash flows. The cumulative effect adjustment of adopting the new standard was not material. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and to not re-evaluate existing contracts as to whether or not they contained a lease.On January 1, 2019, we adopted the new lease standard in accordance with GAAP. See NOTE 9, "LEASES," for detailed information about the adoption of this standard. | |||
Adjustment for adoption of new accounting standards | $ 450 | |||
[1] | Includes $28 million related to adoption of the revenue recognition standard and $2 million related to adoption of the accounting for certain financial instruments standard. See Note 1, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted and Recently Issued Accounting Pronouncements” of the Notes to the Consolidated Financial Statements of our 2018 Form 10-K |
LEASES FOOTNOTE DISCLOSURE (Det
LEASES FOOTNOTE DISCLOSURE (Details 1) | Sep. 29, 2019 |
Real Estate | Minimum | |
Operating Leased Assets [Line Items] | |
Lessee, Operating Lease, Term of Contract | 2 years |
Real Estate | Maximum | |
Operating Leased Assets [Line Items] | |
Lessee, Operating Lease, Term of Contract | 30 years |
Lessee, Operating Lease, Renewal Term | 2 years |
Equipment | Minimum | |
Operating Leased Assets [Line Items] | |
Lessee, Operating Lease, Term of Contract | 2 years |
Equipment | Maximum | |
Operating Leased Assets [Line Items] | |
Lessee, Operating Lease, Term of Contract | 3 years |
LEASES FOOTNOTE DISCLOSURE (D_2
LEASES FOOTNOTE DISCLOSURE (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 29, 2019 | Sep. 29, 2019 | Dec. 31, 2018 | ||
Lessee, Lease, Cost | ||||
Operating Lease, Cost | $ 51 | $ 155 | ||
Finance Lease, Right-of-Use Asset, Amortization | 3 | 12 | ||
Finance Lease, Interest Expense | 1 | 7 | ||
Short-term Lease, Cost | 2 | 4 | ||
Variable Lease, Cost | 2 | 4 | ||
Lease, Cost | 59 | 182 | ||
Lessee, Lease, Description [Line Items] | ||||
Total leased assets | 570 | 570 | ||
Operating lease liability, Current | 124 | 124 | $ 0 | |
Operating lease liabilities, Noncurrent | 333 | 333 | 0 | |
Total Lease Liabilities | 579 | 579 | ||
Finance Lease, Right-of-Use Asset, Accumulated Amortization | 62 | 62 | ||
Lessee, Lease, Supplemental Cash Flow Information | ||||
Operating cash flows from operating leases | 38 | 115 | ||
Operating cash flows from finance leases | 2 | 7 | ||
Financing cash flows from finance leases | 3 | 10 | ||
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability | 51 | 129 | ||
Right-of-Use Asset Obtained in Exchange for Finance Lease Liability | $ 1 | $ 7 | ||
Lessee, Lease, Other Information | ||||
Operating Lease, Weighted Average Remaining Lease Term | 5 years 3 months 18 days | 5 years 3 months 18 days | ||
Finance Lease, Weighted Average Remaining Lease Term | 13 years 10 months 24 days | 13 years 10 months 24 days | ||
Operating Lease, Weighted Average Discount Rate, Percent | 3.30% | 3.30% | ||
Finance Lease, Weighted Average Discount Rate, Percent | 7.20% | 7.20% | ||
Lessee, Lease, Financing | ||||
2019 | $ 5 | $ 5 | ||
2020 | 19 | 19 | ||
2021 | 16 | 16 | ||
2022 | 15 | 15 | ||
2023 | 14 | 14 | ||
After 2023 | 146 | 146 | ||
Total minimum lease payments | 215 | 215 | ||
Lessee, Finance Lease, Liability, Undiscounted Excess Amount | (93) | (93) | ||
Finance Lease, Liability | 122 | 122 | 132 | |
Lessee, Lease, Operating | ||||
2019 | 38 | 38 | ||
2020 | 129 | 129 | ||
2021 | 102 | 102 | ||
2022 | 77 | 77 | ||
2023 | 51 | 51 | ||
After 2023 | 110 | 110 | ||
Total minimum lease payments | 507 | 507 | ||
Lessee, Operating Lease, Liability, Undiscounted Excess Amount | (50) | (50) | ||
Operating Lease, Liability | 457 | 457 | ||
Net present value of the minimum payments due under capital leases | ||||
2019 | 30 | |||
2020 | 21 | |||
2021 | 16 | |||
2022 | 14 | |||
2023 | 13 | |||
After 2023 | 144 | |||
Total minimum lease payments | 238 | |||
Interest | (106) | |||
Present value of net minimum lease payments | 132 | |||
Net present value of the minimum payments due under operating leases | ||||
2019 | 138 | |||
2020 | 109 | |||
2021 | 81 | |||
2022 | 60 | |||
2023 | 39 | |||
After 2023 | 81 | |||
Total minimum lease payments | $ 508 | |||
Other assets | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease assets | 446 | 446 | ||
Property, plant and equipment, net | ||||
Lessee, Lease, Description [Line Items] | ||||
Finance lease assets(1) | [1] | 124 | 124 | |
Other accrued expenses | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease liability, Current | 124 | 124 | ||
Current maturities of long-term debt | ||||
Lessee, Lease, Description [Line Items] | ||||
Finance Lease, Liability, Current | 12 | 12 | ||
Other liabilities | ||||
Lessee, Lease, Description [Line Items] | ||||
Operating lease liabilities, Noncurrent | 333 | 333 | ||
Long-term debt | ||||
Lessee, Lease, Description [Line Items] | ||||
Finance Lease, Liability, Noncurrent | $ 110 | $ 110 | ||
[1] | Finance lease assets are recorded net of accumulated amortization of $62 million at September 29, 2019 . |
DEBT (Details)
DEBT (Details) - USD ($) $ in Millions | 3 Months Ended | ||||
Sep. 29, 2019 | Aug. 21, 2019 | Dec. 31, 2018 | Aug. 22, 2018 | ||
Short-term Debt [Line Items] | |||||
Loans payable | [1] | $ 103 | $ 54 | ||
Commercial paper | [2] | 902 | 780 | ||
Line of Credit Facility, Maximum Borrowing Capacity | 3,500 | $ 2,000 | |||
Line of Credit Facility, Remaining Borrowing Capacity | 2,600 | ||||
Long-term debt | |||||
Other Long-term Debt | 70 | 64 | |||
Unamortized discount | (50) | (52) | |||
Fair value adjustment due to hedge on indebtedness | 41 | 25 | |||
Finance Lease, Liability | 122 | 132 | |||
Total long-term debt | 1,656 | 1,642 | |||
Current maturities of long-term debt | 37 | 45 | |||
Long-term debt | 1,619 | 1,597 | |||
Principal payments | |||||
2019 | 16 | ||||
2020 | 30 | ||||
2021 | 45 | ||||
2022 | 9 | ||||
2023 | 507 | ||||
Long-term Debt, Other Disclosures [Abstract] | |||||
Interest Rate Lock, Notional Amount | 250 | ||||
Increase (Decrease) in Fair Value of Interest Rate Fair Value Hedging Instruments | 28 | ||||
Fair value | |||||
Fair value of total debt | [3] | 3,031 | 2,679 | ||
Carrying value of total debt | $ 2,661 | $ 2,476 | |||
Commercial Paper | |||||
Short-term Debt [Line Items] | |||||
Short-term Debt, Weighted Average Interest Rate, at Point in Time | [2] | 2.18% | 2.59% | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 3,500 | ||||
International and Other Lines of Credit | |||||
Short-term Debt [Line Items] | |||||
Line of Credit Facility, Remaining Borrowing Capacity | $ 200 | ||||
Senior notes, due 2023 | |||||
Long-term debt | |||||
Debt instrument interest rate (as a percent) | 3.65% | ||||
Unsecured Debt | $ 500 | $ 500 | |||
Debentures, due 2027 | |||||
Long-term debt | |||||
Debt instrument interest rate (as a percent) | 6.75% | ||||
Unsecured Debt | $ 58 | 58 | |||
Debentures, due 2028 | |||||
Long-term debt | |||||
Debt instrument interest rate (as a percent) | 7.125% | ||||
Unsecured Debt | $ 250 | 250 | |||
Senior notes, due 2043 | |||||
Long-term debt | |||||
Debt instrument interest rate (as a percent) | 4.875% | ||||
Unsecured Debt | $ 500 | 500 | |||
Debentures, due 2098(1) | |||||
Long-term debt | |||||
Debt instrument interest rate (as a percent) | 5.65% | ||||
Unsecured Debt | [4] | $ 165 | $ 165 | ||
Effective interest rate (as a percent) | 7.48% | ||||
1-year revolving credit agreement | |||||
Short-term Debt [Line Items] | |||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,500 | $ 1,500 | |||
[1] | Loans payable consist primarily of notes payable to various domestic and international financial institutions and it is not practicable to aggregate these notes and calculate a quarterly weighted-average interest rate. | ||||
[2] | The weighted-average interest rate, inclusive of all brokerage fees, was 2.18 percent and 2.59 percent at September 29, 2019 and December 31, 2018 , respectively. | ||||
[3] | The fair value of debt is derived from Level 2 inputs. | ||||
[4] | The effective interest rate on this debt is 7.48% . |
PRODUCT WARRANTY LIABILITY (Det
PRODUCT WARRANTY LIABILITY (Details 1) Warranty Footnote Disclosure - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 24 Months Ended | |||||
Sep. 29, 2019 | Sep. 30, 2018 | Jul. 01, 2018 | Apr. 01, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Dec. 30, 2018 | Dec. 31, 2018 | |
Product Warranties Disclosures [Abstract] | ||||||||
Balance, beginning of year | $ 1,687 | $ 2,208 | $ 1,687 | |||||
Provision for base warranties issued | 360 | 337 | ||||||
Deferred revenue on extended warranty contracts sold | 254 | 211 | ||||||
Provision for product campaigns issued | $ 181 | $ 187 | 163 | 456 | $ 410 | |||
Payments made during period | (431) | (313) | ||||||
Amortization of deferred revenue on extended warranty contracts | (174) | (179) | ||||||
Changes in estimates for pre-existing product warranties | (16) | 18 | ||||||
Foreign currency translation and other | (9) | (6) | ||||||
Balance, end of period | $ 2,355 | $ 2,211 | 2,355 | 2,211 | ||||
Supplier recoveries | 3 | $ 3 | 64 | $ 16 | ||||
Product Warranty Liability | ||||||||
Current portion of warranty related deferred revenue | 545 | 545 | $ 498 | |||||
Long term portion of warranty related deferred revenue | 769 | 769 | 658 | |||||
Deferred Revenue Related to extended coverage, Total | 893 | 893 | 814 | |||||
Current portion of accrued product warranty | 817 | 817 | 654 | |||||
Long-term portion of accrued product warranty | 645 | 645 | 740 | |||||
Standard Product Warranty Accrual | 1,462 | 1,462 | 1,394 | |||||
Current portion of deferred revenue | ||||||||
Product Warranty Liability | ||||||||
Current portion of warranty related deferred revenue | 225 | 225 | 227 | |||||
Deferred revenue | ||||||||
Product Warranty Liability | ||||||||
Long term portion of warranty related deferred revenue | 668 | 668 | 587 | |||||
Current portion of accrued product warranty | ||||||||
Product Warranty Liability | ||||||||
Current portion of accrued product warranty | 817 | 817 | 654 | |||||
Accrued product warranty | ||||||||
Product Warranty Liability | ||||||||
Long-term portion of accrued product warranty | $ 645 | $ 645 | $ 740 |
PRODUCT WARRANTY LIABILITY (D_2
PRODUCT WARRANTY LIABILITY (Details 2) Engine System Campaign - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | 24 Months Ended | ||||
Sep. 29, 2019 | Sep. 30, 2018 | Jul. 01, 2018 | Apr. 01, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Dec. 30, 2018 | |
Product Warranty Liability | |||||||
Provision for product campaigns issued | $ 181 | $ 187 | $ 163 | $ 456 | $ 410 | ||
Income (Loss) from Continuing Operations, Per Diluted Share | $ 0.14 | $ 0.23 | $ 0.85 | $ 0.87 | $ 0.19 | $ 0.23 | |
Engine System Campaign Accrual, Present Value | $ 279 | $ 279 | |||||
Components | |||||||
Product Warranty Liability | |||||||
Provision for product campaigns issued | $ 90 | $ 94 | |||||
Engine | |||||||
Product Warranty Liability | |||||||
Provision for product campaigns issued | $ 91 | $ 93 |
SUPPLEMENTAL BALANCE SHEET DA_3
SUPPLEMENTAL BALANCE SHEET DATA (Details) - USD ($) $ in Millions | Sep. 29, 2019 | Dec. 31, 2018 |
Balance Sheet Related Disclosures [Abstract] | ||
Marketing accruals | $ 208 | $ 199 |
Other taxes payable | 185 | 196 |
Income taxes payable | 132 | 97 |
Current portion of operating lease liabilities | 124 | 0 |
Other Accrued Liabilities, Current | 348 | 360 |
Other accrued expenses | 997 | 852 |
Operating lease liabilities | 333 | 0 |
Deferred income taxes | 301 | 263 |
Income taxes payable | 293 | 293 |
Accrued compensation | 161 | 173 |
Other Accrued Liabilities, Noncurrent | 226 | 163 |
Other liabilities | $ 1,314 | $ 892 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | 9 Months Ended |
Sep. 29, 2019USD ($) | |
Guarantee Obligations | |
Guarantor obligations, maximum potential loss | $ 54 |
Long-term purchase commitment, penalty exposure | 54 |
Total commitments under commodity contracts | 33 |
Performance Bonds and Other Performance Guarantees | $ 140 |
Maximum | |
Guarantee Obligations | |
Forward Contract, Term | P2Y |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | |||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | $ (1,807) | |||||||
Before tax amount | $ (221) | $ (153) | (265) | $ (373) | ||||
Tax benefit (expense) | 8 | (3) | 15 | 5 | ||||
After tax amount | (213) | (156) | (250) | (368) | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 8 | [1] | 7 | [1] | 15 | [2] | 32 | [2] |
Net current period other comprehensive income (loss) | (205) | (149) | (235) | (336) | ||||
Balance at the end of the period | (2,040) | (2,040) | ||||||
Change in pensions and other postretirement defined benefit plans | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (675) | (668) | (671) | (689) | ||||
Before tax amount | 0 | 0 | (22) | (8) | ||||
Tax benefit (expense) | 0 | 0 | 5 | 2 | ||||
After tax amount | 0 | 0 | (17) | (6) | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 6 | [1] | 13 | [1] | 19 | [2] | 40 | [2] |
Net current period other comprehensive income (loss) | 6 | 13 | 2 | 34 | ||||
Balance at the end of the period | (669) | (655) | (669) | (655) | ||||
Foreign currency translation adjustment | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (1,156) | (1,003) | (1,138) | (812) | ||||
Before tax amount | (177) | (139) | (194) | (342) | ||||
Tax benefit (expense) | 0 | (3) | (1) | 9 | ||||
After tax amount | (177) | (142) | (195) | (333) | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 0 | [1] | 0 | [1] | 0 | [2] | 0 | [2] |
Net current period other comprehensive income (loss) | (177) | (142) | (195) | (333) | ||||
Balance at the end of the period | (1,333) | (1,145) | (1,333) | (1,145) | ||||
Unrealized gain (loss) on debt securities | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | 0 | 0 | 0 | 1 | ||||
Before tax amount | 0 | 2 | 0 | 2 | ||||
Tax benefit (expense) | 0 | 0 | 0 | 0 | ||||
After tax amount | 0 | 2 | 0 | 2 | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 0 | [1] | (2) | [1] | 0 | [2] | (3) | [2] |
Net current period other comprehensive income (loss) | 0 | 0 | 0 | (1) | ||||
Balance at the end of the period | 0 | 0 | 0 | 0 | ||||
Unrealized gain (loss) on derivatives | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (9) | 4 | 2 | (3) | ||||
Before tax amount | (39) | 1 | (47) | 16 | ||||
Tax benefit (expense) | 8 | 0 | 11 | (6) | ||||
After tax amount | (31) | 1 | (36) | 10 | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 2 | [1] | (4) | [1] | (4) | [2] | (6) | [2] |
Net current period other comprehensive income (loss) | (29) | (3) | (40) | 4 | ||||
Balance at the end of the period | (38) | 1 | (38) | 1 | ||||
Total attributable to Cummins Inc. | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Balance at the beginning of the period | (1,840) | (1,667) | (1,807) | (1,503) | ||||
Before tax amount | (216) | (136) | (263) | (332) | ||||
Tax benefit (expense) | 8 | (3) | 15 | 5 | ||||
After tax amount | (208) | (139) | (248) | (327) | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 8 | [1] | 7 | [1] | 15 | [2] | 31 | [2] |
Net current period other comprehensive income (loss) | (200) | (132) | (233) | (296) | ||||
Balance at the end of the period | (2,040) | (1,799) | (2,040) | (1,799) | ||||
Noncontrolling interests | ||||||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||||||
Before tax amount | (5) | (17) | (2) | (41) | ||||
Tax benefit (expense) | 0 | 0 | 0 | 0 | ||||
After tax amount | (5) | (17) | (2) | (41) | ||||
Amounts reclassified from accumulated other comprehensive loss(1) | 0 | [1] | 0 | [1] | 0 | [2] | 1 | [2] |
Net current period other comprehensive income (loss) | $ (5) | $ (17) | $ (2) | $ (40) | ||||
[1] | Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. | |||||||
[2] | Amounts are net of tax. Reclassifications out of accumulated other comprehensive income (loss) and the related tax effects are immaterial for separate disclosure. |
ACQUISITION (Details)
ACQUISITION (Details) - USD ($) $ in Millions | Sep. 09, 2019 | Aug. 15, 2018 | Jan. 31, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Business Acquisition [Line Items] | ||||||||||
Goodwill | $ 1,288 | $ 1,288 | $ 1,126 | |||||||
Research, development and engineering expenses | $ 242 | $ 229 | $ 730 | $ 658 | ||||||
Hydrogenics Corporation | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 81.00% | |||||||||
Payments to Acquire Businesses, Gross | $ 235 | |||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||
Business Combination, Consideration Transferred | 235 | |||||||||
Goodwill | 166 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | [1] | 158 | ||||||||
Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period | $ 34 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory | 21 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets | 25 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Assets | 18 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities | (50) | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities | (47) | |||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net | 291 | |||||||||
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | 56 | |||||||||
Efficient Drivetrains, Inc. | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | |||||||||
Payments to Acquire Businesses, Gross | $ 51 | |||||||||
Payments to Acquire Businesses Liabilities Paid | 2 | |||||||||
Business Combination, Consideration Transferred | [2] | 64 | ||||||||
Goodwill | 49 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | [1] | $ 15 | ||||||||
Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period | $ 3 | |||||||||
Johnson Matthey Battery Systems, Ltd. | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 100.00% | |||||||||
Payments to Acquire Businesses, Gross | $ 9 | |||||||||
Payments to Acquire Businesses Liabilities Paid | 0 | |||||||||
Business Combination, Consideration Transferred | 9 | |||||||||
Goodwill | 0 | |||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | [1] | $ 5 | ||||||||
Business Acquisition, Revenue Reported by Acquired Entity for Last Annual Period | $ 3 | |||||||||
Technology-Based Intangible Assets | Hydrogenics Corporation | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 94 | |||||||||
Customer Relationships | Hydrogenics Corporation | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 28 | |||||||||
Intellectual Property | Hydrogenics Corporation | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 35 | |||||||||
Other Intangible Assets | Hydrogenics Corporation | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | $ 1 | |||||||||
Minimum | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | |||||||||
Maximum | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 20 years | |||||||||
[1] | Intangible assets acquired in business combinations were mostly technology and customer related, the majority of which will be amortized over a period of up to 20 years from the date of the acquisition. | |||||||||
[2] | The "Total Purchase Consideration" represents the total amount that will or is estimated to be paid to complete the acquisition. A portion of the acquisition payment has not yet been made and will be paid in future periods in accordance with the purchase contract. |
OPERATING SEGMENTS (Details)
OPERATING SEGMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||||
Sep. 29, 2019 | Sep. 30, 2018 | Sep. 29, 2019 | Sep. 30, 2018 | ||||||
Segment reporting | |||||||||
Net Sales | [1] | $ 5,768 | $ 5,943 | $ 17,993 | $ 17,645 | ||||
Research, development and engineering expenses | 242 | 229 | 730 | 658 | |||||
Equity, royalty and interest income from investees | 68 | 90 | 256 | 315 | |||||
Interest income | 14 | 9 | 38 | 26 | |||||
Segment EBITDA | 958 | 983 | 3,049 | 2,580 | |||||
Depreciation and amortization | 177 | 148 | 491 | 455 | |||||
Less: Interest expense | 26 | 30 | 87 | 82 | |||||
INCOME BEFORE INCOME TAXES | 755 | 805 | 2,471 | 2,043 | |||||
Amortization of Debt Discount (Premium) | 2 | 1 | |||||||
Engine | |||||||||
Segment reporting | |||||||||
Net Sales | 2,416 | 2,726 | 7,772 | 7,868 | |||||
Research, development and engineering expenses | 79 | 74 | 245 | 229 | |||||
Equity, royalty and interest income from investees | 34 | 55 | 152 | 189 | |||||
Interest income | 5 | 3 | 13 | 8 | |||||
Segment EBITDA | 341 | 405 | 1,195 | 1,053 | |||||
Depreciation and amortization | 50 | [2] | 46 | [2] | 151 | [3] | 142 | [3] | |
Distribution | |||||||||
Segment reporting | |||||||||
Net Sales | 2,004 | 1,931 | 6,033 | 5,778 | |||||
Research, development and engineering expenses | 7 | 5 | 21 | 15 | |||||
Equity, royalty and interest income from investees | 12 | 9 | 35 | 33 | |||||
Interest income | 4 | 4 | 12 | 9 | |||||
Segment EBITDA | 186 | 155 | 529 | 423 | |||||
Depreciation and amortization | 29 | [2] | 27 | [2] | 86 | [3] | 81 | [3] | |
Components | |||||||||
Segment reporting | |||||||||
Net Sales | 1,650 | 1,754 | 5,357 | 5,394 | |||||
Research, development and engineering expenses | 73 | 71 | 223 | 195 | |||||
Equity, royalty and interest income from investees | 9 | 12 | 30 | 42 | |||||
Interest income | 2 | 1 | 6 | 4 | |||||
Segment EBITDA | 286 | 288 | 908 | 752 | |||||
Depreciation and amortization | 67 | [2] | 44 | [2] | 160 | [3] | 137 | [3] | |
Power Systems | |||||||||
Segment reporting | |||||||||
Net Sales | 1,126 | 1,107 | 3,406 | 3,427 | |||||
Research, development and engineering expenses | 58 | 57 | 171 | 174 | |||||
Equity, royalty and interest income from investees | 13 | 14 | 39 | 51 | |||||
Interest income | 3 | 1 | 7 | 5 | |||||
Segment EBITDA | 158 | 163 | 469 | 491 | |||||
Depreciation and amortization | 29 | [2] | 29 | [2] | 88 | [3] | 91 | [3] | |
Electrified Power | |||||||||
Segment reporting | |||||||||
Net Sales | 9 | 2 | 20 | 5 | |||||
Research, development and engineering expenses | 25 | 22 | 70 | 45 | |||||
Equity, royalty and interest income from investees | 0 | 0 | 0 | 0 | |||||
Interest income | 0 | 0 | 0 | 0 | |||||
Segment EBITDA | (36) | (30) | (98) | (61) | |||||
Depreciation and amortization | 2 | [2] | 2 | [2] | 6 | [3] | 4 | [3] | |
Total Segments | |||||||||
Segment reporting | |||||||||
Net Sales | 7,205 | 7,520 | 22,588 | 22,472 | |||||
Research, development and engineering expenses | 242 | 229 | 730 | 658 | |||||
Equity, royalty and interest income from investees | 68 | 90 | 256 | 315 | |||||
Interest income | 14 | 9 | 38 | 26 | |||||
Segment EBITDA | 935 | 981 | 3,003 | 2,658 | |||||
Depreciation and amortization | 177 | [2] | 148 | [2] | 491 | [3] | 455 | [3] | |
Intersegment Eliminations | |||||||||
Segment reporting | |||||||||
Net Sales | (1,437) | [4] | (1,577) | [4] | (4,595) | [5] | (4,827) | [5] | |
Non-segment items | |||||||||
Segment reporting | |||||||||
Segment EBITDA | 23 | [4] | 2 | [4] | 46 | [5] | (78) | [5] | |
External Sales | |||||||||
Segment reporting | |||||||||
Net Sales | 5,768 | 5,943 | 17,993 | 17,645 | |||||
External Sales | Engine | |||||||||
Segment reporting | |||||||||
Net Sales | 1,822 | 2,082 | 5,879 | 5,945 | |||||
External Sales | Distribution | |||||||||
Segment reporting | |||||||||
Net Sales | 2,001 | 1,927 | 6,009 | 5,762 | |||||
External Sales | Components | |||||||||
Segment reporting | |||||||||
Net Sales | 1,253 | 1,297 | 4,055 | 4,012 | |||||
External Sales | Power Systems | |||||||||
Segment reporting | |||||||||
Net Sales | 683 | 636 | 2,030 | 1,922 | |||||
External Sales | Electrified Power | |||||||||
Segment reporting | |||||||||
Net Sales | 9 | 1 | 20 | 4 | |||||
External Sales | Total Segments | |||||||||
Segment reporting | |||||||||
Net Sales | 5,768 | 5,943 | 17,993 | 17,645 | |||||
Intersegment sales | Engine | |||||||||
Segment reporting | |||||||||
Net Sales | 594 | 644 | 1,893 | 1,923 | |||||
Intersegment sales | Distribution | |||||||||
Segment reporting | |||||||||
Net Sales | 3 | 4 | 24 | 16 | |||||
Intersegment sales | Components | |||||||||
Segment reporting | |||||||||
Net Sales | 397 | 457 | 1,302 | 1,382 | |||||
Intersegment sales | Power Systems | |||||||||
Segment reporting | |||||||||
Net Sales | 443 | 471 | 1,376 | 1,505 | |||||
Intersegment sales | Electrified Power | |||||||||
Segment reporting | |||||||||
Net Sales | 0 | 1 | 0 | 1 | |||||
Intersegment sales | Total Segments | |||||||||
Segment reporting | |||||||||
Net Sales | 1,437 | 1,577 | 4,595 | 4,827 | |||||
Intersegment sales | Intersegment Eliminations | |||||||||
Segment reporting | |||||||||
Net Sales | $ (1,437) | [4] | $ (1,577) | [4] | $ (4,595) | [5] | $ (4,827) | [5] | |
[1] | Includes sales to nonconsolidated equity investees of $280 million and $882 million for the three and nine months ended September 29, 2019 , compared with $314 million and $951 million for the comparable periods in 2018. | ||||||||
[2] | Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||
[3] | Depreciation and amortization, as shown on a segment basis, excludes the amortization of debt discount and deferred costs included in the Condensed Consolidated Statements of Net Income as "Interest expense." The amortization of debt discount and deferred costs was $2 million and $1 million for the nine months ended September 29, 2019 and September 30, 2018 , respectively. A portion of depreciation expense is included in "Research, development and engineering expenses." | ||||||||
[4] | Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the three months ended September 29, 2019 and September 30, 2018 . | ||||||||
[5] | Includes intersegment sales, intersegment profit in inventory eliminations and unallocated corporate expenses. There were no significant unallocated corporate expenses for the nine months ended September 29, 2019 and September 30, 2018 . |
RECENTLY ADOPTED AND RECENTLY_2
RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) | 9 Months Ended |
Sep. 29, 2019 | |
ASU 2016-02 Leases | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New Accounting Pronouncement or Change in Accounting Principle, Description | In February 2016, the Financial Accounting Standards Board (FASB) amended its standards related to the accounting for leases. Under the new standard, lessees are now required to recognize substantially all leases on the balance sheet as both a right-of-use (ROU) asset and a liability. The standard continues to have two types of leases for income statement recognition purposes: operating leases and finance leases. Operating leases 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 the old standard. Finance leases result in an accelerated expense similar to the accounting for capital leases under the old standard. The determination of a lease classification as operating or finance will occur in a manner similar to the old standard. The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement. We adopted the new standard on January 1, 2019, using a modified retrospective approach and as a result did not adjust prior periods. Adoption of the standard resulted in the recording of $450 million of operating lease ROU assets and operating lease liabilities, but did not have a material impact on our net income or cash flows. The cumulative effect adjustment of adopting the new standard was not material. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and to not re-evaluate existing contracts as to whether or not they contained a lease.On January 1, 2019, we adopted the new lease standard in accordance with GAAP. See NOTE 9, "LEASES," for detailed information about the adoption of this standard. |
ASU 2017-12 Derivatives and Hedging | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New Accounting Pronouncement or Change in Accounting Principle, Description | On January 1, 2019, we adopted the new FASB standard related to accounting for derivatives and hedging. The new standard allows the initial hedge effectiveness assessment to be performed by the end of the first quarter in which the hedge is designated rather than concurrently with entering into the hedge transaction. The changes also expand the use of a periodic qualitative hedge effectiveness assessment in lieu of an ongoing quantitative assessment performed throughout the life of the hedge. The revision removes the requirement to record ineffectiveness on cash flow hedges through the income statement when a hedge is considered highly effective, instead deferring all related hedge gains and losses in other comprehensive income until the hedged item impacts earnings. The modifications permit hedging the contractually-specified price of a component of a commodity purchase and revises certain disclosure requirements. We adopted the new standard on a modified retrospective basis for existing cash flow hedges and prospectively for disclosures. The amendments did not have a material effect on our Condensed Consolidated Financial Statements and no transition adjustment was required upon adoption. The adoption of this standard did not materially change our policies for existing hedges. |
ASU 2018-15 Intangibles Goodwill and Other - Internal-Use Software | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New Accounting Pronouncement or Change in Accounting Principle, Description | In August 2018, the FASB issued a new standard that aligns the accounting for implementation costs incurred in a cloud computing arrangement accounted for as a service contract with the model currently used for internal use software costs. Under the new standard, costs that meet certain criteria will be required to be capitalized on the balance sheet and subsequently amortized over the term of the hosting arrangement. The standard is effective for us beginning on January 1, 2020, with early adoption permitted. The standard allows for either prospective or retrospective transition. We are still evaluating the impact of this standard on our financial statements. |
ASU 2016-13 Measurement of Credit Losses on Financial Instruments | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
New Accounting Pronouncement or Change in Accounting Principle, Description | In June 2016, the FASB amended its standards related to 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 do not expect adoption of this standard to have a material impact on our Consolidated Financial Statements. |
Uncategorized Items - cmi2019q3
Label | Element | Value |
Accounting Standards Update 2014-09 [Member] | ||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleEffectOfAdoptionQuantification | $ 28,000,000 |
Accounting Standards Update 2016-01 [Member] | ||
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification | us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleEffectOfAdoptionQuantification | $ 2,000,000 |